What Is a Surcharge? A Guide for Small and Mid-Sized Healthcare Practices

In your healthcare practice, every dollar spent is a dollar taken away from your bottom line. So, it is important to understand all of the seemingly small areas where you may be spending money, as minor costs can quickly add up.

Credit card interchange fees are processing fees your practice needs to pay on every card transaction. However, you can consider passing this fee over to patients in the form of a surcharge. 

What is a surcharge, and how does it work in your practice? Understanding the answers to these questions can help your practice budget more accurately, communicate costs more transparently to patients, and evaluate payment processing options more effectively.

What is a surcharge?

A surcharge is an additional fee added to the cost of a product or service that is not included in the original quoted price. It is usually displayed as a separate line item on the receipt.

Surcharges can either be fixed dollar amounts or percentages of the total transaction. They are generally applied only to the retail price of the purchase, but calculations can vary by jurisdiction. 

A wide range of entities impose surcharges on transactions, including governments, businesses, and service providers, to offset the specific costs they would otherwise absorb internally. A few common examples of surcharges include:

• Fuel surcharges
• Regulatory fees
• Disposal fees
• Credit card processing fees
• Convenience fees

What is a credit card surcharge?

Credit card surcharges are fees added by merchants to cover interchange fees charged by card networks every time a patient uses a credit card to make a payment. These interchange fees can be as high as 3% per transaction. Businesses, such as healthcare practices, often pass them along to customers or patients rather than absorbing them internally. 

Merchants who choose to surcharge patients must notify the card network at least 30 days before implementing the surcharge. Additionally, credit card surcharges are not illegal at the federal level, but they cannot be applied to customers in certain states, including Massachusetts and Connecticut, as well as Puerto Rico.

If your practice is considering adding credit card surcharges to transactions, you must follow consumer disclosure requirements and clearly communicate the charge to patients before they complete a payment.

How credit card surcharges affect healthcare practices

Absorbing credit card interchange fees in your healthcare practice can eat into your profit margins. These additional costs may not be manageable in practices that are already struggling financially. However, accepting credit cards is an important aspect of maintaining modern payment operations and meeting patient expectations.

Understanding how surcharges work helps you make more informed decisions about whether to absorb or pass on these costs. If you do decide to surcharge patients, you need to prioritize transparency. Patients already feel burdened by insurance, deductibles, and unexpected costs, and surcharges present an extra fee on top of these often unpredictable expenses.

Practices that add surcharges without clear patient communication risk damaging trust and satisfaction. Clear and professional disclosure is a critical component of any surcharging strategy.

Additionally, surcharging patients isn’t the only way to offset processing costs. You might consider cash discounts or look for processing platforms with lower fees rather than passing surcharges directly to patients.

Credit card surcharge fees vs. other payment processing fees

Interchange fees and surcharge fees are not the same. The former are charged by card networks to merchants for eligible credit card transactions. The latter are optional fees that merchants pass on to customers or patients to cover those interchange costs.

You might face other payment processing fees, either from credit card companies or processing platforms. Examples include:

• Monthly platform fees
• Chargeback fees
• Per-transaction fees

You need to review all of these carefully when adopting new processing tools or payment methods in your practice.

Should your practice add credit card surcharges?

How do you decide whether or not to add credit card surcharges to patient balances? These are a few key considerations that can inform your decision:

• Regional restrictions on surcharging: Start by verifying that surcharging is legally permitted in your state and that you can meet all consumer disclosure and card network notification requirements. Laws surrounding surcharge bans change frequently, so always look for the most up-to-date information.
• Impact on patient experience: Patients often aren’t happy to see that they have to pay a surcharge on top of an already steep bill. Consider how surcharges impact the patient experience and whether your practice will take steps to mitigate this effect, such as through a cash discount or transparent, upfront communication.
• Administrative burdens of managing surcharge compliance: If you do implement surcharges, your practice will be responsible for monitoring changes to state laws and ensuring that your fee process is compliant. Be sure to weigh this administrative burden against the actual cost savings you stand to gain.

Some practices find that alternative strategies, such as discounts on cash or ACH payments and processing solutions with lower processing fees, achieve similar cost savings without the complexity of a surcharging program.

How to communicate surcharges to patients effectively

If you plan to move forward with surcharge fees, transparent communication is key. You are legally required to disclose credit card surcharges before a patient completes payment, but this is also a good practice for maintaining patient trust.

To ensure that patients become aware of surcharges before making a transaction, consider displaying surcharge information in several locations, such as:

• At the front desk
• In appointment reminders
• On patient billing notifications

Clarify that paying with a credit card will result in a surcharge, and indicate the specific surcharge amount. Also explain that paying through other methods, such as debit cards, cash, or ACH transfer, will not result in this added charge.

The way you frame surcharges can impact how patients feel about these fees. Consider positioning them as standard processing fees rather than unexpected add-ons, and make alternative payment methods easy to use. This gives patients a sense of control over their payment experiences.

Connecting surcharge disclosures to broader patient communication workflows ensures consistent messaging and helps maintain patient trust despite this unwanted charge.

Reducing credit card processing costs without surcharging patients

Thoroughly examine other methods of reducing processing costs without applying surcharges. For example, you might begin highlighting ACH bank transfers as trustworthy payment methods. These transactions carry significantly lower fees than credit cards.

Different payment processing tools charge different fees. Look for one with competitive processing charges and no hidden fees to reduce the overall cost burden of accepting credit cards.

Also, consider offering flexible payment plans through recurring ACH or card-on-file arrangements to reduce the volume of individual card transactions and the associated interchange fees.

Integrating payment processing with practice management systems can also reduce your manual reconciliation costs by lowering administrative burdens in your practice.

How Weave helps small practices manage credit card processing costs

Weave’s communication platform enables healthcare practices to collect payments via text-to-pay, online portal, and in-office terminal from a single platform. Weave’s transparent pricing offers visibility and confidence for small and mid-sized healthcare practices.

Our platform supports multiple payment methods, including ACH and recurring billing, to give practices and patients flexible options that reduce reliance on high-cost card transactions. Weave also connects payment collection to processes like scheduling, reminders, and patient communication, making it easy to communicate surcharge disclosures consistently at multiple touchpoints.

Your practice can use Weave’s reminders to automatically send surcharge information via text and email when patients receive a new bill, providing clarity and transparency. This integrated approach reduces the need for disconnected tools and manual processes that can add hidden administrative costs.

Final thoughts

Surcharges are often considered a normal part of the payment processing landscape, but it is up to your practice to decide whether you want to impose them on patients. Taking the time to understand what surcharges are and alternative options for absorbing these costs can help you make more informed decisions.

Be sure to weigh legal, financial, and patient experience considerations as part of your decision-making process. If you decide to move forward with surcharges, prioritize clear communication and transparency to continue maintaining patient trust.

See how Weave simplifies payment processing for your practice

Weave simplifies payment processing and patient communication for practices like yours. Whether you begin implementing surcharges or not, Weave can streamline a range of administrative processes and allow your staff to focus more attention on patient care.

Request a demo today to see firsthand how Weave can help your practice manage processing costs and improve the patient payment experience.