Credit to your practice: Letting patients pay with plastic

Physicians are increasingly letting patients say "charge it." Casting payments onto plastic can be convenient for them and cost-effective for you.

By Julie A. Jacob, amednews staff. July 29, 2002.

You probably use credit cards routinely to pay for goods and services in your professional life, such as medical equipment and supplies, continuing education courses, society membership dues and so on.

But credit cards can also be a quick and convenient way for your patients to pay you for your services, and some experts say that if you don't accept them or don't encourage patients to pay for their treatment using credit cards, you're slowing down your payment cycle and losing potential revenue.

Accepting the charges

Giving your patients the option to pay their deductibles, co-payments and uncovered bills by credit card can save your practice money on billing costs, help you get paid more quickly and avoid the hassles of bounced checks.

The key to successfully incorporating credit card payments into your practice, however, is to teach your staff to remind patients about the option of paying by credit card and to encourage your patients to take advantage of that option.

About 75% of physician practices already accept credit card payments for deductibles, co-payments and other services not covered by insurance, according to Pamela Moore, a consultant with Physicians Practice, Inc. In addition, 95% of group practices accept credit card payments, according to Medical Group Management Assn. data.

Processing credit card payments costs about 50 cents; sending invoices, $5.

Louisiana Women's Healthcare Associates, a practice in Baton Rouge, has accepted credit cards for four years, said the group's CEO Tom Schmidt. About 40% of the group's patients are paying their share of the bill by credit card, usually at the time of service, he said.

While it costs about 50 cents to process a credit card payment versus about 35 cents for a check payment, credit cards are cheaper to process when factoring in the costs of bounced checks and invoices.

"It's a win-win situation for both the practice and the patients," he said.

Quicker payments

One advantage of getting paid by credit card is that patients are more willing to pay their deductibles and co-payments at the time of service if they can use a credit card, said Moore. Since practices spend 4% to 12% of their revenue on billing, "anything that cuts down on billing will be helpful," she said.

It costs about $5 to send out an invoice, noted Geoff Anders, president of The Healthcare Group in Plymouth Meeting, Pa. So even for a $10 co-payment, it's still cheaper to have the patient pay by credit card at the time of the appointment and pay a 2% transaction fee -- 20 cents -- than incurring the costs of sending out an invoice.

"The patient doesn't have to worry about writing a check and filling out the envelope and sticking it in the mailbox," said Anders.

Credit card transaction fees are 2% to 5% of the billed charge.

Even when an invoice is sent out, practices can still get paid more quickly if they include a credit card payment form in the invoice, instead of only accepting checks, said Moore.

That's because patients often put medical bills at the bottom of their monthly stack of bills, after the mortgage, utility payments and credit card payments, said Elizabeth Woodcock, director of knowledge management for Physicians Practice, Inc.

"In fact, any personal financial adviser would tell a client to pay their doctor last because they don't charge interest," said Woodcock.

Yet each month that the invoice from the physician's office remains unpaid decreases the chance of the physician's office ever getting paid.

The chances of a person paying a bill drop from 93% one month after a bill is received to 28% five months after a bill is received, according to statistics from MasterCard International.

However, if the invoice includes a line for a credit card number the patient is more likely to simply fill in their credit card number and pay the bill right away, said Moore.

Chances of a bill being paid are greatest in the first month after it is received.

Credit card payments are especially useful for specialty practices where patient co-payments are typically higher than at primary care practices, noted Moore.

Urology Associates of South Texas in McAllen, Texas, has accepted credit cards for seven years, said practice administrator Steven Carrales.

The practice gets about $250 to $500 in payments by credit card every day, he said. The group pays a 1.5% transaction fee for credit card payments, but he noted that "if you go to a collection agency, they are going to ask for 35%."

Payment authorization

Some physician practices are going a step further beyond simply accepting credit card payments. They are keeping copies of their patients' credit card numbers on file and asking patients to sign a form giving their consent for the office to bill their credit cards for patient bills that remain unpaid after 30 or 60 days.

Daniel Griffin, MD, an internist in Fort Collins, Colo., recently instituted such a policy after getting burned by several affluent patients who simply refused to pay their bills. Now he requires all "self-pay" patients who don't have insurance and pay for care on their own to sign a consent form allowing him to keep their credit card numbers on file. Their credit cards are automatically billed for any portion of the bill that is more than 30 days overdue.

"I wanted to create a policy for patients who had the funds to pay, but decided not to pay," said Dr. Griffin, who noted that many of these self-paying patients take weekend skiing vacations and drive new cars.

Most of his patients have no problem signing the form, he said.

"The ones who protested usually knew there was an issue, and they would see me once and never come back," said Dr. Griffin.

Although there have been a few cases where a patient's credit card was over the credit limit or not valid when the practice tried to charge the bill on the card, for the most part the new policy "is working well," he said.

"It's a smart thing to do, very aggressive," said Anders. "If it is presented to the patient properly, it is fine. Certainly other vendors of services handle it the same way, but it is a little bit aggressive for the current state of care ... but practices shouldn't end up being their patients' banks."

Few disadvantages

There are a few disadvantages to using credit cards, but with a little planning, those can be minimized, say physician practice management experts.

One disadvantage is that credit card issuers charge 2% to 5% processing fees for credit card transactions, but transaction charges are usually less for businesses that do a large volume of credit card business, said Corey Mann, a marketing specialist with First National Merchant Solutions, an AMA PracticeLink partner that provides credit card processing services to physician offices.

Another disadvantage to accepting credit card payments is that offices either have to buy or lease equipment to process the credit cards and train their staff to use it. However, such equipment is not that expensive: it costs about $300 to $1,500 to purchase or about $25 to $100 to lease per month, said Mann.

But some physicians may be uncomfortable with patients using plastic to pay for their medical care, as if it were a tank of gas or a pair of shoes. Dr. Griffin said he has noticed that reticence to accept credit cards among his colleagues, especially older physicians. "A lot of physicians are uncomfortable with the reality that medicine is a business, but you can't keep your doors open and continue to provide care if you don't have good business policies in place."

Paying by credit card, however, is becoming increasingly accepted at physician offices, said Moore. "Originally, there was some uncertainty that people would find it distasteful, but I think the patient population has grown more and more comfortable with the idea as we become a credit-based population." According to a MasterCard survey, 80% of patients feel comfortable paying for medical care with credit cards.

Another concern, keeping someone's credit card on file and automatically charging them, is legal as long as patients sign a consent form, Moore said. Such forms can be obtained from credit card issuers.

ADDITIONAL INFORMATION:

Accepting the charges

Credit card payments by the numbers:

32,000 health care locations accept Visa.
Average Visa charge at a physician's office is $84.
95% of medical groups accept credit cards.
Patients used Visa cards to charge $19.5 billion in health care services in 2001, an 11% increase over health care charges in 2000.
80% of Americans feel comfortable paying for health care services using credit cards.

Sources: Visa and MasterCard