In today’s world of coinsurance and high-deductible health plans, more of a practice’s revenue comes from the patient. Therefore taking credit cards as a form of payment has become a must, and along with that come the fees associated with having those cards processed. Are you paying too much?
Credit card processing, commonly referred to as merchant services, is one of the most overlooked expenses in a medical practice, and thus practices often do not scrutinize this expense carefully when it comes time to negotiate the contract with a merchant services vendor, said Brad Davis of TMA Practice Consulting. This is mostly because credit card expense is not a bill paid monthly; vendors take their fees before the depositing payments in the practice’s account. “Not only that, the contracts and fees are not straightforward and can be confusing,” Mr. Davis said.
Below is an overview of the different types of fees merchant services vendors charge that you may be able to negotiate in your favor.
- Percentage of sale. Vendors will take 1.25 percent to 3 percent of the credit card transaction amount before depositing funds in the practice’s account. These fees are usually calculated one of two ways:
- Tiered percentage. Some contracts have tiers — qualified at 1.5 percent, midqualified at 1.75 percent, or nonqualified at 2.5 percent. A card will fall into one of the tiers depending on the type of card. The problem is a practice will not know what tier a card is in when taking the payment.
- Flat rate. This model is a flat percentage of 1.50 percent to 2.50 percent for all cards processed.
- Per-transaction fee. On top of the percentage taken per sale, typically there will be a per-transaction fee as well. This is a .05- to .10 cent fee for every credit card transaction, including refunds and voids.
- Batch closing fee. This is another fee charged each time you close out a batch. For example, at the end of each day when you total and close out the credit card transactions, a fee is charged. This fee also is usually around .05 to .10 cents.
- Statement fee. Most vendors also will charge a monthly statement fee of $5 or $10. This fee is usually more negotiable with paperless statements or with the argument that creating invoices is a cost of doing business for the vendor. No practice should pay this!
“Any practice that has not renegotiated its merchant services contract should do so, and get multiple quotes to play the vendors against each other for the best rate,” Mr. Davis said. A low rate is the most important goal, but some vendors do offer more features than others, sometimes with a fee. The features include widgets to have an online payment option added to your website, auto-debit or payment plan options, and the like.
“Even though negotiating the contact may mean only a few cents off per transaction, or .10 percent less of the sales amount fee, over time that will add up to significant savings,” Mr. Davis said.
TMA Can Help
When you’re in the market for a new member services company, you may want to take advantage of specially negotiated rates for TMA member with TransFirst, a TMA-endorsed vendor. Or, contact TMA Practice Consulting at (800) 523-8776 or practice.consulting[at]texmed[dot]org. A TMA consultant can evaluate and benchmark your all of practice’s operating costs — such as credit card fees — through an Operations Assessment, and find opportunities for improvement.
Published June 14, 2017
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June 14, 2017