For the owner of a medical practice that is falling behind, one question comes before all the others: “How quickly can I get card payments in my bank account?” When most practitioners meet with their financial advisors, they aren’t talking about transaction costs and waiting periods. They’re looking for ways to bolster their finances. The short answer is, really fast. For insurance payments, getting paid with insurer virtual cards is great because the payment hits your account within a few days, but you need to be aware that 3-5 percent will be deducted from the reimbursement you receive from the insurer.
Virtual Cards
A virtual credit card is a one-time use credit card number, issued by a payer or its third-party vendor. Practices usually receive it by fax along with the EOB. Their clerk types it into the card terminal, and the money for the batch of claims hits the bank in a few days. The fee is usually deducted from the rates the doctors have negotiated with the health plan. Often the doctors are unaware of the fee that’s eating into the contracted rates. Sometimes the plan even gets up to 1.75 percent cash back from the card company. In other words, your practice’s money is subsidizing your insurance plan. The trouble is, providers often aren’t aware of the associated costs, and for that reason alone it’s smart to review all payment terms - the good, the bad and the ugly.
Sure, you could tell the insurance companies to stop using these virtual cards, but if they don’t, what recourse do you have? More than many owners realize: doctors have a legal right to demand ACH electronic funds transfer (EFT) and electronic remittance advice (ERA) and to reject virtual cards. If the payor refuses to switch over, you can file a complaint with the Centers for Medicare and Medicaid Services (CMS). The cost of ACH EFT plus ERA is about 34 cents per transaction on average. In the past it was 1.5-2.0 percent, and the provider’s bank would charge it. But that all changed after an Aug. 25, 2014, letter to the U.S. Department of Health and Human Services (HHS) from the American Medical Association (AMA), the American Hospital Association (AHA), the Medical Group Management Association (MGMA), NACHA and the National Committee on Vital and Health Statistics. And posting payments automatically saves about $4.74 per claim, which you lose when you use virtual cards because it can’t be matched to the electronic remittance advice.
The catch is timing. Ask the practice administrator to go through existing payer contracts. Many of them now include an option for the payer to pay via virtual card, and the practice gets charged for the transaction without realizing it. Find the percentage for each transaction and convert that to a dollar amount. Payers may increase the percentage after you start accepting cards. While signing a new contract you can ask for EFT payment. If you’re already under contract with them, try to negotiate to get out of the virtual card clause. It takes time and money to opt out. And you probably won’t be paid by the carrier while you’re waiting. That’s a huge drag on a small practice’s cash flow.
Some practices that accept many plans would rather not enroll in EFT at all, because virtual cards mean less hassle from payers. The extra fees are a “convenience” that you’re willing to pay. That’s a business decision. Just be sure you make it with your eyes open. The last thing a practice that is already behind on bills wants is to lose 3 to 5 percent of every insurance payment. That could have been used to make payroll or pay creditors. Getting paid quickly with a “discount” isn’t the same as getting paid in full.
The Patient’s Balance
Patient balances are the other half of the picture. Collect copays, deductibles, and charges for non-covered services at the time of service. That way you avoid a second collections cycle. Keep credit cards on file with patients so you can charge them. Accept money transfers and debit cards so the funds go straight into your bank account. Try eChecks, or virtual check payments. Bill HSA, FSA, pharmacy cards, or charitable organizations for the patient’s balance. Collect for multiple services provided on the same day in a single payment. For surgical procedures, estimate and collect the pre-op, surgery, and post-op costs all at once up front. Negotiate lower rates with credit card companies. Credit card payments can be made in-person, over the phone, or online via the patient portal. In fact, they can even be taken prior to the service being rendered.
Some practices try to recover card fees by passing them on to patients. This is called “surcharging,” and it’s illegal in some states or for federally qualified health centers. Research your state’s laws (as of Feb 2024 there are certain restrictions). If you can do it: you must notify the card institutions first in writing. Notify the patients too, by letters, invoices or signs. You can only pass on the actual processing fee (which is usually up to 3 percent). Debit cards can never be surcharged, even if they are charged as credit transactions. Prepaid cards are exempt too. HSAs and FSAs are exempt. The surcharge must appear as a separate line item on the invoice. Just stay PCI compliant. The downside? Some patients may dislike it. You’re asking them to pay your bill, your surcharge plus their credit card interest. You could lose patients with a 3 percent fee. You can always ask patients. Send an email or create a flyer, and ask their opinion. Give them a short questionnaire.
How Fast Can Expedited Settlement Happen
So how fast can expedited settlement happen? For insurer virtual cards, within a few days. In short, a practice can get its money very fast, but it has to know how much that is costing it. A practice in trouble can’t afford to give away 3-5 percent and not know it. You should always know the cost before you push that payment button. Be clear with your patients and your payers about what your accepted forms of payment are and what those fees are.
