By Eric Cohen
Over our 20 years of experience working with hospitals, we have learned that hospitals tend to find themselves engulfed in the daily issues of running a complex organization. This along with the fact that credit card usage continues to increase and that there is no easy way to decipher the cost of processing credit card transactions we have found that in many cases, organizations can be overpaying by as much as 40% for this service. Working together with many hospital CEOs and CFOs, the respective departments that handle these costs and thousand of medical office managers, we have been able to expose the hidden cost of processing credit cards nd successfully eliminate these fees and in return, increase the hospital’s bottom line profitability. As we become a more cashless society, hospitals and medical offices continue to have increased credit card acceptance with volumes increasing exponentially year after year. This is caused by the increase in copay amounts and deductibles, insurance companies remitting payment via credit cards, and the fact that consumers are using their credit cards to earn reward points. Acceptance of cards helps alleviate some of the monetary constraints being felt in the healthcare industry today as it allows for faster collection of payment.
Auditing the processing statements is not as simple as checking what your rate is as there are many different pricing programs and variables associated with credit card transactions. While your hospital may have the best “rate”, that is only one variable of about a dozen areas that need to be checked. Could you imagine, you go in for an annual physical and your doctor looks at you, takes just your blood pressure and says you are all good to go and fails to look at all of the details and tests you normally get. This is exactly what we are talking about. There are over 600 categories of cards, coding issues, hidden fees, incorrect setups, lack of optimization, etc. that need to be checked regularly. Just one mistake on an initial set up can cost your systems $100,000s. annually. To make matters even more complicated, most medical organizations are tied to an EMR or back-end office system that is also part of the set up and cost to acceptance.
This is like when the hospital first became incorporated, your financial team helped determine the correct financial set up for your organization. Credit card processing is different as there are continuous changes within the rules of Visa, MasterCard, Discover and American Express. The payments industry is fluid with changes occurring many times throughout the year at the Issuing banks, Card Associations, Acquiring Banks, Processors and Sales Offices and the idea of properly “reading a credit card statement” has become almost impossible, even for the seasoned CFO or Finance personnel.
Another area that coding is important to keep an eye on is with the remittance of insurance payments by the insurance company to the hospital. Over the past 5 years we have seen this area grow exponentially. Acceptance of these payments help streamline the payment process of claims and is an important part of collecting revenue quickly. It is important that this be something you keep an eye on as coding and improper set upset up can cost your system hundreds of thousands of dollars in extra fees. It is imperative that this is checked out. While the banks have over 600 rate categories, there are a few different pricing programs that processors use to collect fees from your organization. You may have programs that include flat rates, swiped rates, keyed rates, qualified, mid-qualified, non-qualified, interchange pass through or passthrough plus. All these different pricing models along with different categories and other fees such as pin based debit, pin less, debit, EMV, PCI, batch fees, debit fees, annual fees, voice verification fees, address confirmation fees etc. all matter when figuring out your overall cost. Many credit card processing companies will offer a low rate but fail to communicate the “downgrades” or penalties that a practice will be charged when a transaction is not considered qualified. To make matters worse the processor can choose what is considered qualified and what isn’t, creating once again a hidden fee.
While we can write a book on these hidden areas, be mindful of the funding time to receive your funds. If you process with your bank and you can receive funds quicker, it can help reduce your fees on your debt service. When is the fee taken out, monthly or daily as that will change the work needed to reconcile? Increase in work obviously adds the cost of processing and of course, why pay daily when you can keep your money in your accounts longer and earn float on this capital. Finally, it is important to note that switching processors can be a difficult task for larger organizations (some of our hospital clients can upwards of 500+ merchant accounts), especially if you have an integrated patient and/or rev cycle system bundled together with your payments program and EMR. However, if you continue to check the health of your credit card processing costs, the concept of changing processors should not be necessary. To attempt to switch processors and possibly change the way your system flows can be a long process with the need to buy new terminals and point of sale systems. By monitoring and managing your payments program, the idea of changing processors should not be needed, unless your current partner does not have the technology upgrades to stay current with integrations, PCI compliance and other features necessary within our industry. If you can continue to keep the fees under control, change should not be needed. If for some reason you do need to explore other options and consult with other processing companies for reasons like your current banking relationship insists on working with your hospital, it is important to have an expert sit next to you making sure everything is done correctly and in the most efficient manner. That being said, just like we must maintain our health and check in with our doctors on a regular basis, hospitals must also spend time continually monitoring their credit card processing expenses in order to protect their P&L and profitability.
