Today, many medical practices, just like other business, are greatly overpaying for their payment processing. Oftentimes, it’s because they are generally unaware of the cost of taking credit and debit cards.
“At some point, they put in place a merchant services contract and they have not looked at it since,” says Scott Tanker, regional sales director for Benchmark Payment Networks in Cold Spring Harbor, NY. “Unfortunately, this means they’re wasting money every time they take credit or debit cards to make money. It may only be a few pennies per transaction, but that can add up to a lot over time.”
Why You’re Overpaying
Robert Livingstone, president and founder of IdealCost.com, based in West Palm Beach, Fla., says most medical offices are busy concentrating on other tasks such as patient check-in, insurance issues, and cancellations.
“We find that medical administrative staff, including office managers, are normally stretched very thin and constantly on the move,” he says.
Additionally, the person who is usually in charge of the merchant account in a medical practice is an office manager rather than the accounting department or a CFO.
“Unlike other types of businesses, these staff members do not have training in finance and truly do not have the time or expertise to handle the merchant account,” Livingstone says. “Also, these merchant account statements are full of cryptic numbers and codes that are impossible to read and understand.”
Lastly, unlike an accounting department or an executive, the office manager’s job is not measured by how much money they save the business.
“Therefore, neither the training nor the incentive to perform is present in the medical office,” Livingstone adds.
Check Your Statements
There are several steps you can take to reduce your merchant services fees. First, all merchant services should be checked monthly. If the office staff does not feel entirely comfortable handling it in house then it should be outsourced to an expert.
“One practical tip is to realize that these merchant contracts have a 3-year term with an early termination fee of $300 or more,” says Livingstone. “Therefore, it’s not wise to keep switching service providers every few months because even if you can generate a slight savings you will keep paying termination fees.”
Another reason to check services monthly is because many credit card processors have policies that won’t allow merchants to dispute a wrongful fee after 30 days. That means that even if a credit card processor wrongfully charges a merchant, after 30 days you can’t have the fee reversed.
Tanker adds that you can ask your payment processor to do an audit annually that includes an analysis of fees paid under the current fee structure versus other possible fee structures.
“You can always negotiate a contract,” he says.
Buy Instead of Lease
Medical offices often sign long-term leases for their credit card machines. That’s the wrong approach say Livingstone and Tanker.
“Rather than buying a machine for $300 and owning it outright, many practices are suckered into renting a machine for $50 per month for 36 months,” says Livingstone. “That is a total of $1,800 over 3 years and at the end of the term you have to send the machine back because you don’t own it.”
Debit Instead of Credit
Since debit cards cost a lot less to process than credit cards, Tanker recommends training your staff to recognize these kinds of cards.
“When they receive one, they should ask, “Do you mind if I run this as debit?” rather than “Debit or credit?” he says. “Additionally, they should limit inputting the numbers into the credit card terminals because that results in the highest fees.”
Staff should also be properly trained because payment processing fees can be confusing.
“It would make sense that each time a payment is processed, a certain percentage of that transaction would go to the processor,” says Tanker. “However, it’s not that simple. Often times the percentage depends on the type of card—American Express being the most expensive and debit cards being the cheapest—and other factors.”
Some merchant services may have a flat fee for each transaction. Looking into the fees and how they’re structured can also save medical practices a lot of money.
Tanker says if you know what fees you’re being charged; process as many payments as possible as debit transactions; and own rather than lease payment terminals, most medical practices can save somewhere between 10 and 25 percent of what they’re spending on payment processing.
“When my medical practice clients have successfully instituted these changes, they’ve saved upwards of $3,500 annually,” he says.
Technology also has a big role in making healthcare more affordable to many people. Imagine a value-based care delivery that can connect providers, caregivers and patients, as well as sources of data in a coordinated way. This technology platform can also support the analysis and integration of this data for improved outcomes at a lower cost. As Richard A. Kimball, Jr., founder and CEO of HExL, Inc. would like to put it, “In the future, the white coats and the [business] suits will become one. Providers have to be able to straddle the diagnosis and treatment elements together with the financial risks they are bearing.”