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The Hidden Tax on Healthcare Revenue: Why Fee-Based Payments Are Becoming the Industry Default

Healthcare organizations have spent years modernizing their revenue cycle operations. Electronic claims, automated remittance processing, and ANSI 835 adoption were meant to speed up cash flow and reduce administrative burden.

Yet today, many providers are facing an uncomfortable reality: they are paying significant fees simply to receive their own reimbursement dollars.

This isn’t just an operational inconvenience. It’s a systemic shift in healthcare payment processing — one that quietly transfers value away from providers and into the hands of intermediaries.

How Virtual Credit Cards Became So Widespread

Virtual credit cards (VCCs) were introduced as an alternative to paper checks, positioned as fast, secure, and electronic. But unlike electronic funds transfer (EFT) paired with ERA transactions, VCCs function like traditional credit cards — and come with interchange and processing fees.

Industry groups have been raising concerns about this for years:

• The American Medical Association (AMA) has repeatedly warned that virtual credit card payments can erode contracted reimbursement rates and increase administrative burden for providers
• MGMA has also highlighted how these fees divert revenue away from practices already under pressure from rising costs and staffing challenges

Despite these warnings, VCC usage has continued to expand — not because providers prefer it, but because the system makes it difficult to avoid.

Why Providers Feel Trapped

There are structural reasons fee-based payments have become the default:

• Payers and intermediaries often benefit financially from VCC transactions through card network incentives
• Federal EFT/ERA requirements don’t prohibit fee-based alternatives, leaving room for VCCs to proliferate
• Enrollment processes are frequently opaque, buried in payer portals, or triggered by a single click
• Opt-out workflows are often unclear, time-consuming, or result in slower paper-based payments

As the Centers for Medicare & Medicaid Services (CMS) has clarified, providers are entitled to fee-free EFT/ERA options — yet many still struggle to operationalize them at scale.

The result is a no-win scenario:

• Accept VCCs and lose revenue to fees
• Or opt out and absorb manual work, slower cash, and administrative drag

Avoiding Fees Without Slowing Cash: Where Modern Automation Comes In

This is where leading healthcare organizations are changing the equation.

The problem isn’t electronic payments — it’s how those payments are routed, processed, and reconciled.

Modern healthcare payment automation makes it possible to:

• Decline virtual credit cards
• Stay fully electronic
• Maintain fast posting and reconciliation
• Preserve full reimbursement value

MediStreams was purpose-built for this reality.

By combining medical lockbox services, paper and PDF EOB conversion, PDF-to-835 generation, and automated reconciliation, MediStreams enables providers to avoid VCC fees without reverting to manual workflows.

Key capabilities include:

• Identifying virtual card payments within correspondence indexing so teams can quickly filter, review, and manage them
• Converting paper and portal-based EOBs into clean ANSI 835 files for automated posting
• Supporting virtual card unenrollment while maintaining posting speed and accuracy
• Delivering same-day or next-day outputs so cash flow doesn’t slow

In short, providers don’t have to choose between fees and friction. With the right remittance management system, like MediStreams, they can eliminate both.

Why This Matters for Growth and Financial Control

As organizations expand — adding locations, payers, and volume — the cost of fee-based payments scales with them. A few percentage points of lost reimbursement can quickly translate into millions of dollars annually.

Just as important, fee-based models undermine:

• Forecasting accuracy
• Margin integrity
• Confidence in reported revenue

Healthcare leaders are increasingly recognizing that payment method control is a strategic issue, not just an operational one.

That’s why more organizations are re-evaluating how they handle:

• Healthcare lockbox services
• EOB and ERA processing
• Payment reconciliation systems
• Correspondence indexing and document management

A Better Path Forward

Healthcare providers shouldn’t have to pay a toll to access money they’ve already earned. And they shouldn’t have to slow down their revenue cycle to avoid it.

The industry is at an inflection point. Providers now have the tools to:

• Stay electronic
• Eliminate unnecessary fees
• Reduce manual work
• Improve visibility across the entire payment lifecycle

Understanding how fee-based payments became the default is the first step. Taking control of how you get paid is the next.

Learn More About the Research — and the Way Forward

The full research report explores:

• Why fee-based payments spread so quickly
• How much revenue is typically impacted
• Why opting out has been so difficult
• What leading organizations are doing to regain control

Download the full research report to understand the hidden tax on healthcare revenue — and how to avoid it without slowing cash.

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