Chargebacks in the Healthcare Industry: Best Ways to Handle Them

Healthcare is expensive, and the expectations from insurance providers for treatments do not often match the bills. This is one major reason why patients chargeback transactions they had to pay for.

Other reasons range from billing errors to disputes over services rendered, all of which lead to revenue losses for healthcare providers. This is why healthcare providers must have a chargeback resolution mechanism in place besides great caregiving if they want to safeguard revenue and attain financial stability to continue practicing. 

We have brought this guide together to help you through the requisites of chargebacks in healthcare, their impact on your business, and the reasons they happen, so you can handle and prevent them. 

Why do chargebacks happen in the healthcare industry?

Let’s get started with understanding what chargebacks mean. Chargebacks are when a patient reports a medical treatment charge / medical supplies-related charge for reasons such as incorrect bills, unauthorized transactions, fraud, technical errors, and more. Customers, rather than going for a refund, raise the chargeback request with the issuing bank or the card payment provider.

The issuing bank or payment provider receives the request and evaluates the reason for the chargeback and its authenticity. If found true, they issue a clearance, which leads to a reversal of the transaction, and the money goes back to the customer’s account.

Now, the concerned party notifies the healthcare provider of the reversal, who can either accept the reversal or fight it. You must be guided by the fact that if you wish to fight the request, you must send your response to the issuing bank on time. If you cross their deadline to respond, they mark it as accepted automatically. 

Now let’s understand the reason why chargebacks happen:

1. Insurance coverage mismatch

Insurance terms are often misunderstood or vary based on multiple factors. Most of the chargebacks recorded in the healthcare industry are from patients who believe their bills, or at least a portion of their bills, should be covered. Patients do not see an additional charge on their treatments or rejection of coverage coming and choose to chargeback them.

2. Billing issues

A transaction with an incorrect amount, double bill, hidden charges, and other similar billing issues are generally chargebacked. The root causes of these billing issues are administrative errors, technical glitches, or a patient’s misunderstanding of the amount charged. This is another common reason for chargebacks in this industry.

3. Dissatisfactory service

Healthcare is a very fragile service and not as simple as a product transaction. Moreover, people are deeply connected with the outcome of the service. So anytime a treatment result is not as expected and they still have to pay the charges, they are angered and choose to chargeback the transaction. Even if it is a simple consultation service and the patient is not satisfied with the service, they can request a chargeback.

4. Fraudulent transactions

Unauthorized transactions, security breaches, identity theft, and similar frauds are part of the healthcare industry as well. Fraudsters can use a stolen card or data to make payments for medical services. When cardholders encounter such unrecognized transactions, they request a chargeback instantly.

How can you fight a chargeback?

Chargebacks are not easy for merchant healthcare providers like you. They contribute to a major revenue loss from lost transactions plus heavy chargeback fees from the banks and payment providers.

Beyond the financial impact, chargebacks cause damage to a healthcare provider’s reputation and operations. Banks and customers notice frequent chargebacks, which leads to a loss of trust. High chargebacks are a concern, and when you focus on them, you and your workforce are diverted from caregiving, which leads to operational disruptions. 

This is why you must manage chargebacks efficiently to maintain financial stability and patient trust. Here’s the information you need to fight a chargeback:

• Evidence - you have one chance to prove the charges were correct and earn your money back. So, you must gather relevant documents that act as evidence to prove your case. Here are some examples of documents you can use based on the reason for chargeback - patient records, billing statements, insurance documentation, appointment records, communication logs, service agreement forms, proof of service, identity verification, and refund policies.
• Reason codes - when the issuing bank reverses the transaction, they create a reason code. It is an alphanumeric code that decodes the reason why the chargeback request was raised and accepted. This code is sent along with the notification of reversal. You must check the code to understand the reason for the chargeback and start gathering your evidence.
• Response - your response should be strictly based on the reason code. Plus, you must follow the response structure of the concerned issuing bank and add the documents they demand. Deviation from the format will lead to the rejection of your case. Necessary evidence and rebuttal letter are a must in your response.
• Rebuttal letter - you must write a rebuttal letter and attach your evidence while filing the case. Ensure the rebuttal letter you create is to the point and makes a statement instantly. The banks do not spend a lot of time reviewing each case, so you must keep it short. Adhere to the timeframe given to send your response.

Can you prevent chargebacks in healthcare?

As a rule of thumb, you must have a chargeback management process in place. You can be ahead of the curve and even have a prevention process in place. 

Dealing with chargebacks is time-consuming and uses a lot of your financial and human resources in the process. So, if you can prevent a major fraction of these chargebacks from happening, you will save yourself and your employees time, effort, and money. Here’s how you can prevent them from happening:

1. Billing efficiency

Enhance the accuracy of your billing practice and make the breakdowns clear for customers to evaluate. It is very important to have a process and software that are error-free and go into detail to explain charges, adjustments, and refunds, if any. If the bills are clear and free of error, customers will have a better understanding of the charges, thereby preventing cases of chargebacks.

2. Transparency in communication

You must make the terms, conditions, charges, and requirements clear to the customers. Draft all these documents in simple language for anybody to understand. Give your customers time and the space to reach out to you with questions. Clarify all their doubts to the best of your knowledge if you want customer satisfaction and no misunderstandings. Transparency can help you prevent chargebacks because there’s no room for doubts here.

3. Clarity in insurance coverage

Maintain a nice relationship with insurance service providers, enough to understand their terms, conditions, and coverage. Stay in touch with them to understand and convey the coverage provided to the patients. Communicate the expected coverage to the patients and ask for their consent before providing the service. Clarifying the to and fros of insurance aligns expectations and minimizes chargeback requests.

4. Improved payment security

Introduce verification processes for payments to ensure genuine payments. You must learn the security protocols essential to safeguarding a customer’s data and preventing any cases of fraud. Other ways to maximize security is to choose a secure payment gateway and keep monitoring and updating your systems.

5. Proactive customer service

Pull together a customer service team that’s proactive at addressing customer’s queries. If you have a dedicated team for customer service and make it accessible to the customers, you can avert chargeback requests to queries. Educate your customers to reach out to you for any concerns before going for a chargeback. This will save you a hefty fee from chargebacks. 

6. Safe-keeping of documents

Keep all your customers as well as chargeback request-related documents handy. Revisit them and assess them thoroughly to find the gaps when you see a hike in chargebacks. You can also use the history of your transactions to find unique data points that can help you create better prevention strategies. 

7. Automate reminders

Automate the process of recurring bills to make it easy for you and your customers. Both of you must be aware of the payment and service intervals to avoid delays and disagreements. You can also trigger notifications through email, text messages, or mobile apps to ensure a smooth and timely service.

Need some help managing chargebacks?

If all of this sounds difficult, we hear you! ChargePay is an automated chargeback management solution that can have your chargebacks sorted. We use AI to help you automatically contest, manage, and win chargebacks without the burden of manual effort.

Our solution is tailored to fit the needs of your industry. We can help you with the complexity of insurance providers, chargebacks stemming from missed or delayed treatments and medication delivery, identifying genuine claims, staying compliant with healthcare regulations, and more. You can focus on what you do best, i.e., patient care, while we handle your business revenue. 

Navigate through your lost revenue with ChargePay. Get Started Now!