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Physician, protect thyself: The threat of credit card chargebacks

 

Hundreds, if not thousands, of physicians are scammed by their own patients every year. Unfortunately, Michael A. Persky, MD, a well-known plastic surgeon in California, was one of them.
With Persky’s stellar reputation, who would think of him as an easy mark? One of his patients – a 67-year old female artist – did.
 
“When I consulted with her we decided to do a face- and neck-lift and also do a fat transfer from her abdomen to her face,” Persky said.
 
In lieu of payment, the woman tried to barter with Persky by offering some of her artwork.
 
“Repeatedly, I said I don’t do bartering, the cost is the cost,” Persky said.
 
On the day of the pre-operative visit, Persky’s office manager requested payment in full from the patient. The woman gave the office manager a credit card and said, “Put $4,000 on this, and Dr. Persky said he would take the other $4,000 in barter.”
 
Surprised, the office manager indicated such a deal was unacceptable, and the patient ultimately presented another credit card and charged the additional $4,000 to the second card.
 
Fast-forward six months. Persky was looking over his bank statements and discovered a debit for $4,000. He discovered that the 67-year-old woman had filed a credit card chargeback. Persky contacted his merchant bank, and was told the bank sent out an appeal letter months before via fax.
 
“The fax number that the patient had given to the merchant bank was erroneous,” Persky recalls. “It was off by a few numbers so I never received the fax.”
 
In response, Persky filed a small claims action against his former patient to recover the $4,000. The case eventually went to trial, during which the judge examined the pre- and post-surgical photographs. In a desperate attempt to avoid payment, the patient even lifted her shirt, showed the judge her stomach and claimed she should not have to pay because she “could not wear a bikini” when she goes to the beach.
The judge ultimately ruled in Persky’s favor, and required the woman to pay the $4,000 she owed.
 
If you run a physician practice and have never had a chargeback occur in your office, count yourself lucky. But when – not if – it happens, here is what you can expect.
 
According to Brian Manning, a district manager of Allied Bancard in Indianapolis, Ind., the merchant is notified by mail that there is a chargeback/dispute. The merchant then has 30 days to respond to the notice. If the physician practice is not deemed at fault, then the office will only be responsible for the regular processing fees.
 
But why take the risk?
 
Thankfully, there are some things a physician can do to protect him or herself against improper chargebacks. One is through a binding financial agreement which covers the following:
·      If a patient uses a credit card, have him/her sign the receipt according to the vendor's guidelines – amount, date and the credit card number masked by a collection of x's except for the last 4 or 5 digits.
·      Next, if you have a proposed treatment plan, have the patient sign the plan and approve the cost of the plan.
·      Finally, if you have a policy on refunds or deposits, put it in writing and have the patient sign it.
Medical practices may also consider working with companies which offer a healthcare credit card that can be used as a payment option for certain expenses not covered by insurance. After his chargeback experience, Persky now offers such a card to his patients.
 
“I never wanted to put the patient in a position of going into debt for having an elective procedure,” Persky said. “But while (the struggle) was worth the $4,000, it was mainly worth it for what is right, and the principle of the matter.”
 

Michael J. Sacopulos is a partner with Sacopulos, Johnson & Sacopulos, in Terre Haute, Ind. His core expertise is in medical malpractice defense and third party payment disputes. He may be reached at mike_sacopulos@sacopulos.com

 

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