Phantom payment fees boost cost of health care, study finds

The current scrutiny of health insurance company billing practices has revealed many questionable practices around billing. But a new one has surfaced that is indeed novel: adding a surcharge for processing a payment that actually saves the insurers money in the first place.

A recent article in the publication Pro Publica revealed that health insurers now impose a fee of 1.5% to 5% on doctors who are paid electronically. The fees are ironic because the same insurers virtually forced doctors to accept electronic payment rather than checks, because electronic payments were cheaper to process.

Technically, the insurers don’t extract the fee. Their henchmen – middleman companies that process the payments – began adding the additional fee as part of their “service.” Never mind that the insurers were already paying these firms to manage payments. Further, Pro Publica said, the middlemen often share the fees with insurers.

There’s a further irony: When ObamaCare was adopted, it included language pushing for electronic payments as a way to reduce the cost of care. When the Center for Medicare and Medicaid Services learned about the fees for electronic payments in 2017, it posted a note on its website reminding insurers that was a no-no.

But insurers were not about to let an easy buck disappear so easily. They lobbied CMS to remove the note and kept on billing, according to Pro Publica.

The practice, said the publication, has two major impacts. One, it encourages physicians to pass on the surcharge to patients. And worse – No. 2 – it threatens to drive more physician practices into the arms of investors or large health systems.

“All these additional fees are the reason why you see small practices folding up on a regular basis, or at least contributing to it,” Dr. Terence Gray, an anesthesiologist in Scarborough, ME, told Pro Publica.

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Some physicians are lobbying CMS to bring down the hammer on the electronic payment fee scam. The ranks of the protesters appear to be growing, and no wonder. One estimate said 60% of medical practices must pay the fee. That tallies up to billions of dollars that have nothing to do with keeping people healthy. But those fees do keep certain bottom lines healthier.