Dermatology accounting that keeps medical and cosmetic apart
Sorso keeps the books for dermatology practices across the US, with a separate P&L for the medical side, the cosmetic side and retail skincare, so you can see what each one actually earns.
A 4-minute test your accountant hopes you skip.
At a glance
TL;DR — What is Dermatology Accounting?
Dermatology accounting keeps a dermatology or Mohs practice's books as two businesses, medical and cosmetic, so the margin on each is visible: insurance payments reconciled on one side, injectables, devices and skincare tracked on the other. Sorso is an accounting and bookkeeping firm that does this for dermatology practices across the US, from about $500K to $10M in revenue. Accounting starts at $2,000 a month, month-to-month after onboarding, with a 45-day money-back guarantee. Tax preparation and filing stay with your CPA; we hand them reconciled books.
Industry Context
How Dermatology Practices Actually Run Their Books
Dermatology is two businesses operating under one roof, and this is where most accounting setups fail. The medical side bills insurance for skin checks, biopsies, Mohs surgery, and inflammatory skin disease management. The cosmetic side collects cash from patients for Botox, fillers, lasers, peels, and skincare products. The two sides have different margins, staffing models, supply costs, and sales tax exposure, and cosmetic is not automatically the more profitable one: FTI Consulting puts operating costs at 75.1 percent of net revenue in cosmetic dermatology against 72.9 percent in medical. When the books treat them as one business, owners cannot tell which side is funding which.
Dermatology owners need true segment reporting: a P&L for medical, a P&L for cosmetic, and a P&L for retail product sales if they sell skincare. They also need biologics tracking: most psoriasis and eczema biologics (Cosentyx, Dupixent, Skyrizi) are self-injected and filled through specialty pharmacies, but office-administered ones such as Ilumya are buy-and-bill items that flow through both expense and revenue at high dollar amounts. The margin on each biologic varies by drug, by payer, and by whether the practice is paid Medicare's rate of average sales price (ASP) plus 6 percent or a commercial contract rate.
Is This Right for You?
This service is for dermatology practice owners who recognize these problems:
Need strategic financial leadership? Our Fractional CFO service for dermatology practices may be a better fit.
What We Often Find
Common Accounting Mistakes in Dermatology Practices
These are common mistakes worth checking for in the books of a dermatology practice.
01
One P&L for medical and cosmetic combined
When the financials lump Botox revenue with biopsy revenue and laser supplies with surgical supplies, it is impossible to see which line of service is actually profitable. We separate medical and cosmetic into distinct departments with their own P&Ls.
02
Booking biologics as cost of goods rather than tracking margin
Biologic drugs flow through buy-and-bill at high dollar amounts but variable margins. Booking them as a single COGS line hides the fact that some drugs are profitable at ASP plus 6 percent while others lose money after the cost of administration and wastage.
03
Not separating pathology revenue from clinical revenue
Practices with in-house pathology should track that revenue and the costs to run the lab as a separate department. Without this, owners cannot tell whether the in-house lab is paying for itself or losing money on volume.
04
Treating cosmetic deposits as revenue when received
Patient deposits on series packages (laser, microneedling, peels) are deferred revenue, not realized revenue, until services are delivered. Booking them on receipt overstates current revenue and understates package liability.
05
Ignoring drug wastage and discard tracking
Single-use vials of biologics or cosmetic injectables often have leftover product that must be discarded. Medicare allows billing for discarded amounts with the JW modifier, and a practice that skips it or bills it incorrectly gives up that payment.
The Numbers That Matter
Key Accounting Metrics for Dermatology Practices
Medical vs Cosmetic Revenue Mix
- Cosmetic revenue as a percentage of total revenue. Tracks the strategic balance of the practice.
Cosmetic Gross Margin
- Cosmetic revenue minus direct cost of injectables, retail product, and supplies, divided by cosmetic revenue.
Biologic Revenue per Drug
- Net revenue per administered drug after acquisition cost, wastage, and reimbursement.
Pathology Revenue per Specimen
- Net pathology collections divided by specimens processed, for in-house pathology operations.
Provider Production per Hour
- Collections generated divided by clinical hours worked, by provider.
Retail Product Sell-Through Rate
- Units sold divided by units stocked over a rolling 90-day window.
Software & Vendors
EHR, PM, and Vendor Reality for Dermatology Practices
Most dermatology practices run on Modernizing Medicine (EMA/ModMed), Nextech, EZDERM, or Practice Fusion for clinical work, often supplemented by separate cosmetic-focused systems like Aesthetic Record, Vagaro, or Boulevard for the cosmetic side. Medical and cosmetic data sources do not naturally talk to each other, and reconciling combined revenue against the bank deposit requires manual work each month. We build a chart of accounts that mirrors the clinical-cosmetic split and a monthly reconciliation workflow that matches deposits back to source systems.
Drug acquisition vendors (McKesson Plasma and Biologics, ASD Healthcare, Besse Medical) and group purchasing organizations meaningfully affect biologic margins. Pathology lab partners (Aurora Diagnostics, PathGroup, in-house dermatopathology setups) need separate vendor tracking because the pathology line is often a high-volume, high-cost line item that should be analyzed for in-source vs outsource economics annually.
What's Included
How We Work With Dermatology Practices
Dermatology-specific accounting that goes beyond reconciliation.
Medical vs Cosmetic Revenue Separation
- •Dual P&L structure (medical and cosmetic)
- •Shared overhead allocation between medical and cosmetic
- •Cosmetic service margin analysis by procedure type
- •Sales tax compliance for cosmetic services
Cosmetic Inventory & Product Tracking
- •Botox/filler unit cost tracking and waste analysis
- •Laser consumable cost per treatment
- •Skincare retail inventory management and margin tracking
Provider-Level Economics
- •Revenue and margin per provider (MD vs PA/NP)
- •Mohs case cost analysis (staff, supplies, time)
- •Cosmetic procedure profitability by provider
- •Supervision cost allocation for mid-levels
Membership & Package Accounting
- •Deferred revenue tracking for prepaid packages
- •Membership program profitability analysis
- •Breakage rate and utilization tracking
Results
Results in this example
| Metric | In this example |
|---|---|
| Cosmetic margin improvement | $150K–$200K range annually from margin analysis, pricing corrections, and filler waste reduction |
| Mohs revenue recovered | Mid-five figures from coding corrections |
| Mid-level restructuring | Both providers became profitable within a quarter or two once the schedule was optimized |
Illustrative Scenario
What This Looks Like In Practice
A multi-physician dermatology practice with a cosmetic suite, single location, several million in annual revenue. Revenue had grown in the high teens as a percentage over a few years while net income stayed flat. The owner could not explain the gap.
What the review found:
- •Cosmetic generating roughly a third of revenue but closer to a fifth of profit, driven by untracked filler waste in the low double digits per vial and under-priced laser treatments
- •Mohs multi-stage cases being billed as single-stage a meaningful share of the time, leaving mid-five-figure revenue uncollected annually
- •Mid-level providers showing as revenue generators on the surface but net-negative once supervision time, benefits, and overhead were properly allocated
- •A membership program with a high utilization rate that meant the practice was effectively giving away five figures in unused services a year
Representative results
$150K–$200K range annually from margin analysis, pricing corrections, and filler waste reduction
Cosmetic margin improvement
Mid-five figures from coding corrections
Mohs revenue recovered
Both providers became profitable within a quarter or two once the schedule was optimized
Mid-level restructuring
The takeaway
The lesson from this example: without provider-level and service-level margin tracking, cosmetic often looks better than it really is on a loaded-cost basis, while the quieter medical side is doing the actual work.
Common Questions About Accounting for Dermatology Practices
How much does dermatology accounting cost?+
Accounting starts at $2,000 a month. Onboarding is a one-time $3,000 to $9,000, depending on how much cleanup the books need. After that the engagement is month-to-month, with a 45-day money-back guarantee.
Do you prepare our taxes?+
No. Tax preparation and filing stay with your CPA. We keep the books every month, reconcile insurance and cosmetic revenue, and give your CPA reconciled books at year end, so their work starts from numbers that tie out.
How is Sorso different from a dermatology CPA firm?+
A CPA firm's core work is tax and compliance. Ours is the monthly books and what they show: medical and cosmetic P&Ls, the margin on each injectable and device, profit by provider, and three to five specific actions each month. You can keep your CPA for taxes and use Sorso for the books.
Do you work with dermatology practices in my state?+
Yes. We work with dermatology practices across the US, and we track the state rules that change the books, such as sales tax on cosmetic services and retail skincare.
Why does dermatology need separate medical and cosmetic accounting?+
Because they have completely different economics. Medical derm has insurance reimbursement and lower margins. Cosmetic has higher margins but inventory costs and sales tax. Mixing them hides problems in both.
How do you track Botox and filler inventory?+
We track purchase cost per unit, units used per treatment, waste rates, and revenue per unit. You will know your actual margin on every injectable, not a guess.
Can you handle the sales tax complexity for cosmetic services?+
Yes. We track cosmetic vs medical revenue separately and apply the correct tax treatment based on your state's rules. This is an area where general accountants frequently make errors.
How do you handle deferred revenue from memberships and packages?+
We book prepaid packages as deferred revenue and recognize it as services are delivered. This gives you an accurate picture of what you have earned vs what you owe in future services.
What reporting do we get each month?+
Dual P&L (medical and cosmetic), provider production reports, cosmetic inventory analysis, and KPI dashboard with trends. Everything you need to see both sides of your practice clearly.
Do you work with practices that have retail skincare lines?+
Yes. We track skincare retail as a separate revenue line with inventory management, margin analysis, and shrinkage monitoring.
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The test your accountant hopes you skip.
Sources
Figures on this page come from these published sources. Rows marked Sorso estimate are our own arithmetic on them.
- FTI Consulting, Dermatology: Looking Good (2024)
- CMS, 2026 physician fee schedule relative value file (RVU26D)
- CMS, Medicare Part B drug payment limits (ASP files)
- 42 CFR 414.904, ASP plus 6 percent
- CMS, JW and JZ modifier policy FAQ
- CMS Claims Processing Manual, ch. 12 (modifier 25)
- Health Affairs Scholar, 2026: dermatology practice ownership 2012-2022
- AAFP, practice finances benchmarks (A/R days, collection rate)
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By state
Dermatology Practices accounting and CFO support, by state
State-level tax, payer, and regulatory context shapes what “good” looks like for dermatology practices practices. The pages below walk through each state's specifics.