Nickel and Dimed: Physicians Can Avoid Electronic Credit Cards and Their Fees
By Sean Price Texas Medicine August 2022

Chances are that at least one small health care coverage plan is trying to force your medical practice to receive payments through a virtual credit card – one that charges unnecessary fees. 

“This is something that’s affecting all practices to some degree, whether it’s a hospital that’s billing … or private physicians like myself,” said Frisco internist Bryan Johnson, MD. “This would obviously reduce a physician’s revenue and what they’re getting back in payments.” 

The good news is that physicians don’t need to put up with that, and the Texas Medical Association can help. (See “How to Respond to an Electronic Credit Card,” page 47.)  

The bad news is that it might take some work to resolve the problem. 

Since the major provisions of the Affordable Care Act (ACA) took effect in 2014, a typical insurance plan payment process has gone like this: The physician’s office requests that the health plan pay a patient’s claim using an electronic funds transfer (EFT). The health plan complies and electronically drops the money straight into the physician’s bank account with no fees. 

But Dr. Johnson says a “significant minority” of small health plans are still trying to force physician offices to receive payment another way: The health plan issues an electronic credit card to the physician as payment. But this method comes with a fee from the health plan of 3.5% or more – paid for by the physician and deducted from the card. The credit card company charges the physician an additional fee.  

The result: A transaction that should earn a doctor’s office $100 instead earns closer to $95. For a busy practice, such deductions add up fast. 

Not only are insurers requiring the use of an electronic credit card to transfer money, but also they make it very difficult for physician offices to change payment methods once they agree to the electronic credit card option, Dr. Johnson says. 

 “If there is a way to opt out, physicians don’t know about it, and it isn’t readily available for someone to find.” 

Inexperienced office staff might not understand what they’re agreeing to when they accept an electronic credit card as a means of payment, says Joseph Mathews, practice administrator for Advanced Orthopaedics and Sports Medicine in Houston. In larger practices – especially those with multiple offices – all it takes is one of these employees to agree to the electronic credit card payment – usually offered in the form of a letter or email – to obligate the entire practice and all its offices to that agreement. 

“The staff who are accepting these letters often don’t know, and it might go on for months or maybe a year before you catch it because you’re reviewing and seeing that the backend fees have gone up so much,” Mr. Mathews said. 

Skirting the rules 

The use of electronic credit cards by health insurance plans is a long-standing problem, says Carra Benson, TMA manager for practice management and reimbursement services. ACA as well as a Centers for Medicare & Medicaid Services rule that went into effect in 2014 created standardized practices for EFTs and each patient’s electronic remittance advice, or explanation of benefits (EOB). 

The regulations apply to all insurers required to comply with HIPAA, which is most health plans, Ms. Benson says. However, it’s typically smaller health plans that have skirted the law and insisted on issuing virtual credit cards instead of offering EFTs. 

That can include Medicare Advantage plans that appear to supplement regular Medicare coverage but instead effectively replace it with an HMO-like plan with less coverage, says Sharon Oliphant, Dr. Johnson’s chief operating officer.  

Others plans may not be required to be HIPAA-compliant and therefore to follow the federal EFT standards, Ms. Benson says. For instance, so-called health care-sharing ministries are nonprofit organizations that pool members’ contributions to cover certain medical expenses. But these organizations are not technically insurers and therefore typically not regulated as such. 

Anecdotally, physician practices have noticed electronic credit cards are commonly used by less-established insurance entities.  

“[Some of] these businesses pop up overnight, and then they’re gone within six months,” said Christy Owens, the business manager who works with Mr. Mathews at Advanced Orthopaedics and Sports Medicine. 

Regardless of the electronic credit card’s source, TMA-member physicians should contact TMA to discern insurers’ obligations and help practices minimize future problems, Ms. Benson says. 

“That way we can do more research on our end … and give the practice information on how to handle the virtual credit cards so that they’re educated on that front moving forward.” 

No easy option 

If the health care company is not HIPAA-compliant – and doesn’t have to follow rules governing EFTs – then practices may face two bad choices: accept the credit card and the accompanying fees or accept a slower form of payment – usually getting a check by mail – which means not receiving payments promptly.  

“I’ve seen as much as six to eight weeks go by before you get that paper check in the mail,” Ms. Owens said. 

There are other reasons physicians may want to avoid using electronic credit cards in general, largely because they add paperwork.  

For instance, when an EFT is done through a patient’s electronic medical record, the EOB typically is uploaded at the same time. On the flip side, an EOB does not automatically accompany an electronic credit card payment.  

In those cases, staff members must spend time tracking down the EOB, Ms. Oliphant says. Unfortunately, receiving payments by mail leads to the same problem. 

Practices always have the option of dropping those health plans paying by virtual credit card, Dr. Johnson says. But that means losing those patients, too, leaving both parties in a tough predicament. 

 “My dedication to my patients makes that decision very difficult,” he said. 

In addition to contacting TMA for help, practices can start heading off this problem by putting staff members on alert that the reasonable-sounding solicitations for electronic credit cards will hurt the practice.  

“The best defense is educating the front-line staff about the letters they receive and about what is an acceptable form of payment and what is not,” Mr. Mathews said. “You have to educate every single [person on] staff.”