What Healthcare Providers Need To Know About the Hidden Costs of Virtual Credit Cards

Virtual credit card (VCC) payments from insurance companies are on the rise and are often costing practices more than they realize. We sat down with Eric Cohen, CEO of Merchant Advocate, to unpack what providers should know about VCCs, the fees they often don’t see, and how to fight back without switching processors.

Q: What exactly are virtual credit cards, and why are they becoming more common in healthcare reimbursement?

Virtual credit cards are randomly generated, single-use credit card numbers typically issued by an insurance payer or payment aggregator for provider reimbursement. They’re often pitched as a secure and efficient alternative to paper checks or electronic funds transfers (EFTs). For insurance companies, VCCs streamline the payment process, allowing them to earn cashback rewards on the transaction. This makes VCCs attractive for payers, but the convenience comes at a cost to providers.

Q: What kind of costs are we talking about?

Most healthcare providers are unaware that virtual credit card payments can carry processing fees anywhere from 2% to 5%. On average, we see providers paying between an additional 3% to 4% per transaction with VCCs. Over time, those fees add up significantly, especially for high-volume practices.

Q: Isn’t that just the cost of doing business in a digital age?

Not necessarily. That’s a common misconception. The truth is that providers often have a choice, but they don’t realize it. In many states, insurance companies are legally required to offer alternatives to VCCs, including ACH EFT payments, which carry much lower fees, typically just a few cents per transaction. Many insurers still default to VCCs unless the provider explicitly requests something else.

Q: So, if a provider wants to avoid these fees, what should they do first?

Step one is understanding your rights. Several states, including Colorado, have passed legislation that prohibits insurance companies from making VCCs the only reimbursement method. Check with the American Medical Association or your state medical board to find out what the law says in your jurisdiction.

Reviewing your contracts is also crucial. Many providers sign agreements with insurers without realizing that payment terms are included or negotiable. If you’re not sure what your agreement allows, that’s a red flag that warrants a closer review.

Q: What other steps can providers take to reduce or avoid these hidden fees?

1. Audit your current payments. Understand how you’re getting paid, by whom, and how often. Separate VCCs from EFTs and patient payments. Many practices don’t even realize how much of their reimbursement is tied to VCCs until they do a line-item audit.
2. Request alternative payment methods. If your state allows it, formally request ACH EFTs from payers instead of accepting VCCs by default. Keep written documentation of those requests and any responses from the payer. If they deny your request without cause, you can file a complaint against the health plan with the Centers for Medicare & Medicaid Services.
3. Partner with experts. Outside experts can help providers navigate the complexities of payment systems and identify areas where fees can be reduced. These professionals can assist with contract analysis, clarify fee structures, and suggest more cost-effective payment arrangements, all without requiring a change in processors.

Q: Can you share an example of what fee reduction might look like in practice?

Every medical practice is different, but we often find that providers are unaware of how much they’re losing to virtual card fees until they take a closer look. By analyzing how reimbursements come in and working through the details of payer contracts, many practices can shift toward lower-cost payment methods, such as ACH, and significantly reduce overall processing costs. These improvements often don’t require changing processors or overhauling operations, just more transparency and better oversight.

Q: Why isn’t this issue more widely known in the healthcare industry?

I think it’s a combination of opacity and inertia. The payment space is complex and constantly evolving. Most administrators are focused on delivering quality care and managing day-to-day operations, not the nuances of interchange fees. VCCs are also marketed as the default, making them easy to accept and hard to question unless you know what to look for.

Q: Any final advice for healthcare administrators who want to get ahead of this?

Stay informed and proactive. Treat your payment methods like any other vendor or operational expense; you wouldn’t accept a 3% surcharge on your rent or utilities without questioning it. The same scrutiny should apply here. A few small changes could make a big difference to your bottom line.