Why Virtual Credit Cards Are Costly, But Won’t Go Away
When insurance companies reimburse you by issuing virtual credit cards, your practice loses money, which is why most practices now receive payment using electronic funds transfer (EFT). Unfortunately, virtual credit cards aren’t going away: Some smaller payers still default to virtual credit cards, while at least one major private payer, UnitedHealthcare, will issue virtual credit cards when providers don’t participate with some of its initiatives.
What are they? Virtual credit cards are simply a credit card number tied to a specific dollar amount. When payers issue these numbers as payment, the practice must process them to receive the funds, and the processing comes at a cost – whatever rate you have negotiated with your credit card processor, says Kevin Watson, administrator at Colorado ENT & Allergy and the AOA’s immediate past president.
Isn’t EFT mandatory? The administrative simplification provisions in the Affordable Care Act (ACA) do require payers to offer EFT, but many payers skirt the issue by offering both, and merely defaulting to virtual credit cards, which can be cheaper for the payer. Providers must manually request EFT in those cases.
When virtual credit cards are issued and “cashed” by the practice, the processing fees are often 2% to 3% of the payment amount, but could be higher, depending on the card and processing company, Watson says. Regardless, these fees cut into the practice’s reimbursement and represent a loss that the practice shouldn’t have to accept, he says. “I found out one day that my billing office was processing those credit cards and told them to stop immediately.”
Watson then called the payers responsible and managed to switch to an online payment system offered through Emdeon, the electronic claims clearinghouse. This system is similar to EFT in that there are no credit card fees. Most insurance companies now reimburse practices using EFT, but some smaller, often regional payers still offer only a mailed check or virtual credit cards, Watson says.
Virtual credit cards won’t go away
Recently, UnitedHealthcare (UHC) quietly rolled out a new “member payments” program in which patients are billed directly by UHC for the amounts they owe after being treated. These amounts are then remitted via direct deposit EFT to the practice, but only if the practice signs up for this type of payment. Practices that don’t will simply receive a virtual MasterCard number with the money owed, and that brings back the issue of practices having to pay processing fees, Watson says.
UHC is selling the program as a benefit: In an email obtained by The Business of Medicine, UHC writes that “by registering for Member Payments, you have the option to receive these payments deposited directly to your designated bank account — at no cost to you!”
Unfortunately, this program is not a benefit to all practices, Watson says. First, patients are being billed by UHC regardless of whether practices signed up for the program. This can result in patients being double-billed, and the practice having to refund the money if the patient already paid UHC. Second, this process delays the practice’s revenue cycle because UHC is holding the patient-responsible amount – and presumably making some profit via interest for this period – until practices either sign up for EFT or get issued the virtual credit card number.
Some smaller practices might see the “member payments” program as a benefit, if they don’t have a good system for handling several thousand dollars in cash payments daily, but the issue is UHC taking control away from practices, says Robert Tennant, director of health information technology policy at the Medical Group Management Association (MGMA) in Washington. “It’s true smaller practices might appreciate the payer taking away this particular feature of the revenue cycle. But practices should be able to choose whether to outsource this to UHC, and not be asked to receive virtual credit cards if they don’t opt in – that’s not fair to the practice.”
The ACA’s provisions require payers to offer EFT, but the member payments program avoids the law entirely because it law only applies to payer-responsible amounts, not patient-responsible amounts, Tennant explains. The MGMA, which has long opposed virtual credit cards, has reached out to UHC officials for more details about its member payments program.
In the meantime, you should make sure your practice opts out of virtual credit cards with all commercial payers, Watson says. This means calling each of your payers and requesting the switch to EFT, which can be a pain and result in a temporary payment delay, but it beats continuing to pay extra processing fees.
As for UHC’s member payments program, your options are to sign up for the program and accept the delayed payment (while instructing your staff not to bill UHC patients for the amounts they owe), or opting out and taking virtual credit cards for UHC.
UHC’s new program “puts all of us in a weird position,” Watson says. “It’s always been the problem with healthcare that we get reimbursed for services, not paid for services, it works in reverse, and now this makes it worse.”
— Grant Huang, CPC, CPMA (firstname.lastname@example.org). The author is Director of Content at DoctorsManagement.
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