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Pitfalls of Electronic Payment

Virtual credit cards raise ire of providers with lopsided value proposition
By Mirza Baig and Elizabeth Sidney

In recent years, many unsuspecting practices have seen their contractual reimbursement shrink because of high interchange and transaction fees associated with virtual credit card payments. Providers may find themselves subject to fees as high as 5%, while health plans receive cash-back incentives from credit card companies, including rebates up to 1.75%.

The push for virtual credit cards is driven in part by the Affordable Care Act. The law required health insurers to make an automated clearing house (ACH) exchange funds transfer (EFT) available to physician practices by Jan. 1, 2014.

As a way to avoid using an ACH EFT, health plans began to push virtual credit cards, with some even requiring virtual cards within their contracts.

Office staff have to manually enter the virtual card number into the point of sale processing terminal. The card processing network gives them an authorization for payment. Here’s where the practice gets charged a processing fee. For example, if the practice receives a $1,000 virtual credit card payment from a health plan, the practice loses anywhere from $20 to $50 on the $1,000 payment, depending on the processing fee of 2% to 5%.

Physicians are automatically enrolled into the 16 digit virtual credit card unless they specifically opt-out. The manual opt-out process is burdensome and time-consuming.

Flooded with complaints, medical advocacy groups have taken up arms, lobbying the Department of Health and Human Services to establish clear requirements for how virtual card payments can be used.

The organizations point out that virtual card payment does not meet the HIPAA transaction standard for EFT. The joint letter to HHS Secretary Sylvia Mathews Burwell is signed by the American Hospital Association, American Medical Association, Medical Group Management Association, and the NACHA.

HHS “explicitly contradicted” the HIPAA standard when it stated that health plans are not required to send health care EFT through the ACH Network, according to the August 2014 letter.

HHS identified the HIPAA standard transaction for EFT as NACHA’s “CCD+ Addenda.” Thus, the virtual credit card payment is non-standard EFT transaction and is not supported by the HIPAA standard transaction for electronic remittance advice (ERA).

Physicians using an EFT, however, can avoid vendor fees attached to virtual card payments. ACH EFT payments are subject only to a single transaction fee of $0.34 cents regardless of the payment amount.

The savings to a physician practice can be significant.

The AMA offers a toolkit to help physicians understand their rights and health plan responsibilities under the new EFT standard. This resource advises physicians on how to avoid the percentage-based fees and auto-debit programs some vendors are attempting to impose with ACH EFT.

Ultimately, implementing the HIPAA standard EFT transaction will save practices money.

Mirza Baig is a student at John Marshall Law School. He holds an MBA with a concentration in health care administration.

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