Should a hospital add a surcharge for card transactions?

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Question Dear Your Business Credit,
I'm a financial counselor for a small Nebraska hospital. We are moving to charging a 2.49 percent transaction fee for credit card users, no matter what credit card you use. What experience or recommendation would you have regarding a transaction fee for those who pay their medical bills with a credit card?  – Cheryl

Answer Dear Cheryl,
I do not recommend you charge a transaction fee for credit card users. While you are certainly allowed to do so in Nebraska, as long as it does not exceed the fees you are charged to process them, it is likely to cause anger among your patients.

Medical care, especially if it is emergency care, isn’t necessarily something someone can wait to purchase until they’ve saved up the money to pay for it. Most people have no idea what their medical care at a hospital will cost until they’ve actually been billed for it.

As a result, many people feel blindsided when they get a hospital bill. Adding a credit card processing fee to what they owe you is likely to push some of them over the edge.

Let’s look at someone who has a high deductible plan and has to pay $2,000 for a medical test out of pocket because he or she has not met the deductible. The transaction fee you propose would cost that person $49.80.

Coming up with the $2,000 in the first place would be hard for many people. The Federal Reserve has found that nearly half of Americans could not come up with $400 to meet an unexpected expense. Although some people save money for medical expenses in a Health Savings Account, many people can’t afford to put money into them. Adding almost $50 to their bill will only make their situation worse and make paying off the total bill seem more hopeless.

Some patients in this boat may decide to try to work out a payment plan with you to avoid the credit card fee, which will result in the hospital getting paid more slowly. Others may do this unofficially by paying you as they have cash available. You can, of course, hire a collections agency to go after those who pay you very late, but when you subtract the collection agency’s fees, you’ll probably be bringing in less in the end than if you made it easy for them to pay by credit card in the first place.

You could argue that credit card transactions are costing the hospital money – and indeed they are – but it would be far better to find savings to offset these fees elsewhere. Even in well-run organizations, there is always waste, whether it is on energy, materials that are not used judiciously, poor planning of workers’ shifts or a host of other things.

I would focus your energies on looking for waste and rooting it out, so you don’t have to pass along the fees. It is possible that you are not getting the best possible deal on merchant processing fees, so shopping around is one project I would put at the top of your list. A better deal could save you quite a bit of money over time.

Given all of the turmoil about national health care policy, I realize it is a difficult time for any medical institution to make ends meet. Small hospitals don’t always have the economies of scale that larger ones do. But you do have a big advantage: The friendliness and personal touch that a giant organization can’t offer. I would not risk eroding that by tacking on fees that will leave patients with a negative impression. 

See related: 5 reasons not to put medical bills on credit cards, How high of a fee do businesses pay to accept cards?, Should a business add a surcharge for card transactions? 

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Updated: 11-19-2017