South Florida Hospital News
Friday August 29, 2014
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February 2009 - Volume 5 - Issue 8

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The Hidden Fees of Credit Card Processing - Increase the Profitability for Your Hospital

Charge Card Systems (CCS Medical), a leader in credit card processing solutions (the acceptance of Visa, MasterCard) works with medical practices and hospitals throughout the United States in developing cost savings solutions with regard to credit card processing that improve cash flow and increase your bottom line profitability.

Our research shows that hospitals are engulfed in daily survival issues and, consequently, the attention to credit card transactions and the corresponding costs are not being adequately and properly addressed. Having worked with many hospitals around the county, we have found that the healthcare industry faces the same survival issues as a retailer or restaurant. After all, a business is a business.

In today’s environment, shrinking margins are compounded by the cash flow crunch of payments not made within 60 or 90 days and the expense to "chase" money or hire a collections firm. What is the expense of accepting checks? It seems so simple, yet think about the time it takes to fill out a deposit slip, go to the bank to make a deposit and wait for the funds to clear. Each one of these issues adversely effects cash flow and bottom line profitability.

The acceptance of credit cards helps in many ways: however, it is important to avoid the pitfalls associated with taking a credit card for payment. Just like we need to maintain our health by exercising regularly, hospital administrators must exercise their financial acumen when analyzing whether they have the best "credit card program" for their practice.

Yes, the word "program" is critical as there are different programs and solutions depending upon the needs of your hospital. What is your rate is the most common question we hear when speaking with a medical office. Yet the base rate is only part of the equation. The credit card industry has numerous "hidden costs" which can, and will, inflate credit card costs. Unfortunately, most hospital CFOs are unaware of the potential pitfalls and how the additional fees are adversely affecting the bottom line.

Did you know that there are different rate structures based upon how the hospital account is set-up? Different rate structures exist depending upon how a transaction will be conducted. For instance, are the majority of your transactions swiped (card and cardholder present) or manually entered (card and cardholder not present.)? There are numerous accounts that can be set up for a hospital ranging from each medical speciality, philanthropy, cafeteria, parking garage, and many others. It is critical to understand that, depending on the business profile of each of your divisions, that there are ways to set up your merchant account to ensure the most competitive pricing.

Visa and MasterCard maintain different rate structures for different types of cards and based upon how a transaction is processed. Credit card companies present these rates in different forms i.e. qualified, mid-qualified, non-qualified. Credit card companies also have other fees such as batch fees, debit fees, annual fees, voice verification fees, address confirmation fees, etc., I think you can understand the point.

In addition to discount rates there are transaction fees. Not having a transaction fee does not necessarily ensure the best rate structure. Some credit card processors will "bundle" their rate, combining the discount rate and the transaction fee to give hospitals the appearance of a better rate structure. However, in situations such as this the discount rate will be much higher, which could adversely affect the bottom line. Don’t get caught up in the game of not having a transaction fee, it may not make sense for your hospital.

Many credit card companies will offer a low introductory rate, which to a layperson will seem unbelievable. However, what will be unbelievable will be the "downgrades" or penalties that a hospital will be paying, without even realizing it, because there are so many additional issues that have to be addressed besides a low base rate. In order to run your hospital in a financially astute manner, you must know your "effective rate" (takes into consideration all charges) vs. your "base rate", which is the initial rate discussed with your credit card company.

Other issues that are rarely raised is how long until your money is deposited into your bank account – 12, 48 or 72 hours? Why should you have to wait three days to get your money, doesn’t 12 hours sound better? When is your discount fee taken, daily or monthly? Think about the savings on interest, the float of your money plus increased cash flow if your fees were removed at the end of the month? It certainly adds up and these issues will help greatly with your cash management.

Finally, it is important to note that switching processors is not a difficult task. In most cases there is no fee to switch and it typically involves filling out a 2-page application. Why not start saving money today for your hospital? It is a much better investment than wasting money on the high and hidden costs of your credit card processing fees.

Jeffrey Shavitz is a Founder of Charge Card Systems Inc., a nationally-recognized credit card processing company that has an expertise in working with hospitals and medical practices throughout the country. He can be reached directly at (561) 338-4452 or jshavitz@chargecardsystems.com.
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