March 8, 2023
When patients pay their medical bills electronically doctors often make less as a result. This is due to interchange and transaction fees. Within every card transaction running on payment networks like Visa or Mastercard, there are fees. These “swipe fees,” historically paid by the business owner, can range from 2% to 3.5% or even higher.
Many practices see these fees as a cost of doing business, but they can add up quickly. For example, let’s say that a patient pays a $15,000 bill with a card that has a 3% fee. That’s $450 that the practice does not receive on that transaction. If 10 of these transactions take place over the course of a year, the practice loses $4,500—all for the privilege of taking payments electronically.
Experts say there are ways a practice can reduce the amount it pays in processing fees. Michael Gutlove, founder and CEO of ERJ Solutions, has worked with hundreds of medical practices helping streamline their systems and provide merchant services at a lower cost. He says that practices can save money simply by examining how they get paid and making a few adjustments.
“Doctors don't attend medical school to become accountants, bookkeepers or mathematicians,” he said. “Most of the time, a practice will opt to use whatever is recommended to them, just out of convenience. They don't have to think about it. But the convenient approach can be unnecessarily expensive.”
Gutlove says that practices can often reduce processing fees by making changes to pricing and the systems used to accept payments. He is so confident that ERJ Solutions, which is part of Nitra’s partnership network, can save medical practices money that he offers Nitra card members a 30% savings over their existing merchant services.
“We aim to present as many choices as possible,” Gutlove said. “We don't want to dictate how the consumer behaves; we want to give them options. By doing so we mitigate the potential high costs to the practice when they get paid from their patients.”
One strategy is called “dual pricing” and it is seen most often in an unusual place: gas stations. In many states, stations advertise one price for customers who pay with a card and a separate, lower price for those who pay with cash. Medical practices can do something very similar, Gutlove says, and give patients a choice. They can pay with a card and absorb the fee or pay by cash or check and save money.
“The consumer will get a benefit,” he said. “When they use their card, they'll get points, they'll get rewards, they'll get miles and whatever else they're going to get. But the practice won’t have to pay for it. They can also give a benefit to patients who say, ‘I'll write you a check.’ By doing so, they don't have to pay the higher fee for using a card.”
Gutlove says that examining and overhauling payment systems has other benefits, too. Often, it can streamline revenue cycle management, eliminating manual work and giving doctors and staff more time to spend on healthcare. That’s no small matter. Most private practices and medical groups dedicate about one full month of an employee’s work time each year—more than 150 hours—to financial busy work, according to Nitra’s Doctor Survey.
One of the first things Gutlove’s firm does when it engages a practice is analyzing how payments and billing are handled. “Typically, we uncover some things that are working well and some things that aren't,” he said. Often, there are ways to improve.
When it comes to dual pricing, he says that the idea is often greeted with enthusiasm in medical practices, and by patients as well.
“Ultimately, we're not going to steer a patient to go one way or the other,” he said. “We like to present the concept of choice. At the end of the day, it comes down to what the consumer wants to do. The more choices offered, the less painful it is to help the practice get paid.”