2020 Financial Benchmark Report: How Dermatology and Aesthetic Practices Fared in the COVID Era

For more than 20 years, Allergan and BSM Consulting have conducted an annual benchmarking survey among medical aesthetic, dermatology, and medispa practices across the US. That data showed the aesthetic industry enjoying a period of considerable growth over the past decade, but then COVID hit, threatening to curb growth and providing a hurdle no one saw coming.

The implications of the pandemic were felt by our surveyed aesthetic practices predominantly through practice and surgical center closures. As a result, regular operations were halted, and cash flow evaporated seemingly overnight. Without the opportunity to perform procedures and treatments, practices sought other means of generating income by selling retail products via e-commerce, conducting virtual consultations, offering pre-paid services and packages, expanding their online marketing and social media presence, and leveraging federal and local financial assistance programs.

Almost 90 percent of the nearly 500 practices that participated in the 2020 Financial Benchmarking Report (FBR) program reported federal and/or state assistance. The most common forms of aid were Paycheck Protection Program (PPP) loans and grants from the US Department of Health and Human Services (HHS) Provider Relief Fund (PRF). Those funds were used to retain employees, cover rent and utilities, and satisfy other financial obligations.

It’s worth noting how assistance program funds were recognized in our financial survey. Funds received through the PPP are loans and recorded as cash and a liability, not as a source of practice operating revenue. Even when forgiven, the loan forgiveness “revenue” is reported as a gain on the extinguishment of that debt and not considered operating revenue. Meanwhile, monies received from grants, such as PRF, were included in operating revenue but not classified as provider-specific service revenue.

Knowing the financial obstacles surveyed practices faced in the initial year of COVID, you may be wondering how they performed. Based on the recently released 2020 Allergan/BSM Medical Aesthetics Database Results—which includes results from 2018, 2019, and 2020 practice surveys that were received and processed through November 30, 2021—participating practices fared pretty well.

Please note survey results are separated into three primary segments: medical aesthetics (plastic surgery, cosmetic dermatology, and other aesthetic practices such as oculoplastic and facial plastic), medical dermatology, and medical spas. The key findings below primarily focus on the medical aesthetic sector.

Key Survey Findings

Given the circumstances of 2020, you may find it surprising that median aesthetic practice revenue was essentially flat from 2019 to 2020. 2019 revenue was $3,310,000 and 2020 was $3,325,000, or 0.5 percent higher. However, the $3.3 million reported in 2020 is 10 percent higher than 2018, and it’s the highest median practice revenue ever reported by the survey. Revenue sources include funds generated by provider licensure, physicians, physician assistants (PAs)/nurse practitioners (NPs), nurses, and aestheticians, along with other service lines, such as retail sales, ambulatory surgery centers, and consulting and research. Please note revenue by provider is reported on a full-time equivalent (FTE) basis.

The growth seen in top-line revenue appears to be primarily generated from physicians. Their collections were up nearly seven percent to $1,640,000 from 2019 to 2020, while revenue by other provider types was down or flat over the same period. Nurse provider collections were down more than five percent, while PAs and NPs were down more than three percent, and aestheticians were flat.

While total medical aesthetic practice revenue grew from 2019 to 2020, practices appeared to manage their overhead well during the pandemic, which translated into improved practice margins. Over those two years, practices saw an increase of $15,000 in median revenue, but a decrease in spend of nearly three percent. Operating expenses decreased $59,000, and net income margins expanded by almost $75,000. The operating income margin was calculated by multiplying the operating margin by the total practice revenue.

Though it may be assumed that the decrease in practice overhead during 2020 is possibly due to reductions in support staff, the Allergan/BSM Consulting database shows median staffing levels actually increased slightly (3.2 percent). This increase in headcount and the non-provider payroll ratio (0.8 percent) indicates that additional staff were utilized effectively, supporting revenue growth in such a way that any year-over-year increases in payroll costs were offset.

All relevant metrics are listed in Fig. 1-1 below. Please note that contributing practices were identified by the Allergan Practice Consulting team and may not reflect the “average” cosmetic practice. Participation in the program was voluntary, and all participating practices willingly submitted the following source data for report creation:

• Practice financial statements or income tax returns,
• Productivity reports, and
• Employee census data.

Contributing Practice Demographics

To put this data into further perspective, it is important to understand the demographics of participating practices. Of the 477 survey participants in 2020, 37 percent were in solo private practices, 34 percent were without a physician (medical spas), 21 percent were in practices with up to three physicians, and seven percent were in groups with four or more physicians. Additionally, these practices were either medical spas (34 percent) or specialized in plastic surgery (30 percent), “aesthetic other” (18 percent), cosmetic dermatology (nine percent), or medical dermatology (nine percent). All this data is represented in Fig. 2-1 below.

Note: “Aesthetic Other” represents facial plastics, oculoplastics, and any practice specialty other than those identified as “Plastic Surgery” or “Cosmetic Dermatology.”

Based on specialty, consistent differences in production and efficiency among participating practices can and continue to be seen. These differences are summarized in Fig. 2-2 below.

Contributing Practice Regions

As illustrated in Fig. 3-1, benchmarking results were also segmented by practice region, which is consistent with the regional alignment set forth in the Medical Group Management Association Annual Cost Survey.

Breaking down the data by territory revealed some interesting regional differences in practice revenue, physician production, and operating efficiency measures, summarized in Fig. 3-2 below.

Directional in Nature

There are several factors that may impact the validity of the results shared here including, but not limited to, the number of survey respondents and who was surveyed. In addition, practices report financial results on a cash basis of accounting, which may serve to distort the true measure of performance. Also, practices use different methods to classify expenses, which can make it difficult to draw meaningful conclusions concerning inter-practice variances. As such, you are strongly encouraged to view reported results and benchmark comparisons as directional in nature.