Merchant Account Fees for Your Medical Practice

Timely patient payment collection has never been more important for the financial well-being of medical practices.  

Main Content

Merchant Account Fees for Your Medical Practice

Jun 22, 2017

Merchant Account Fees for Your Medical Practice

Timely patient payment collection has never been more important for the financial well-being of medical practices. Two recent statistics from The Aite Group underscore why:

  1. More than 30 percent of practice revenues come from patient payments.
  2. Approximately 50 percent of patient payment responsibility is uncollected and written off.1

Many practices have already learned that credit card acceptance can be an important tool for beating those odds and getting paid at the time of service. If your practice has recently started accepting payment cards — or if you’re considering it — you should know that just like the field of medicine, the payment processing industry has its own vocabulary. Here are some of the terms related to processing rates and fees that you’ll see on your monthly statement:

The discount rate/fee is a processing fee that’s calculated as a percentage of each transaction. It’s lower for card-present transactions where a payment card is swiped or dipped than for card-not-present (CNP) transactions.

Interchange is set by the credit card associations, charged to the processor and paid to the card-issuing banks. The processor passes it along to the merchant account holder. Interchange accounts for the largest part of the discount fee.

A transaction fee is charged on every transaction processed, whether it is approved by the issuing bank or not.

Processors charge an ACH/batch fee to settle transactions with the issuing banks. Batch settlement is usually done once daily through the Automated Clearing House (ACH). This process must be completed before the proceeds are deposited into the practice’s bank account.

An internet gateway fee applies only to practices that process their transactions online through an electronic payment gateway.

The AVS fee is charged for use of the Address Verification System (AVS), a service that helps reduce fraudulent CNP transactions. AVS verifies that the address provided by the cardholder matches the address on file with the bank that issued the card.

The statement fee is a fixed monthly cost that is unrelated to the number of transactions a practice processes.

The monthly minimum fee is the minimum amount that a practice must pay the processor each month. For example, if the monthly minimum fee is $45 but the practice generates only $35 in processing fees in a given month, it will still be billed $45.

Retrieval and chargeback fees are generated when a cardholder disputes a transaction with the issuing bank. The bank requests a copy of the transaction receipt (retrieval) from the processor and allows the practice to explain its side of the transaction. If the bank upholds the dispute, it charges back the amount of the transaction to the practice. The processor charges fees for handling these actions.

The customer service and support fee covers service and technical support the processor provides to the practice.

Application/set-up fees are not as common as they once were, but you may encounter them from processors to cover the costs of processing your application and setting up your merchant account.

A cancellation/termination fee may be charged if a practice closes their merchant account before the contract expires. Processors use this fee to offset revenue lost by the premature termination. The cancellation/termination fee can sometimes be negotiated, particularly if there are unresolved issues between the practice and the processor.

Merchant account fees are simply the cost of being able to accept credit and debit cards as well as FSA and HSA cards from your patients. Unlike many business expenses, however, the capability to accept payment cards typically generates enough income to offset the charges. Check out these suggestions from TSYS® for saving on merchant account fees.

1Source: U.S. Medical Bill Payments: A Digital Revolution; Aite Group LLC, February 2016