Healthcare merchant accounts allow medical practices and other medical-related businesses to accept credit cards and other digital payments.
But unlike many retail settings, healthcare has specific challenges when accepting payments that many other industries don’t have, including different ways for patients to pay an invoice or HIPAA compliance issues.
Below, we’ll go over the steps involved in opening a healthcare merchant account and ways to choose the best credit card processing for medical offices.
What Makes Health Care Merchant Accounts Different
When most small business owners think of credit or debit card processing, they usually think of a retail setting or an online shopping store. These are generally straightforward situations where businesses accept one-time payments for various goods or services at a point of sale or during an online checkout.
However, this more simplified scenario for payment processing doesn’t fit well with healthcare merchants and medical credit card processing. Healthcare providers have different payment processing needs beyond what most retailers or e-commerce businesses require.
Below, we’ll outline some key differences that healthcare merchants must be aware of when choosing credit card processing for medical practices.
Security And Compliance
All merchants must be aware of compliance regarding the credit card industry standards for customer data protection. These are the PCI DSS (Payment Card Industry Data Security Standard). The PCI DSS are guidelines, protocols, and best practices that all merchants must follow to maintain their merchant accounts.
However, healthcare merchants have to go above and beyond that. When dealing with patient information, including some payment data, healthcare merchants must also be compliant with federal HIPAA regulations.
Unlike the PCI DSS standards, which are industry-adopted, HIPAA is a federal regulation and can carry severe fines and penalties if breached.
Security and HIPAA-compliant payment processing need to be one of the top concerns for healthcare providers seeking a credit card processing service.
Merchant accounts can be a vector for cybercriminals to target. However, with a healthcare provider, a data breach means payment information and patient data may be compromised.
Different Methods Of Processing
Another area of payment processing that is different for healthcare providers is the methods of processing that must be available.
Unlike retailers, which are mostly one-time purchases or maybe memberships, healthcare providers usually need to take a variety of payment methods. Sometimes from the same customer and for the same bill.
Some parts of a healthcare bill may be made with a credit or debit card, to cover copay, for example. Other times, that customer may have balances to pay. These balances might be paid all at once or in installments. A customer may want to pay that balance that with a check. In this case, healthcare providers should have the proper integrated payment solutions to accept eChecks in their billing processing.
Some prepaid or financing services, such as Care Credit merchant services, require implementing their proprietary software with your other billing software.
These are just a few examples. However, healthcare providers almost always have a more complex billing environment than retail stores or e-commerce businesses. Because of this, when searching for a merchant account, it’s important to ensure you can easily implement all of these features.
Digital Wallet Options
Digital wallets or mobile payment solutions like Apple Pay and Google Pay are growing in popularity. So much so that some customers don’t even carry their physical credit or debit cards when visiting a store or healthcare provider. You can easily add these HIPAA-compliant POS solutions to your existing billing system and healthcare credit card processing workflow.
Processing these newer contactless digital wallets provides the best patient experience. A competent payment processor can provide these solutions and help you integrate them into your billing workflow.
Healthcare Merchant Account Processing Fees
Healthcare average transaction amounts can be higher than in other industries, depending on the type of services offered. Since processors usually charge merchant processing fees as a percentage of the total transaction, this can significantly drain revenue if the processing fees are too high.
All processing will involve transaction fees. But, there are fees also associated with maintaining your merchant account, chargebacks, disputes, and other fees.
The perfect merchant account for a healthcare provider will be one with the best possible fees and a clearly outlined fee structure. This way, there are never any surprises on your monthly statement.
In a later section, we’ll go over fee structures in more detail to help you understand this sometimes complicated topic and how it relates to healthcare merchants.
Customer Support That Understands Your Industry
Regarding payment processing and choosing a merchant account, customer support needs to be one of the key considerations, especially with credit card processing companies for healthcare.
When everything is working properly, payment processing seems almost transparent. But when an issue arises, it can quickly put your office operations on hold.
Your payment processor’s customer support must be familiar with the healthcare industry and your specific billing workflow. Otherwise, their assistance may fall short and not adequately solve your problem or answer your questions.
Another area to consider is whether your merchant account comes with in-house customer support or whether they outsource it to other companies or even other countries.
In a healthcare setting where security needs to be a top priority, it’s too risky to share sensitive information with outsourced customer service.
Reputable healthcare payment companies will have their own in-house support for billing issues and technical experts to help walk you through any technology-related issues you may have.
Steps To Open A Healthcare Merchant Account
Before you search for a merchant account, it’s a good idea to understand the components involved and how the overall process works. As a result, you can ask the right questions and make the most informed decision for healthcare payment solutions.
The Payment Processor
You’ll work with a payment processor to obtain a merchant account for your medical practice. A payment processor is the company you apply to and will grant you a merchant account.
The payment processor, sometimes called an acquiring bank, will be your main point of contact once the merchant account is set up and you are processing payments. Any questions about your billing statement, fees, or technical issues will likely go through your payment processor first.
Your choice of payment processor is one of the most important decisions when choosing a merchant account for medical credit card processing. Keep in mind that although a merchant account may have a great fee structure or other unique features, if it comes from a payment processor with poor service, it isn’t a great choice.
You must also consider HIPAA-compliant credit card processing when seeking out possible healthcare payment processors.
Merchant Aggregators vs. Merchant Providers
A payment processor offering individual merchant accounts is a merchant account provider. Therefore, your merchant account would be solely for your medical business, and you have full control over it.
Individualized merchant accounts are the preferred method for almost every medical practice since they offer the most security for your business and data. You’ll likely also pay significantly lower fees when you have your own merchant account through a merchant provider.
Merchant aggregators offer another type of merchant account. They are also sometimes referred to as third-party credit card processing companies. These services sign up each merchant or medical practice under a single merchant ID or account.
Essentially, every merchant account shares the same processing. It makes the application process easier for merchants. Often, the approval can take a day or even less in some cases, with minimal information needed.
The downside, though, is quite significant. Since these are essentially shared accounts, you have far less control over individual aspects of your payment processing.
It also means your risk is pooled with every other merchant using that service. Pooled accounts benefit the merchant aggregator service, but it means most merchants under the system are paying higher fees to subsidize higher-risk merchants sharing the system.
Merchant aggregators are relatively common in retail payment processing for restaurants and eCommerce-related fields. However, some do exist in healthcare payment services, so it’s important to understand this distinction when seeking a merchant account.
For almost every medical practice looking for healthcare merchant services, obtaining your own individualized merchant account through a merchant account provider and payment processor makes far more technical and financial sense.
Payment Gateways
Your healthcare merchant account will also come with payment gateway access. The payment gateway connects your business, the payment processor, and the different entities involved in processing a credit or debit transaction.
There are several payment gateways available, and a reputable payment processor should offer several different options to best fit the needs of your medical facility.
Payment gateways are integrated into your office software and other aspects of your practice, so your payment gateway is an important area to consider. Suppose you’re already using a specific software solution to run your practice. In that case, you should share that with your payment provider to make sure the payment gateway is compatible and can be easily integrated.
The payment gateway can also provide powerful tools to help your practice deal with fraud detection or customer data storage. Using these options to their fullest can help your medical practice save substantial money through decreased fees and lower security requirements if the payment gateway stores data.
If you’re unsure how to implement any of these cost-saving features, contact your payment processor or ECS Payments to speak with one of our medical payment processing experts.
Applying For a Healthcare Merchant Account
The application for a merchant is relatively easy. In most cases, once a merchant fills out their forms and provides their documents, providers can complete their review in a few days once your information is submitted. Each case may be different, but below is the standard information that most payment processors will need.
Business Information
Business information will include your business entity registration information, such as your LLC or articles of incorporation. You may also need to supply other basic information like your business address, name, and phone number.
Banking Information
You will need a business bank account under the name of the practice applying for the merchant account. The bank account will then need to be verified by your payment processor. Verification is usually an instant process if the payment processor uses instant bank verification (IBV). With IBV, you log into a third-party app that verifies your account details, and then the process is complete in most cases.
If the payment processor does not use IBV, you may have to submit other information, such as copies of statements or a voided check.
Business and Personal Financial History
You’ll likely also need to submit past information about your medical business if it is already an established business. If you are opening a new practice, providers will use your personal credit history.
Most payment processors will be looking for past credit issues, bankruptcies, or if a business has held past merchant accounts that were shut down for any reason. If none of these issues exist in your past financial history, then there should be no issue with this process.
Even if you have past issues with credit or a past business, most payment processors will generally still be able to work with you to provide a merchant account.
In these cases, they’ll likely have to charge slightly higher fees due to the risk involved. They also may ask to set up a rolling reserve for your practice. A rolling reserve holds a set percentage of each transaction in a separate account. The money is held for a specific period to cover any returns, chargebacks, or fraud that may occur.
After a period of good standing, the rolling reserve may be reduced or removed entirely depending on the circumstances.
Processing Volumes And Statements
If you’re an existing medical practice seeking a new merchant account provider, the potential provider will want to see your past statements and chargeback ratios. Past statements help determine your average processing volumes. Your average processing volume can be your monthly total transaction and your average transaction amount. Your chargeback ratio can assess your risk and provide you with the best pricing structure possible.
payment providers can offer you the most competitive and accurate fee structure by knowing as much as possible about your medical business payment processing.
You will need to estimate these amounts if you’re a new medical business or opening a new practice. A payment processor with experience in the medical field, such as ECS Payments, can help you determine these estimations to get the best rate possible.
For payment processing, healthcare transaction volume estimations can be important because if these amounts are overestimated or underestimated, it can result in paying higher fees than you otherwise would. Yet, another reason why medical businesses should partner with a trusted payment processor that understands the healthcare industry.
Healthcare Merchant Account Payment Processing Integrations
Healthcare businesses often require robust invoicing solutions that must be integrated into their payment processing. For example, sending unpaid invoices directly to patients via email with a link to complete a full or partial payment, depending on the arrangement.
Some of these arrangements also include periodic or recurring billing to pay for services in installments.
These HIPAA-compliant online payments are known as integrated payments and recurring payments. Both of these can be achieved by using many of the tools included with your payment gateway access. Your payment gateway can also be further integrated into your billing software or practice management solution so staff members can send these billing requests directly from the software.
Virtual Terminals
Another patient payment processing option that many healthcare businesses need is known as a virtual terminal. A virtual terminal is a software version of a typical card reader you would see at a retail store’s checkout.
Virtual terminals allow front office staff to accept payments via the phone when the card is not present. Some patients in certain healthcare settings may feel uncomfortable using a computer to make their payments online. For these patients, offering the ability to pay via the phone is a perfect option.
When selecting a healthcare merchant account and healthcare payment platform, make sure it offers virtual terminal support with the features you will need for your phone transactions.
Healthcare Merchant Account Fees
When opening a healthcare merchant account, you want to be aware of all the fees and the different pricing models that may be used for various medical merchant services.
We can break the overall fees into two main categories. You will first have your processing fees. These fees are generally charged per transaction and are made up of the following.
Interchange Fee
The interchange fee applies to all credit and debit card processing, making up most of the total transaction fee. The fee covers the cost of using the card networks, which can vary depending on which card the customer uses.
Each card company can have a different interchange fee. For example, American Express generally has the highest interchange fee, and Visa tends to be the lowest.
Assessment Fee
The card networks charge an assessment fee, which is less than one percentage point. The fee varies slightly with each different credit and debit card company.
Payment Processor Fee
The processor that grants you a merchant account also includes a small fee for each transaction. These fees cover the costs of maintaining their portion of the credit card network and paying for fraud prevention and other services provided to merchants.
Merchant Fee Pricing Structures
Payment processors will offer one of the following three pricing structures. Each has its distinct benefits and drawbacks, so it’s important to find the right pricing structure for your specific healthcare business.
Tiered Pricing
Tiered pricing sets up several pricing tiers depending on the type of credit card in the transaction. The different tiers are generally:
- Qualified cards (cards with no reward program)
- Mid-qualified cards (Cards with reward programs)
- Non-qualified (Cards with generous reward programs, such as corporate cards)
The highest fees in this tier system will be with non-qualified cards, while the lowest fees are from qualified cards.
Tiered pricing is best for businesses that have detailed sales data. This data can help negotiate the best rates for each tier. For most smaller businesses, such as medical practices, tiered pricing will generally have higher fees.
Interchange-Plus Pricing
The interchange-plus pricing model will often provide the lowest fees for most healthcare businesses or medical practices.
With interchange-plus pricing, every transaction has a predetermined markup above the standard interchange rate.
The interchange rate can change based on the card type, such as Visa or Mastercard, or whether it’s a non-qualified or qualified card. Then, there is an additional fee on top of the interchange fee for that specific card transaction.
The interchange-plus pricing can yield lower fees. However, it has the drawback of being inconsistent since the fee depends on different card types. For most healthcare businesses, it’s worth the tradeoff.
Flat Rate – Blended Pricing
You’ll often see a flat rate fee structure with the aggregate merchant account providers we mentioned earlier in the article. With this pricing structure, merchants pay a flat rate plus a per-transaction fee of a set amount.
For example, you may pay 2.5% in fees plus a $.10 per transaction fee.
The benefit of this pricing structure is consistency. Merchants will always know their processing overhead, which helps them better set their prices. The downside is that this pricing structure is generally more expensive for the merchant than interchange-plus.
If you’re unsure what pricing structure would best fit your medical practice, contact one of our experts at ECS Payments. We can help you determine the best structure for you based on your processing volumes and typical transaction types.
Other Standard Fees
Most healthcare merchant accounts will also have a monthly fee. Monthly fees are typically made up of the payment gateway access fee, which is $25-$35 per month and does not change based on processing.
Outside of that, there are situational fees, such as chargebacks. These can be costly and take time to resolve or dispute. So, it’s best to work out any payment issue with the patient first so they don’t initiate a chargeback.
Chargebacks can also be part of credit card fraud. One type of chargeback is from “friendly fraud.” However, friendly fraud is not really so “friendly.” It’s when a customer knowingly makes a charge, say for medical services, but then claims they either didn’t receive the services or were unsatisfied despite that not being the case.
Your payment processor can help you use various payment gateway tools to fight fraud and may even have their own fraud prevention tools you can implement.
It’s important to take advantage of these tools to keep your chargebacks low and your overall costs when managing a healthcare facility.
Are Healthcare Merchant Accounts High Risk?
As you’re looking to open a healthcare merchant account, you may have encountered the term “high-risk” and are unsure what that means concerning payment processing.
Unlike credit scores, high risk in payment processing means that credit card companies have determined that certain industries are at higher risk for fraud and chargebacks. Risk is completely determined by statistical data over time.
Outside of specific industries, certain types of transactions are considered high-risk due to their total amount or services delivered.
Several areas of healthcare can be deemed high-risk depending on the situation. For example, telemedicine consultations can have a high chargeback rate and are sometimes considered high-risk.
Also, medical payments are generally much larger than typical purchases, so this can also place them into a high-risk category.
Medical payment solutions must consider this, meaning you must pay higher transaction fees than typical retail transactions.
When you talk with your payment processor, they should determine your risk based on your past transaction history and the type of healthcare business you run. From there, they can find the best merchant account and fee structure to fit your HIPAA credit card processing needs.
Getting Started With A Healthcare Merchant Account
Opening a healthcare merchant account is more than just being able to accept credit cards. It’s about finding a trusted technology partner to help your practice grow.
ECS Payments specializes in high-risk processing and healthcare or medical merchant accounts. We can work with you to find the perfect billing solutions to help your practice maximize efficiency and reduce costs.
Contact ECS Payments today to learn more about our innovative healthcare billing solutions.
