Electronic Health Reporter

Over the past decade, credit card spending has more than tripled, leading to billions of dollars in processing fees for merchants. Despite the size of this industry, many find its complexities challenging to navigate. Credit card processors frequently hide and inflate fees, resulting in substantial annual expenses that could otherwise be reduced or eliminated.

Navigating the ever-changing changing landscape of the processing industry and opaque merchant statements can be especially daunting for medical offices. Those without the expertise or resources to review these costs often wind up paying more than necessary. However, it is possible for experts to demystify these fees through a merchant statement analysis to identify potential savings for medical practices.

Eric Cohen, CEO of Merchant Advocate, specializes in assisting businesses and medical practices of all sizes—from large medical groups to small clinics—in uncovering hidden fees and optimizing revenue structures without switching processors.

Below are some common questions Eric encounters from medical office administrators and managers about managing processing fees.

Why should medical practices prioritize optimizing their credit card processing costs?

All businesses would benefit from optimizing their processing costs, but for medical practices, this is even more true given their unique challenges. These include costly fees from virtual credit insurance payments, software integration issues, and handling sensitive patient data, which can mean inflated fees, penalties, and a higher risk for security breaches. Medical practices looking to reduce these unnecessary expenses can bring in a third-party consultant or advisor to find hidden fees and potential areas to optimize their costs, ultimately strengthening their bottom line.

How much do credit card processing fees typically cost medical practices?

Credit card processing fees typically cost anywhere from 2.5% to 4.5%, depending on the type of transaction, merchant category, and card used. Since medical practices often handle large volumes of payments, these fees can go unchecked, becoming quite costly. Businesses can save on these fees by understanding and analyzing their merchant statements to identify areas where they are being overcharged and negotiating with their processor.

How can medical practices avoid these processing fees?

Beyond regularly reviewing credit card statements, medical practices can avoid unnecessary fees by regularly updating their practice management software. With critical patches for security and compatibility, delays in these updates can lead to serious consequences, such as HIPAA violations. These violations can result in hefty fines and damage to your business’ reputation. In addition to protecting your reputation, keeping your software up-to-date and compliant protects your business from any penalties that may arise if not all the required data is passed to the processor.

How can medical practices prepare for credit card surcharging?

Practices considering a surcharge program need to be aware of the laws and regulations that vary by state and card network. For example, New York State recently introduced a law requiring businesses to disclose credit card surcharges, limit them to the processor’s fee, and display the total cost including the surcharge or the cash price alongside the card price before checkout. It’s more important than ever for practices to prepare, which can be achieved by knowing what the law requires of your practice in your state, including familiarizing yourself with fee caps and signage requirements. Many states mandate visible signage at the point of sale, with some requiring signage at the entrance to inform customers about surcharges.

Insurance and insurance reimbursement cards are another part of processing that practices must be familiar with. Insurance reimbursement cards are corporate credit cards with a specific amount of money loaded to send payments from the insurance company. These cards do not work with surcharges, as they cannot pay for the additional surcharge fees. A medical office can add a surcharge fee to regular credit card transactions if their program and pricing for services fall in line with insurance, state, and card brand requirements.

Can you explain the difference between credit card surcharging and cash discounting?

Cash discounting is when businesses offer a discount to customers paying cash whereas credit card surcharging adds a fee for the convenience of using a credit card. Cash discounting provides a reduced price for customers who pay with cash, which helps businesses bypass processing fees entirely. To properly implement a true cash discount program, prices are raised across the board, with a set discount given to those paying with cash.

While this will remove the processor entirely, this also assumes that customers have cash on hand, which is becoming increasingly rare. Even though this discount eliminates fees for cash users, it still doesn’t reduce fees for those who still choose to pay with a credit card. Surcharging can help directly cover these processing costs but merchants should proceed with caution if they are considering implementing.