Understanding The Implications Of Surcharging In The Dental Industry

Known as surcharging in the processing industry, passing credit card fees on to consumers continues to be a bone of contention for dental practices. Some see it as a healthy way of tackling the growing cost of operating a busy practice, while others view it as something that will irk and frustrate patients and insurance regulators. 

For dental practice managers considering surcharging as a means of offsetting certain costs, understanding state law compliance, insurance provider contracts and card brand rules, is essential; something that the best dental accountants can help with. 

The cost of dental care and payment acceptance

Year after year, processing fees continue to increase for dental practices, while more patients than ever before struggle to afford care. Both of these challenges highlight the importance of evaluating programs and payment structures carefully, including whether patients should be surcharged. 

Any mistakes made when implementing surcharging could easily jeopardize your practice’s compliance, put a strain on relationships with patients, and cause conflicts with agreements from insurers. 

Who really wins when it comes to surcharging?

A fee is added to all transactions using credit cards when a surcharge program is implemented (it’s illegal to surcharge debit cards), but making the distinction between the two, isn’t always easy. 

For dental practices to be compliant, their system for processing payments must be able to accurately distinguish between transactions made with a credit card, and transactions made with a debit card. However, a lot of point-of-sale systems used within the dental industry, aren’t capable of making this distinction, adding further complexity to the issue of compliance. 

When a dental practice adopts a surcharging program, the processor and the rep from whom they bought the system, are the real winners. 

The complex regulatory landscape

When a practice considers implementing a surcharge program, their biggest hurdle to overcome usually involves the complicated and ever-changing regulatory landscape. Laws can vary a lot from state-to-state, and some states ban surcharging altogether, or impose restrictions on how it can be applied. 

As well as this, cards like Mastercard and Visa have their own set of rules surrounding surcharge program governance, that includes how customers are informed about the fees. 

If any of these rules aren’t complied with, fines or loss of privileges when payment-processing, typically ensue. 

Considerations involving insurance providers

Violation of dental practice contracts with insurance providers can lead to issues with reimbursement, or in some cases, the provider relationship may be terminated. Some clauses included in insurance contracts may regulate such things as the processing of payments, or setting of prices for products or services that are covered. 

Implications for taxes and reporting

If a practice has implemented a surcharge program, their payment processors and applicable card networks must be notified in advance, and on tax forms, all revenue from surcharging must be reported accurately to avoid penalties or audits. 

What should your practice do?

Being able to strike a balance between patient trust and the reduction of processing fees for credit card payments is paramount, and instead of implementing a surcharge program, practice managers may wish to identify unnecessary charges or hidden fees by reviewing their monthly merchant statements, to try and bring acceptance costs down overall. 

If your practice does opt to implement a surcharging program, compliance and a sound understanding of surcharge and cash discount laws must be a priority, as must making sure that your program is in alignment with insurance provider agreements and card brand rules. Local tax planning for dentists can be instrumental in helping you achieve this, and working closely with them while you set up the system, is strongly recommended.

Whatever payment policy you decide to implement at your dental practice, you must keep yourself up-to-date with state laws, the requirements of card brands, and insurance contracts. If you keep all of these factors in mind, there’s no reason why you shouldn’t be able to put a payment program in place that is of benefit to your practice, and your patients.