Gilbert Johnston

Beware of the enticement to switch merchant services to a financial institution with lower fees on credit card transactions. “Physicians and physician practices are often convinced by their banking partner to take a merchant service agreement from that bank, ignoring the extra resources that program will require,” says Gilbert Johnston, COO at The Valletta Group.

With every credit card transaction costing the practice between two to four percent of the total charged plus a small transaction fee of around $.10 to $.25, lower rates are tempting. Even a small practice that earns $15,000 a month in credit card payments, would appear to generate a yearly savings of $1,800 for even a one percent drop in rates.

But that savings is deceptive because medical practices can harness their practice management (PM) software and save a bundle on the far greater expense of staff time. “Typically, retail banks do not offer a tool that integrates with practice management software,” Johnston says. “So with a lower rate, you gain a few extra cents per transaction. But you lose additional workflow and the hours needed to process and post those transactions to your PM software.”

With most bank credit card terminals, office staff is required to run the credit card (or the number) through the terminal to attain approval, and then manually post the payment to the practice management (PM) system.

In contrast, merchant service programs that are integrated with the PM system drop staff involvement to one step or even none. “The patient can call the office to make their payment, and the staff would not process the payment via a terminal, but into the PM software. One step,” Johnston says.

With the online bill pay function, the payment process becomes ultra-efficient. When the patient pays through the integrated software’s secure portal, it gets posted directly into the PM software. No staff time required. Their only duty may be to associate the payment to the appropriate charge, which would mean reading through and clicking a few things on the screen each day. “You’ve mitigated staff time greatly if the patient has paid online,” Johnston says.

Even better, says Johnston, is to take advantage of the card-on-file function. Basically, it’s like a deposit on upcoming services or procedures using the patient’s credit card. The patient preauthorizes their card to be charged up to a certain dollar amount. Then, if they owe a balance after the claim is processed, the practice can automatically charge the card for the balance up to that agreed-upon amount.

The savings can be notable. One practice for whom The Valletta Group provides billing services improved their patient collections by 12% simply by implementing card-on-file to their workflow.

Primary care practices typically pre-authorize for $50 to $100, possibly more for those patients carrying a high deductible. The maximum will be determined by the specialty. “It does speed up your money,” he says. “You don’t have to spend money to send the patient a statement, and as soon as insurance processes the claim, you can immediately charge the remaining patient responsibility portion to that card you kept on file.”

If a statement for balances due is needed, integrated merchant services can automatically send it through texts and email, saving cost for paper, postage and associated staff time. The links make for easy online payments in just a few clicks.

The disadvantage to integrated billing models lies in the time invested to train staff on the software and different workflow adaptations. “So there’s some front-end pain for a long-term reward,” Johnston says.

The same with the cost. It may appear to cost more than a lower-rate retail bank service, but not when staff time and workflow are assessed. For an average single provider, fees for an integrated merchant services solution may equate to $50 to $75 more per month than a personal bank. “The cost savings from staff resources will be in the $150 to $200 per month range, though,” Johnston says.

According to a survey of 171 healthcare IT executives by US Bank, 72% of executives reported their payments integrated or embedded in their management software in 2019. A year later, that number shot to 92%, proving a strong trend in the integration option as a cost-saver.

Finding an integrated billing service begins with contacting the practice management software vendor to ascertain which merchant service programs are compatible. Most only have one choice. “Then ask if they will match your current bank rate to win your business. Tell them you’ll move forward right then,” Johnston says. “And don’t try to beat your current rate, just ask if they’ll match it.”

Within the next five years, the healthcare IT executives who participated in the US Bank survey believe practices healthcare payments will expand beyond credit cards and cash. They expect revenue to come through peer-to-peer payments (Venmo, PayPal and Cash App), contactless payments (swiping smartphones and kiosks), and mobile apps. Meaning anything practices can do now to make incoming revenue more compatible with their practice management, the better. Yet another question to ask when seeking the next merchant service option.