Paying for Health Care by Virtual Credit Card

On January 30, 2015, several healthcare organizations sent a group letter to CMS protesting the use of virtual credit cards by health plans to pay providers. In a virtual credit card payment (a nonstandard type of electronic funds transfer EFT), a health plan or its payment vendor issues single-use credit card information to a provider via mail, fax or email; the payment is “virtual” in that there is not a physical credit card. Providers then manually enter the virtual credit card number into their point-of-sale (POS) processing terminal, and the card processing network authorizes the payment. Virtual credit card programs are generally rolled out as an opt-out function and providers can end up being enrolled without their knowledge or consent.

The letter states that “While the process described above may sound benign and similar to provider processing of patient credit cards, virtual credit card payments can have a significant negative financial impact on a provider. Interchange fees of up to five percent are imposed on virtual credit card payments; these fees essentially reduce the contracted fee rate that has been negotiated with the health plan for a particular service or services. Unfortunately, many providers are unaware of these fees when accepting virtual credit card payments. Yet while providers are losing income from this payment method, health plans and intermediaries can profit from virtual credit cards, as they often receive cash-back incentives from credit card companies.”

The letter recommended that CMS provide the following direction to the health care industry regarding virtual credit card and Automated Clearing House ACH EFT payments:

  • Require that a provider explicitly opt-in to virtual credit card payments prior to the issuance of any payments via this method;
  • Require that prior to opting in to virtual credit card payments, the provider must receive a complete disclosure of all fees associated with this payment option;
  • Require that virtual credit card programs provide clear and hassle-free instructions to providers on how to opt-out of these payments, should they later decide to choose another payment method;
  • Prohibit health plans from requiring acceptance of virtual credit card payments as part of their provider contracts;
  • Clarify the definition of “excessive fees” in the context of ACH EFT payments to prohibit health plans and their vendors from charging fees for ACH EFT payments in excess of the nominal charge assessed by the providers’ financial institution; and
  • Require that any services designed to supplement the standard ACH EFT process be independently selected at the provider’s discretion and be unambiguously separate from ACH EFT enrollment forms.

Providers need to examine the impact of virtual credit cards on their practices and consider the merits of opting in or opting out.