How to reduce your practice's credit card fees

Surveys show that more and more physicians no longer accept credit and debit cards, in large part because of the expense. But these charges can be contained by shopping around, paying attention to added fees and processing in the most secure manner.

For instance, Fayth Breeding, the office manager of Chatham Facial Plastic Surgery in Louisville, Ky., and New Albany, Ind., collected sales pitches sent to her by credit card processing companies and decided to call them when the one they were using increased its rates.

Armed with information on the various arrangements, she had companies bid for their business. In the end, the practice was able to get the processing machine at no charge and reduce the average percentage paid on each transaction by about a point. This is saving the practice hundreds of dollars annually.

"Every little bit helps," she said. "That's enough for a big order of office supplies."

Merchant service organizations charge approximately 2% to 5% of the value of a transaction, and experts say it is possible to keep these costs on the low end. A practice can reduce this expense by approximately $800 to $1,200 per physician per year. Physicians may be able to get lower rates, as Chatham Facial Plastic Surgery did, by calling several processing companies to compare costs and use the information to negotiate lower fees.

Smaller practices may get better deals by joining with other small businesses and using a processor linked to a local chamber of commerce or a professional association. The American Medical Association has an arrangement with First National Merchant Solutions for its members.

"There's always the option for [physicians] to negotiate and shop around," said Randy Phelps, associate manager and First National's liaison to the AMA. "Everybody negotiates to some extent, although, when practices are small, it is going to be more difficult to get as competitive a rate."

When shopping for a processor, however, determining what exactly is a good deal can be extremely complicated. Credit card processing fees rival medical billing in complexity, although there are some common areas that can cause the most problems.

For instance, for practices just starting to accept plastic and shopping for a processing machine or "swipe box," experts say leasing agreements should be avoided and are rarely cost-effective. That's because these devices can be bought for a few hundred dollars or may be supplied by some companies at no cost.

Physicians also should ensure that the machine allows patients to enter a PIN for debit cards. The fees for this type of transaction can be lower than for credit cards, especially for bills more than $40, because debit cards are charged at a flat rate of 70 to 80 cents per transaction instead of a percentage.

Experts also say the mistake many business owners make when shopping for a processor is to compare only the percentage charged for the transaction. They advocate asking about tacked-on additional fees. These vary widely and can include per-transaction flat fees on top of the percentage. Other possible charges are those for authorizing the transaction, issuing statements, or not meeting minimum volume requirements.

"The first thing is [physicians] need to know where the cost is coming from, but that is very hard to do. It seems there can be all sorts of fees thrown in there haphazardly," said Steve Erickson, CEO and president of EnablePay Direct Inc., a processor in Garden City, N.Y.

Other possible expenses that need to be taken into account include annual or monthly fees or those for terminating contracts early. Any promise to lock in low rates for longer than six months also should be viewed skeptically. Processors add their fees to interchange rates set by credit card companies, but these change twice a year.

"If a processor comes into a practice and guarantees a rate for the next three years, ask some additional questions," Phelps said.

Once a machine is in place and an arrangement with a processor set up, paying attention to how office workers process the cards also can save money. The more secure a transaction is, the less likely it is to be fraudulent or need correcting down the line, and the lower the fee tends to be.

For example, swiping the card while the patient is there and having them sign the remittance is likely to be charged a lower processing fee or "qualified" rate than if a credit card number is keyed or phoned in later.

If patients are billed and sends in their credit card information, the fee may be lowered if staff members are able to perform address verification at the time of processing. But those who work in this area also suggest discussing with the processor exactly how transactions are categorized and what actions are needed to ensure the lowest fee. There are approximately 100 different interchange categories, although most processors divide these into three to five broad groups that vary widely.

"[Physicians] should have their office manager or whoever is doing the accounting confirm all the rates and fully understand every charge for every transaction," Erickson said.

But physicians say accepting plastic is worth it, because it's what patients want. The expense of this form of payment also often is outweighed by the cost-saving associated with putting fewer resources into billing and collecting after patients leave the office. This is even more true if the associated expense is minimized.

"This is the way the world economy operates. I pay for nearly everything with a credit card. It is convenient for me, and convenient for the patients," said Donn R. Chatham, MD, owner of Chatham Facial Plastic Surgery and president of the American Academy of Facial Plastic and Reconstructive Surgery.