How to Navigate Chargebacks for Dental Practices

January 3, 2022

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Chargebacks— when a credit card company mandates a return— have become a favored way for patients to get out of paying for treatments. As the patient goes through their bank card or credit card company to request the chargeback, they can avoid having to deal with your front office staff. Unfortunately, however, at this stage, the transaction has already been closed in your accounts receivable, throwing a wrench into balancing your books and taking a bite out of your profits.Many don't realize just how complicated running a dental practice is. Although what you like to focus on is taking care of your patience, the hardest aspect is often dealing with the complex coding and billing systems that allow you to receive payment from the government and insurance companies. Minor errors can have significant consequences on your revenue. Chargebacks, fines, and unpaid bills add up quickly, erode your margins, and damage your cash flow.Your front office staff has a lot to juggle. Let's see if we can help them, help you, get paid.[method-blog-cta]

Why Chargebacks Are So Difficult

As a dental professional, you understand that accepting debit and credit cards is not only convenient for patients but good for business as it eliminates the headaches (and risk that comes with) having to send invoices and secure payment at a later date.Unfortunately, however, chargebacks put a dent into profits, and for some time as disputes can drag with back-and-forths for months. Credit card companies may request documentation from you numerous times, and patients who leverage this tactic to avoid payment are just waiting for you to miss a response deadline.The main issue that makes chargebacks so challenging to dispute is the amount of input required of the "merchant" (your practice). As you'll soon see, there are many stages to the process, and every stage requires a response or action to be taken by the merchant in order for the process to move forward. If due dates for responses aren't met, the chargeback is automatically accepted and becomes permanent, meaning it will no longer be contestable.Response requirements depend on many factors and will vary from network to network. And to complicate matters further, some customers may go so far as to claim a different reason for the chargeback every time.Depending on the state in which your practice resides, the chargeback process could be even more costly and arduous as laws differ by state. Arkansas, for example, has one of the more difficult regulations, while California has very clearly defined policies; hence, Arkansas has one of the lowest numbers of services and professionals accepting credit cards. Meanwhile, in California, even the smallest of businesses accept credit cards.

Dangers of Chargebacks

Once you add in fees and overhead, chargebacks can end up costing your practice more than double the original transaction amount. This makes them a grave danger to your revenue.Additionally, whether you win or lose, chargebacks come with even more risk:

  • A bank or credit card company may choose to decline a dental practice or organization from processing credit card receipts if they have too many chargebacks.
  • Too many chargebacks may cause you to be charged higher processing fees.
  • Not receiving payment for services your practice delivered honestly hurts your profits and efficiencies.
  • Even if you do eventually win and are able to have the chargeback reversed, the fight takes time away from your employees they should be spending on servicing your patients.
  • Again, even if you do get your money back, your cash flow takes a hit in the meantime.
  • Just another reminder that any misstep that causes you to miss a deadline means the chargeback is accepted and becomes indisputable.

Who Is Involved in the Chargeback Process

Here are the five, or maybe even up to six, major players involved in the chargeback process:

The Credit Card Network

Credit card networks own the credit card brand used in the transaction and set the credit cards terms, which the banks then follow. Visa, Mastercard, American Express, and Discover are the four major credit card networks within the U.S.

The Customer and Cardholder

Although the customer (your patient) is also often the cardholder, that's not always the case. The cardholder is the person that was issued the card that was used in the transaction.In cases of fraud, the customer may have used a stolen card, and it is the cardholder who then disputes the charge.

The Merchant

The merchant is the seller of the product or service, in this case, the dental organization. Once a chargeback is filed, the merchant must decide if they are going to accept or dispute it.

The Issuing Bank (also referred to as the Issuer)

This is the bank or financial institution which issued the payment card to the cardholder, such as Wells Fargo, Capital One, or Bank of America.

The Acquiring Bank (also referred to as the Acquirer)

The acquiring bank holds the merchant's bank account and enables them to accept credit card payments.

Others

Payment gateways and processors or other companies that service merchants accounts may also be involved in the chargeback dispute resolution process.

The Steps of a Chargeback Process

First, either because they simply do not want to pay for services rendered, or because they, in fact, believe they were wrongly charged, the customer or cardholder (most often this would be your patient) calls their issuing bank or credit card company to dispute a transaction. Upon receiving the call, the bank or credit card company issues the customer a provisional credit. Meanwhile, they will contact the merchant (your dental practice).Once you have been contacted, you will be responsible for providing proof of delivery of treatment within 15 calendar days. If you do not have a formal documentation process, this may present a challenge. Note that your documentation must prove that the service in question was, in fact, performed. If it is deemed to not be adequate proof, the provisional credit originally provided to the cardholder is then finalized, and your account will receive a debit.Below is a more detailed outline of the process. However, please note that depending on certain factors and the parties involved, the process may vary, and actions are non-linear and will demand specific deadlines.

  • The cardholder makes contact with the issuing bank to dispute the charge.
  • The issuing bank determines whether they believe the cardholder's claim is valid and reason enough to provide a chargeback.
  • If the claim is deemed invalid, the process ends here, and no chargeback is given.
  • If the claim is deemed valid, the issuing bank issues the cardholder a provisional credit (equal to the full amount of the disputed transaction). It is important to note that most banks give the benefit of the doubt to their clients and allow the chargeback.
  • The issuing bank then first informs the card network of the chargeback.
  • The card network will then inform the merchant's (your practice's) acquiring bank of the chargeback.
  • Upon notification of the chargeback, the acquiring bank will debit your practice's account for the full amount of the chargeback plus any applicable chargeback fees.
  • Once your account has been debited, the acquiring bank will notify you of the chargeback. Although this may be quite some time, after the initial charge dispute, it is likely the first time you have become aware of the issue.
  • Before your response time expires, you must decide if you will accept or fight the chargeback. Note, any back and forth communication between the parties will eat away at this time.
  • If you intend to fight a chargeback, this will be referred to as representment (meaning that you're presenting the charge for a second time). This means you'll need to provide evidence that refutes the cardholder's claim. Keep that in mind when searching for documentation and information to submit.
  • What is considered the "right" evidence will entirely depend on the specifics of the case. However, here are a few things that may be relevant evidence:
  • Transaction data (make sure it includes a date and timestamp)
  • Any evidence that the service was performed
  • Any of the cardholder's history with your clinic (charged to the same card)
  • Any communications between your practice and the cardholder
  • Any documentation signed by the cardholder
  • Other critical documentation or transactions related to the transaction being disputed
  • Remember, everything you would like to present as evidence will need to be provided by the given deadline. If you miss a due date, the chargeback is automatically accepted and becomes permanent and uncontestable.
  • Your evidence will then be forwarded from the receiver to the network and onto the Issuer.
  • The Issuer will review the case, including your evidence, and make a decision.
  • Finally, the final decision is made by the issuing bank.
  • If your dispute of the chargeback is recognized as legitimate, the provisional refund is reversed, and the revenue is returned back to your bank account.
  • However, if the cardholder's original claim is accepted to be legitimate, the chargeback stands.

In many cases, the chargeback process will end when the practice fails to submit responses. In these cases, as we noted above, the chargeback is automatically accepted and becomes indisputable. However, win or lose, the process may not end here.The cardholder may still decide to dispute their bank's decision and escalate it further. If this is to happen, the card networks will have a different process for this. Mastercard calls them arbitration chargebacks, while Visa refers to it as pre-arbitration. However they refer to it, the process will include more fees that will be incurred by the party who loses the case.

How to Win a Chargeback Dispute

Identity fraud has been an issue credit card companies and banks have long since been eager to end. Luckily, charge fraud is no different. Not only do chargebacks cause you to lose out on funds, but the credit card company loses out as well. They also lead to increased processing costs and well upset their merchants, and rightfully so.To help fight this, any consumer who loses a chargeback dispute to three or more merchants may lose their credit card and be put on "The MATCH (Member Alert to Control to High-Risk Merchants) List"— a list that provides acquiring banks with a record of high-risk merchants who have fraudulently used credit cards as defined by Mastercard.Chargebacks have become such an issue for large corporations that some, like Google, now have entire departments within their accounting division specifically solely responsible for fighting chargebacks. With the MATCH ensuring consumers lose their charging privilege if they fraudulently request chargebacks, corporations are now fighting each and every chargeback they receive.Dental practices would do themselves well by following suit.Here are some steps you can take that may help you win chargeback disputes.

  1. Gather and save ALL documentation, everything from phone records to faxes and service appointments.
  2. Once you have secured all documentation and information, put together a statement or timeline.
  3. Fax or email the statement and/or timeline to the bank or credit card company handling the dispute.
  4. Call the Dispute Manager immediately upon sending your response and ask if they have received sufficient documentation for you to win the dispute.
  5. Make sure you are aware of the timeframes, deadlines, and response types required of you.
  6. Save EVERYTHING. If you win, the patient may re-attempt another chargeback.
  7. To help prevent further fraud, upon winning a dispute, ensure to file a fraudulent charging complaint with the company that issued the patient's card.

Fighting chargebacks helps dental organizations to recover lost revenue and makes it less likely to reflect poorly on your practice, ensuring you preserve your practice's reputation with issuing banks.Disputing wrongful chargebacks allows you to close out your accounts receivable and are, quite frankly, just smart to do because your business deserves to be paid for the services it provides in good faith.Happen to be looking for more ways to safeguard your profitability? Look no further than how you purchase your dental supplies. Mitigate your risks and safeguard your practice while improving profitability with Method Procurement Technologies.Tell us a bit about your dental organization and arrange a personalized demo to suit your dental practice's needs.

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