Switching merchant service providers: 5 key considerations

Whether your ASC is setting up merchant services for the first time or you are researching alternatives to an existing vendor, this is a significant decision and one you should not take lightly. There are several important factors to consider when choosing or switching merchant service providers that go beyond just the cost of services.

We previously discussed four questions ASCs should ask themselves when considering whether there is an opportunity to reduce merchant services costs. Here are five key considerations to take into account when choosing or switching market service providers.

1. Always get multiple quotes. Treat the decision you are about to make as a serious one and get quotes from multiple vendors as you should when weighing other substantial investments.

2. Insist on "interchange-plus" pricing. Interchange-plus pricing ensures you will receive the benefit of low-cost debit cards. As Peter Kipp, PhD, president of Merchant Services Fee Advisors, a merchant services consulting firm, notes, this is the most favorable and transparent pricing available in the market.

"It assigns a fixed markup on each transaction, such that the markup you pay does not vary by the card type," he told the author of this column. "If your quote indicates the rate offered is for 'qualified' transactions, consider this a major red flag as it indicates the offer is not for interchange-plus pricing. In every case, interchange-plus pricing is set as a percentage of the dollar volume of the transaction and a per item fee."

Rates vary by geography, business size and the individual vendor offering the pricing, so this is another reason why obtaining multiple quotes is essential. Interchange-plus quotes are easy to compare to one another as they should all have the same structure of 0.xx% + $0.xx.

If a vendor says it does not offer interchange-plus pricing or suggests interchange-plus pricing is not favorable to you, Dr. Kipp says it is probably worthwhile to move on from the vendor.

3. Avoid proprietary equipment to process payments. There are many equipment options available to process payments. You may use standalone terminals that do not integrate with back-office functions. You may purchase software or services that allow integration of payment processing with electronic medical records or accounts payable. Perhaps you are setting up an online bill pay website.

A key consideration when making any of these decisions is to avoid proprietary software or equipment that locks you into a specific merchant services provider.

Any merchant services provider should be able to integrate with your online bill pay website using the industry standard gateway, Authorize.net (Note: Fees for Authorize.net are negotiable.)

"If you buy credit card terminals, be sure they are not proprietary to your merchant services platform," Dr. Kipp says. "There are vendors that will sell you a suite of terminals that are not re-programmable to process payment cards outside of their system. If you buy their terminals and ever want to switch from them in the future, you will have to invest in new terminals."

4. Be wary of free equipment. In some cases, a merchant services provider may offer free terminals. While it sounds attractive to receive terminals at no cost, there is a high probability that these terminals come with proprietary software that will make them unusable if you decide to change vendors.

5. View bundles skeptically. Another area where organizations experience remorse is in value-added software that links to an EMR or AP. Many solutions exist, and these software solutions can provide operational efficiencies. They are typically simple patches that should require no maintenance, Dr. Kipp says.

"Negotiate the rates for these solutions aggressively, and be wary of bundles with merchant services that unnecessarily increase costs," he adds. "If the software firm recommends a specific merchant service provider, it is possible that a revenue-sharing agreement is in place. This means that your merchant services cost will be increased to pay the software company for connecting you with the merchant services company."

Always ask software providers if you can choose your own merchant services company. If they require a specific provider, ask them to match the best rate available to you.

Jessica Nantz (jessica@outpatienthcs.com) is president and founder of Outpatient Healthcare Strategies, a consulting management services firm focusing on operational improvement and efficiencies for hospital outpatient departments, hospital perioperative services and ambulatory surgery centers.

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