Declining reimbursement rates from payors have long put a strain on healthcare providers. However, there’s another, rarely-discussed aspect of this relationship that is also contributing to the problem: the use of Virtual Credit Cards, or VCCs.

While VCCs are often advertised as having a variety of benefits, there are also significant drawbacks for those who receive them — drawbacks that can exacerbate the financial challenges faced by healthcare providers.

In this piece, we will break down the impact that VCCs can have on physician reimbursement, then outline the potential strategies a practice can use to mitigate the negative effects of this payment method.

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What Are Virtual Credit Cards?

A Virtual Credit Card (VCC) is exactly what it sounds like. It’s a digital payment method often used by insurance companies to reimburse providers. Unlike other credit cards, which can be used over and over, VCCs can typically only be used once, even though they are processed like normal credit cards.

VCCs can offer certain benefits, such as streamlined transactions and improved security against fraud. That said, there are processing fees associated with every transaction, typically ranging between 3% and 5% of the payment amount — and the cost of processing these payments falls entirely on providers.

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The Financial Burden of VCC Fees

On the surface, a 3% to 5% processing fee may not sound like a high amount, but for healthcare providers already dealing with reduced reimbursement rates, VCC fees represent a significant additional expense, especially when applied to large volumes of payments.

For example, a payment of $10,000 processed by a VCC could cost a provider $300 to $500 in fees. This can be devastating for practices running on slim margins, particularly for smaller or rural providers who may lack the negotiating power of larger healthcare systems.

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Alternatives to VCCs Have Their Own Problems

One of the bigger challenges in solving this issue is that the alternatives to VCCs come with their own drawbacks.

For example, a provider may want to request alternative payment methods, such as paper checks or electronic funds transfers (EFTs), to avoid VCC fees.

However, while paper checks may be free of processing fees, there is additional administrative time and effort required to manage and track them, along with an unavoidable delay while waiting for the arrival of paper checks. 

EFTs, in contrast, may be more efficient, but payors may be hesitant to offer this option, even though they are legally required to do so. There are also fees associated with EFTs, though they are minor when compared to VCC fees.

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Legislative Efforts to Address VCC Fees

The impact of VCC fees has not gone unnoticed. In 2023, Representative Dr. Greg Murphy (R-NC) introduced House Bill 6487, which sought to limit the use of VCCs as a default payment method and to ensure that providers could opt for fee-free alternatives without undue burden.

Unfortunately, the bill stalled in committee and did not advance, and as of the time of writing, no similar legislation has been introduced into Congress. This means that, without federal regulations to curb the use of VCCs or cap their associated fees, providers must look for other ways to mitigate their financial impact.

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How Can a Practice Reduce or Eliminate VCC Fees?

While methods to lessen the impact of VCC fees are few and far between, there are still some efforts practices can make to limit the impact these fees have on their operations.

First, changes can be made in both how a practice operates and how it deals with payors. A practice can implement cost-management tools to track payment methods and associated fees, which can allow them to recognize where these fees are having the most impact.

This information can then be used to proactively engage with health plans to negotiate the terms of reimbursement. For example, a practice can request EFTs as their default payment method, or they can attempt to secure an agreement for the payor to cover VCC processing fees.

Second, practices need to make an effort to ensure leadership is aware of this issue. Providers should educate themselves and their staff about the financial implications of VCC fees, potentially working with other practices and industry stakeholders to amplify their voices.

From there, providers and professional organizations can advocate for state and federal legislation to regulate VCC fees and mandate alternative payment options. The American Medical Association (AMA) and other groups have previously highlighted the problem, but there is still substantial work to be done.

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What’s Next?

Despite the associated problems, the use of virtual credit cards for healthcare payments is unlikely to disappear anytime soon. If this is to be the case, a multifaceted approach is needed to tackle the issue, combining provider advocacy and payor engagement with legislative action.

By working together and raising awareness about this issue, the healthcare community can push for solutions to ensure practices are fairly reimbursed, supporting the financial sustainability of medical practices.