Virtual Card Payments and Their Hidden Costs for Dental Offices
In today’s ever-evolving dental industry, shrewd auditing is paramount to maintaining a thriving practice. However, one area that often escapes scrutiny is the high acceptance cost of virtual credit card payments from insurance companies.
While these payments offer convenience, they can also result in significant fees that negatively impact your practice’s bottom line. As a dental office manager seeking to mitigate costs, taking a closer look at your practice’s virtual payments is crucial.
The Rise of Virtual Credit Card Payments
Insurance companies have increasingly adopted virtual credit card (VCC) payments as a method to reimburse healthcare providers. VCCs are unique credit card numbers generated for a specific transaction or payee, offering a secure and efficient alternative to traditional payment methods. For insurance companies, VCCs streamline the payment process and reduce administrative burdens while allowing them to reap the benefits of credit card-use rewards programs.
“Insurance payers view VCC issuances as just another revenue line item on their books, earning up to 2% cashback on every VCC accepted,” relates Steven Pishko, one of Merchant Advocate’s dedicated AADOM sales representatives.
The Hidden Costs of Convenience
While VCCs offer benefits to insurers, they can pose financial challenges for dental practices. VCC payments come with higher processing fees compared to traditional payment methods such as electronic funds transfers (EFTs) or paper checks. These fees can range from 2% to 5% per transaction, which, over time, can significantly erode your practice’s revenue.
“Most virtual cards submitted by insurance payers and patient payment aggregators are costing dental practices between 3% to 4% in additional fees,” says Pishko. “Understanding how to optimize these payments can reduce costs, sometimes by over a percentage point.”
This can go a long way— especially if you’re a high-volume office or have multiple locations.
“Working with one pediatric dental clinic, I was able to cut their VCC fees by more than 1%,” he adds. “That’s a savings of more than $5,000 in fees per year.”
Check Your State’s Laws
The financial strain that obligatory VCC payments can place on healthcare providers has not gone unnoticed by government officials, and several states have enacted legislation to regulate their use. These laws often prohibit insurance companies from exclusively offering VCCs as a reimbursement method, ensuring that providers have alternative options.
To determine whether your state has such legislation, consult the American Dental Association’s (ADA) resources on practice management and insurance regulations.
Three Strategies for Optimizing Virtual Payment Acceptance
To mitigate the impact of high processing fees associated with VCCs, consider taking these steps:
- Stay Informed About State Regulations: As mentioned above, regularly consult the ADA for updates on legislation affecting payment methods. If you are in a state that requires alternative payment methods, the insurance company must comply if you request payment by ACH EFT. If they fail to comply, you can file a complaint against the health plan with the Centers for Medicare & Medicaid Services.
- Review Contracts Carefully: Examine your agreements with insurance companies to understand the stipulated payment methods and associated fees. Seek clarification and favorable terms where possible to include more favorable terms.
- Leverage Professional Resources: Consider partnering with independent consultants like Merchant Advocate who can provide guidance on both optimizing your virtual payment setup and reducing your overall processing fee costs without switching processors.
By proactively managing payment methods, educating your team on how to differentiate between patient and health plan credit card payments, and staying informed about relevant legislation, you can help your practice navigate the complexities of virtual payment acceptance.
As a long-term, trusted partner of AADOM, Merchant Advocate is here to help you with any payments-related challenges. To find out more or get a complementary analysis, please click here.
