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Passing credit card fees on to patients—known in the processing industry as surcharging—has become a major discussion point across healthcare. Some dental offices view surcharging as a way to counter rising operational and payment acceptance costs, especially as margins tighten due to processor consolidations and subsequent rate increases. Others worry about patient dissatisfaction, payer scrutiny, and compliance risks.
For billing leaders and office administrators, fully understanding how these programs work—and whether they comply with state laws, card brand rules, and payer contracts—is essential before relying on surcharging as a cost-reduction strategy.
The Rising Costs of Care and Payment Acceptance
Operating a dental practice has never been more expensive. Credit card processing fees continue to increase, and patients are struggling with larger out-of-pocket responsibilities. These combined pressures are leading more offices to evaluate whether a surcharge program could offset payment acceptance costs.
However, a misstep in setup or execution can create serious problems, including compliance violations, conflicts with payer and insurance agreements, revenue cycle workflow complications—not to mention patient frustration and reduced trust. And with costs continuing to rise, practices must approach payment structure changes carefully.
Who Actually Benefits from Surcharging?
A surcharge program adds a fee to all credit card transactions—never debit, which cannot legally be surcharged. Distinguishing between the two is not always simple.
To comply, practices need payment systems that can automatically and accurately separate debit from credit transactions. Many healthcare-specific PMS and POS systems lack this functionality, especially in multi-location environments. That creates significant compliance gaps.
In many cases, the parties who benefit most from a surcharge program are not the dental offices—but the payment processors selling them:
- They earn more revenue on every transaction.
- They remove scrutiny of true processing costs.
- They shift patient frustration about fees away from themselves and onto the dental practice.
This dynamic often leaves office managers holding the burden of fielding questions and complaints from patients.
State Laws and Card Brand Rules: A Complex Landscape
The biggest challenge with surcharge and cash-discount programs is navigating a patchwork of state laws. Some states prohibit surcharging, while others strictly regulate how and when fees may be added.
Visa, Mastercard, and other card brands add another layer of requirements, including mandatory customer disclosures, formal registration and notification before implementation, and fee caps. Noncompliance can result in fines or even the loss of processing privileges. Unfortunately, many vendors selling “compliant” programs do not fully understand the healthcare industry—leaving practices exposed. Find out more about surcharging by watching this video on the topic.
Considerations for Payers and Insurance Contracts
Dental practices must also ensure that surcharging does not violate payer agreements. Many insurance contracts include restrictions on how payments may be collected, set reimbursement rates or allowable amounts, and prohibitions against adding patient fees outside contracted rates. A surcharge added incorrectly can jeopardize reimbursements or even risk termination of payer relationships—something no billing department wants to experience.
Tax and Reporting Implications
Implementing a surcharge program also has tax implications. Practices must notify processors and card networks in advance; plus ensure surcharge revenue is properly reported. Improper reporting can trigger audits or penalties.
What’s the Best Approach?
For dental office managers and billing teams, the goal is clear: reduce payment processing costs without compromising compliance, payer relationships, or patient trust. When done correctly, practices can lower costs while protecting the patient experience and maintaining a clean, compliant revenue cycle.
If you’d like a clearer picture of your current processing costs—or to see whether a compliant structure is possible for your office—you can request a FREE analysis from the experts at Merchant Advocate. Click here to begin your savings journey.
