Credit card surcharging vs. discounts in dentistry: What every dental practice needs to know

For years, many dental practices offered courtesy discounts to patients who paid in cash or at the time of service. These discounts were often viewed as a simple way to encourage prompt payment, reduce accounts receivable, and reward patients for paying upfront. But things have changed. 

Today, practices are increasingly hearing two seemingly contradictory messages:

• You may be able to add a credit card surcharge.

• You cannot offer discounts to insured patients.

This leaves many dentists and office managers asking, "What's the difference?" 

The answer lies in how dental insurance contracts, fee schedules, and payer compliance requirements have evolved over time. Understanding these distinctions is critical to avoiding compliance issues while still managing rising payment processing costs.Understanding the difference between credit card surcharging and patient discounts can help dental practices remain compliant while protecting profitability. 

Key takeaways on credit card surcharging versus giving discounts at the dental practice: 

• Insurance fee schedules can impact how providers are permitted to charge for services.

• Routine discounts for insured patients may create compliance concerns with some payer contracts.

• Practices considering surcharging should understand applicable laws, card brand rules, and insurance requirements before implementation.

Understanding the difference between discounts and surcharges

At first glance, a discount and a surcharge may seem like two sides of the same coin. However, insurance companies, payment processors, and regulators often view them very differently.

What is a dental patient discount?

A patient discount is a reduction in the fee charged for treatment. Common examples include:

• Cash-pay discounts.

• Same-day payment discounts.

• Senior citizen discounts.

• Courtesy discounts.

• Employee or family discounts.

In each of these cases, the provider is reducing the amount charged for the dental service itself.

What is a credit card surcharge?

A credit card surcharge is a separate fee added to a transaction when a patient chooses to pay with a credit card. The purpose of the surcharge is generally to offset the cost of processing that payment. Credit card surcharging allows practices to offset payment processing costs without changing the fee charged for treatment, subject to applicable laws and contractual requirements. 

Unlike a treatment discount, a surcharge is typically not intended to change the fee for the clinical service provided. Instead, it is associated with the patient's selected payment method and is usually disclosed before payment is collected.

Why these are not the same thing

The distinction matters because discounts affect the fee being charged for treatment, while surcharges are generally tied to the cost of accepting a specific form of payment.

From an insurance carrier's perspective, reducing the treatment fee can affect reimbursement calculations and contractual obligations. A surcharge, on the other hand, may be treated as a separate payment processing expense, subject to its own set of rules and restrictions.

How insurance contracts changed the rules

The biggest reason dental practices have become more cautious about discounts is the growing complexity of insurance contracts. The ADA explains: 

“Failure to notify the plan of any accounting reduction could be considered fraud, even though it may be no more than a simple oversight. Some insurance contracts require the dentist to avail their enrollees of the lowest service fees provided in the office. 

Repeated fee reductions may qualify as such an occurrence and the practice may be required to extend the discount to all members in a particular insurance plan. Also, remember that different states have different laws regarding discounts”

When your practice chooses to go in-network with an insurance company, you agree to accept their negotiated fee schedules. These contracts establish the fees that can be charged and the reimbursement arrangements that govern covered services.

While these agreements vary by payer, they are designed to create consistency in pricing and patient responsibility calculations.

The problem with discounts in a dental office

Issues can arise when a practice routinely discounts treatment fees after billing an insurance company based on a higher amount.

“The problem that we’re seeing regarding discounts and credits is that the discount is often not applied when billing the insurance company. For example, if you extend a 5% discount to a patient, this rate also applies to the amount you’re billing to the patient’s insurance company. Many dentists will offer the credit to the patient, but are still billing the insurance companies for the full amount of treatment!” —Pro Dental Designs

This is one reason carriers closely scrutinize discounting practices. If a provider consistently reduces fees but reports higher charges to the insurance company, questions can arise regarding the provider's actual fees and reimbursement calculations.

Many payer agreements require providers to follow established fee schedules and collect patient responsibility amounts as outlined by the plan. When providers routinely waive, reduce, or forgive portions of patient responsibility, they may create conflicts with contractual obligations depending on the language of the agreement.

Because contract terms vary, practices should carefully review their payer agreements before implementing discount programs.

Why credit card surcharging is being treated differently

While discounts have received increased scrutiny, credit card surcharging has become more common across many industries, including healthcare. The cost of accepting credit cards has increased significantly over the past decade. For many dental practices, processing fees represent thousands (or even tens of thousands) of dollars annually.

Related: Are you overpaying? Dental credit card processing fees explained

As operating costs continue to rise, practices are looking for ways to protect profitability without increasing treatment fees. Many dental practices are evaluating payment processing strategies as a way to manage rising operating expenses without increasing treatment fees.Unlike a discount, a surcharge is typically associated with the method of payment rather than the clinical service itself.

Because of this distinction, surcharges are often evaluated under payment processing rules rather than fee schedule rules. However, that does not mean surcharges are universally permitted.

Important caveat: Rules vary on credit card surcharging

Before implementing a surcharge program, practices should understand that requirements can vary based on:

• State laws.

• Credit card brand requirements.

• Merchant processor policies.

• Insurance contracts.

• Healthcare-specific regulations.

A surcharge program that is compliant in one state or under one merchant services provider may not be appropriate in another situation. Despite these complexities, many practices are evaluating surcharging because it may help protect operating margins, offset increasing payment processing expenses, maintain consistency with contracted fee schedules, and reduce the financial impact of credit card acceptance. 

When implemented correctly, surcharging can provide an alternative to absorbing all payment processing costs internally.

Be sure to inform yourself before offering discounts and/or applying a credit card surcharge

To recap, we covered: 

• Understanding the difference between discounts and surcharges

• How insurance contracts changed the rules

• Why credit card surcharging is being treated differently

Whether your practice is considering discounts, surcharges, or both, taking time to understand the rules can help prevent compliance issues down the road. Every payer relationship is different. Review network agreements carefully and understand any restrictions related to discounts, patient responsibility, or payment collection requirements.

State regulations surrounding credit card surcharging continue to evolve. Confirm current requirements before implementing any program.

Your front office team will often be responsible for explaining payment options and answering patient questions. Providing training and scripting helps ensure consistent communication and reduces confusion.

You can simplify patient payments as a whole when you choose QuantaPay as your patient billing software. Schedule a call with the QuantaPay team to learn how modern payment technology can help improve collections, streamline payment processing, and support a better patient experience.