Practices can speed collections by preauthorizing credit cards

Hotels and rental car companies have long preauthorized a customer's credit card before the final bill is tallied. Now some companies are offering physicians the ability to do the same -- for a fee.

The preauthorization systems work much like many others that process credit, debit and various health and flexible savings account cards. A swipe box is plugged into a computer, usually through a USB port, and can be used for both charges and preauthorization. The patient needs to present the credit card at each visit, although most of the systems also allow for automatic recurring charges over time. Practices can estimate costs and process payments through a suite of Web-based tools, which can be integrated with most practice-management systems.

"That's where the providers see the value in the system. They do not have to send out any statements," said Brian Beutner, CEO of mPay Gateway, one of the companies that offer such preauthorization services. "And they can collect as if the patient were still there. Patients like the transparency and knowing the most that they are going to be responsible for."

Others offering the service, either directly or through various banks, practice-management systems and health care information technology providers, include NaviNet and First Paid Healthcare Solutions, which is offered to American Medical Association members through an arrangement with First National Merchant Solutions.

Few takers as yet

So far, not many physicians have signed up. mPay launched its service 1½ years ago and has about 1,500 doctors as customers. NaviNet and First Paid began offering the service several months ago and have a few dozen physicians each.

"We have heard positive things so far, although it's pretty early to tell if physicians really like it," said Cory Mann, vice president of marketing and products at First National. "Changing some of the work flow can be a little bit daunting."

But early adopters report benefits. For example, Alan Smiy, MD, a solo family physician in St. Joseph, Mich., who signed up for the mPay program at the end of June, said he reduced the amount he was usually owed at the end of the month by $25,000 to $30,000. Most of those bills would have been paid eventually, he said, but improved cash flow makes his business more stable. He also saves money by mailing fewer paper statements.

"We wanted to come up with a system where we didn't have to wait 60, 90 or 120 days to collect balances," Dr. Smiy said. "We have been very pleased with the performance. Patients like the fact that everything is more current. We did lose a few people, but very few didn't want to pay. There are some who cannot, but we try to work with that population as much as we can."

Collecting credit card information for a future charge is not a completely new idea. Many medical offices have long done this, but usually with pen and paper. The firms offering these services say they automate the process and make it more secure. The information is kept off-site on servers in a system compliant with payment card industry standards.

"It has been done for years in a steno pad," said Elizabeth Woodcock, principal of Woodcock & Associates in Atlanta. "This is a secure way to do it that offers protection for practices from embezzlement or internal fraud."

Vendors say these services also have the potential to increase collections at time of service. Sending out bills after the fact can have limited success, and, as more time passes, patients are less likely to pay.

Fees are higher

Before signing on, physicians need to consider the fees, which vary widely but are higher than processing a credit card charge. For example, mPay Gateway charges 4% of the amount charged per preauthorized transaction. This is on the high end of merchant processing fees.

But supporters say this cost is balanced out by the reduced need to send out paper statements, which can average about a dollar each in staff time, postage and materials.

Before adopting preauthorization, medical practices need to identify if they have enough routine services that can be estimated easily. Then there's the challenge of persuading patients that preauthorization is a convenience -- that the cost of having a lower limit on a credit or debit card is worth not having to wait for refunds on overpayments or facing unexpected bills if payment at the time of service was not enough.