Removal of CMS Regulatory Language May Leave Providers Vulnerable on EFT Fees

The potential revenue hit is increasing as the industry continues to phase out paper-based payments in favor of electronic transactions.

April 6—Some healthcare providers are fretting over the disappearance of a section on the Centers for Medicare & Medicaid Services (CMS) website that prohibits fees on provider payments made through electronic funds transfers (EFTs), saying the absence of such language could allow third-party administrators to short their income.

The U.S. Department of Health and Human Services (HHS) in January deleted the EFT frequently asked questions section, saying it would evaluate the topic after providers complained about the practice.

“We have heard from both healthcare providers and other partners that fees associated with electronic transactions are a continuing concern,” spokeswoman Tasha Bradley said in an email. “HHS may issue guidance subsequent to further exploration of this issue.”

Bradley would not say how long an evaluation would take.

Providers had complained that third-party administrators such as e-payments vendors imposed transaction fees on insurer payments, effectively reducing their revenue, said Robert Tennant, director of health information technology policy at the Medical Group Management Association.

Under an Affordable Care Act mandate, CMS in January 2014 required health plans to offer EFT to healthcare providers, allowing Medicare to send payments directly to providers’ financial institutions. Proponents touted the time savings for staff, phasing out of paper checks that could get lost in the mail, and faster access to funds. CMS issued guidance in September 2017.

Third-party vendors that contract with health plans, however, are charging providers for those transactions even though the practice is prohibited, Tennant said.  

“Some folks have been trying to charge practices for that transaction,” Tennant said. “It’s like your employer deducting 2 percent from your direct deposit and saying it’s an administrative fee.”

Physician Group Voices Concern

One in six practices pays fees for electronic payments, and 17 percent pay a fee of 2 to 5 percent, according to MGMA.

“We are very concerned that the removal of the CMS EFT FAQ will trigger an increased use by health plans and their business-associate payment vendors of virtual credit cards and an expansion of the unfair business practice of requiring providers to incur fees to receive their payments via EFT,” Tennant said. “Combined, the use of virtual credit cards and the imposition of EFT fees force providers to pay needless fees, contrary to the intent of this CMS administrative simplification regulation, and divert money away from delivering patient care.”

CMS, Tennant said, has bowed to pressure from e-payments vendors that are concerned about losing their fees.

MGMA is trying to mount a large provider coalition to issue a response and call for the reposting of the FAQ. 

The American Medical Association (AMA) addressed the practice, along with the use of virtual credit cards, in a March 26 letter to CMS Administrator Seema Verma. It urged the agency to clarify its policy on electronic payments and restore the FAQs section. The AMA wanted the agency to make clear that health care professionals can’t be forced to accept payments via virtual credit cards. The AMA said health plans are reaping benefits of having providers be paid through VCCs, with the plans getting up to 1.75 percent of the revenue from the fees.

The National Medical Association and the American Academy of Family Physicians said they’ve seen no complaints from their members regarding fees attached to EFT payments.

Leading epayments vendor Zelis Healthcare would not comment on the practice, and a spokesperson from America’s Health Insurance Plans, a trade association of insurers, said they were unfamiliar with it.

An Increasingly Relevant Issue

The growth of electronic payment forms is taking place as the industry moves away from paper checks to improve efficiency.

Providers have opted for EFT payments over virtual credit cards to avoid the transaction fees— up to 4 percent—that have been attached to the cards, Tennant said. And the EFT payments are easier to square up with insurers’ explanation of benefits, which arrive in separate mailings. 

Physicians also alleged that insurers were getting portions of the virtual credit card fees from their contracted payment vendors.

Attorney Patricia Hofstra, a partner at Duane Morris law firm in Chicago, said she worked with clients about a year ago who were upset that transaction fees were taken out of virtual credit card payments.

The providers fought back, alleging breach of contract, she said.

“The payers said that they had the right to unilaterally amend certain terms in their contract pursuant to their policies and procedures, and their policies were to pay practices through credit card reimbursements and electronic funds,” she said. “We learned that the credit card companies and the payers were splitting the fees, so that there was actually repayment made to the payers as a result of it.”

She counsels clients to negotiate terms of payment so that either no fees are deducted from their transactions or the health plan pays any such fees.

“The contract that the provider has with the payer has to say that any fees associated with payment have to be borne by the payer and not by the provider,” she said. “You need to be really clear in the contract. That seems to help. But you tend to have a lot of contracts that just say it’s subject to unilateral amendment due to policies and procedures posted on the website of the payer.”

Larger practices are more apt to be able to negotiate, she said, while smaller operations have a better chance to fight fees when banding together.

“We talked to the virtual credit cards about a class-action lawsuit, and we threatened payers with that,” she said. “And, for our clients, the payers stopped making those deductions,” she said.

Hofstra said providers should ensure that contracts include provisions allowing for termination before the implementation of any changes with which a provider does not agree.

“Protest if it’s not in the contract and they withhold it,” she said, referring to the early-termination provision. “And be careful about what you agree within your contract. A lot of providers don’t pay any attention to it. They just collect the money and they don’t even notice what deductions they’ve taken. It’s good when they do notice.”

Cheryl V. Jackson is a freelance writer. Follow her on Twitter: @cherylvjackson.