If you own a medical practice or clinic of any kind—whether you’re a doctor, dentist, or specialist—you need to accept credit card payments. But it’s important to understand the unique considerations facing medical practices that accept credit card payments.
Doctors and healthcare practitioners are professional service providers who process and accept payments differently than most other retailers. For example, although doctors run in-person businesses, they accept a large percentage of payments over the phone and online. Additionally, insurance companies may often pay medical practices using credit cards.
Over the past several years, doctor’s expenses have shot up while insurance company payments have decreased. In fact, recent estimates indicated that the average medical practice overhead is between 60–70%. With numbers like that, the last thing you need to worry when you’re trying to make and save money are high credit card processing fees.
Here’s the thing: if you’re running a medical practice of any kind and accepting credit card payments, there’s a very good chance you’re overpaying. That’s because merchant services providers know that, unlike restaurants and other retailers, medical practice transactions are much more valuable on average, and they want to capitalize on your high-value transactions by upping their rates.
With doctors too busy dealing with patient paperwork to diligently review their billing statements, these types of merchant services providers often get away with this, too. On average, medical practices may often be spending well over $1,000 per month on credit card processing fees. But, if they look more closely at their statements, they’ll realize they’re significantly overpaying.
What are the typical medical practice credit card processing fees?
If you’re accepting one of the four major credit card networks, then you’re paying somewhere between 1.5–2.9% in credit card processing fees. Note that American Express card rates can go as high as 3.5%.
More specifically, the average interchange rates for each of the four major credit card networks are:
- American Express: 2.50–3.50%
- Discover: 1.56–2.30%
- Mastercard: 1.55–2.60%
- Visa: 1.43–2.40%
How can you use this information? Simple. If you signed up for a merchant services provider without doing too much due diligence (or if you suspect for any reason that you’re being overcharged), simply divide the monthly credit card processing fees on your merchant service provider’s billing statement by your total credit card payments per month.
If that number is well above the aforementioned ranges, you’re in a bad business relationship. It would be in your best interest to find another merchant services provider as soon as possible.
What percentage of medical practice charges are through cards?
In 2017, payment processor TSYS surveyed over 1,000 consumers to see how they preferred to pay for things. The overall findings were that:
- 44% of all payments were made with debit cards
- 33% of all payments were made with credit cards
- 12% of all payments were made with cash
Debit cards are the preferred method of payment for smaller, day-to-day purchases, while credit cards are the preferred payment method for larger, one-off purchases—like annual checkups or regular visits to the doctor.
Yet a 2010 study by the American Medical Association found that up to a third of medical practices (33%) did not accept credit card payments at the time. That is a really high percentage in a field where the vast majority of payments—from both patients and insurance companies—arrives in the form of a credit card payment.
Additionally, a Blackbook 2017 Revenue Cycle Management survey discovered that the average patient deductible and maximum out-of-pocket payments have increased by 29.4% since 2015. Which, in practice, means that more patients are paying out of pocket for their visits, and medical practices are responsible for collecting those payments (usually via credit cards).
Finally, in the same survey, 71% of patients indicated that mobile payment options and billing alerts improved their satisfaction with their provider. And 95% of patients agreed they would pay online with a credit card if the provider had a website that offered the option.
With that kind of consensus from patients, having a medical practice but not accepting credit card payments doesn’t make much business sense.
What about HIPAA-compliant credit card processing?
As a quick aside, many medical practices have asked us whether we are HIPAA-compliant, and only want to work with HIPAA-compliant credit card processors. Here’s the thing—there really is no such thing as a HIPAA-compliant credit card processor, because basic processing generally falls outside the scope of HIPAA requirements and isn’t something you actually need to worry about.
This is because medical practices are ‘covered entities’ that must work with HIPAA-compliant third-party service providers when handling sensitive patient information. But when it comes to just credit card billing and processing, your merchant services provider doesn’t actually count as a business associate that handles sensitive patient information.
In other words, your practice should not provide protected health information (PHI) to your payments processor. Don’t enter details about a patients’ treatment in online payment forms. Generally speaking, you should leave comment boxes blank and only provide the absolutely essential information necessary for your processor to handle the payment.
On the flip side, your processor should not be sending receipts to patients via unsecured methods, such as text or unencrypted email.
As long as you can check these boxes, your merchant services provider doesn’t have to be HIPAA-compliant for you to work with them.
What about Health Savings Account / Flexible Spending Accounts?
As another aside, you may have some patients who want to use their health savings account (HSA), health reimbursement account (HRA), or flexible spending account (FSA) to pay for visits. If you want to accept these cards, you can. But you’ll need to let your processor know the correct classification.
We’re referring to merchant category codes (MCC), which designate your business type. You can only accept HSA and FSA cards if you’re assigned a healthcare MCC. The following list of MCCs includes specialists and general practitioners as well as dental and optometry practices:
- 4119 – Ambulance Services
- 5975 – Hearing Aids-Sales, Service, Supply Stores
- 5976 – Orthopedic Goods – Artificial Limb Stores
- 7277 – Debt, Marriage, Personal – Counseling Service
- 8011 – Doctors-not elsewhere classified
- 8021 – Dentists, Orthodontists
- 8031 – Osteopathic Physicians
- 8041 – Chiropractors
- 8042 – Optometrists, Ophthalmologists
- 8043 – Opticians, Optical Goods, and Eyeglasses
- 8049 – Chiropodists, Podiatrists
- 8050 – Nursing and Personal Care Facilities
- 8062 – Hospitals
- 8071 – Dental and Medical Laboratories
- 8099 – Health Practitioners, Medical Services-not elsewhere classified
If you aren’t sure what the right MCC for your medical practice should be, don’t worry. Just ask your merchant services provider to locate the correct code for you, do some simple due diligence, and you’ll be all set to accept HSA and FSA card payments.
How much you pay in card processing fees in one year
According to the 2019 Merritt Hawkins Physician Inpatient/Outpatient Revenue Survey, which is conducted every 3 years, specialist physicians made the most on average while primary care physicians made the least. No surprise there. But physician revenues have jumped tremendously since 2016 when the last survey was conducted:
The average physician had $2.38 million in revenue in 2019
Primary care physicians made $2.13 million in revenue, while specialists made $2.45 million in revenue, on average. Physicians as a whole made $2.38 million in revenue on average—53% more than they made in 2016, just 3 years prior.
Pediatricians make the least, on average, while cardiovascular surgeons make the most
Merritt Hawkins also gave breakdowns by specialty. Cardiovascular surgeons brought in the most revenue in 2019, with $3.7 million on average. Pediatricians were on the other end of the spectrum, bringing in just $1.61 million in revenue on average.
Let’s use the overall physician average of $2.38 million in revenue before expenses. While we don’t know the percentage of those payments that were made with credit cards, we can safely assume that it was at least 36% of all transactions, if not more. This is the accepted average percentage of all payments made via credit card at restaurants in the U.S.
We can assume that the average medical practice will accept more than that in credit card payments, but it doesn’t hurt to be conservative in our estimates.
With these assumptions, let’s see how much the average medical practice paid to their credit card processor in 2019—as well as how much they’d pay over a 30-year career, assuming revenue does not increase (which it will because of inflation):
|# of years in business:||30 years|
|30-year total revenue:||$71,400,000.00|
|% of credit card payments:||0.36 (36%)|
|Average credit card processing fee:||0.029 (2.9%)|
|Processing fees in 2019:||$24,847.20|
|Processing fees over 30 years:||$745,416.00|
As you can see, those card processing fees really add up. In 2017, the median home price in the U.S. was $199,200, which means your medical practice credit card processing fees over 30 years would add up to nearly four one-family homes. That’s crazy.
Put another way, if the average medical practice overhead is as high as 70%, that means that in 2019, the average medical practice only had $714,000 in profits. Which means that your 30-year credit card processing total could be as high or higher than an entire year of your take-home profits. That’s unacceptable.
What a cash discount program can do for you
It’s safe to say that, with recent developments in healthcare insurance, more and more patients will be paying with credit cards at your medical practice over the years. So not only will your percentage of credit card payments likely rise over time, patients are increasingly expecting in-person, over-the-phone, and online credit card payment options from their providers.
Fortunately, whether you already accept credit cards or don’t, there is a better way. With a cash discount program, you can bypass nearly all of your card processing fees while accepting cash, debit card, and credit card payments.
Simply put, a cash discount program is a type of credit card surcharge program that certain merchant services providers can help you set up for your medical practice. The best part? It’s 100% legal and compliant.
If you’d like to learn more about a cash discount program and how we can help you set one up in less than a week, just click the button below or call +1 (929) 293-1800: