Chargeback Management

2020 HIPAA Disputes and Chargebacks Guide

bank fraud investigation

Chargebacks are a major challenge in the health care industry. Health care service providers like hospitals, clinics, and testing facilities have two options for dealing with them - neither of them good. They can either write off chargebacks as just another cost of doing business, or they can report accounts that have disputed payments to a collection agency. However, when a dispute is filed, the health care provider has to wait at least six months before they can report the account to collections. 


According to the American Collectors Association, it is estimated that collection agencies are able to collect from only 17% of patients overall. Due to the low recovery rate, collection agencies tend to take anywhere from 40 to 50% of the revenue they collect. 

What many health care providers don’t realize is that there is a third option. You may be surprised to know that even in an industry with stringent requirements for HIPAA compliance, health care providers can recover up to 70% of their lost revenue without paying heavy collection fees or violating HIPAA regulations. 

Debunking the Chargeback Representment Myth 


Health Insurance Chargeback StudyThe team at Chargeback Gurus has found that many health care providers are either unaware of their rights, or they don’t have an experienced team or the right tools to dispute chargebacks. Clinics and small institutions write off anywhere from $20,000 to $250,000 per year as bad debt. Card networks allow health care providers to dispute chargebacks without violating HIPAA compliance, and much of the information that gets revealed to the collection agency can be used to dispute your chargebacks. 


Per the US Department of Health & Human Services, the Privacy Rule permits a covered entity, or a business associate acting on behalf of a covered entity (like a collection agency), to disclose protected health information as necessary to obtain payment for health care, and does not limit to whom such disclosures can be made. 


Across all industries, merchants who do nothing about their chargebacks stand to lose up to 40% of their revenue, and health care providers are no exception. Many disputes are based on false or mistaken premises, and these so-called “friendly fraud” chargebacks can comprise anywhere from 17 to 32% of a merchant’s total chargebacks. The good news is that these chargebacks can be beaten if you fight them effectively. 


Reasons to Consider Chargeback Representment 


Still unsure? Here are the top three reasons why health care providers should consider chargeback representment: 


  1. You have an opportunity to dispute chargebacks immediately—you can recover your revenue without waiting six months. 
  1. Your cost for disputing the chargeback is a fraction of the cost of a collection agency. 
  1. By looking more closely at your chargebacks, you can identify their root causes and fix issues with your processes and operations to prevent future disputes. 


How Can You Fight Health Care Chargebacks Under HIPAA? 


For the best chance of winning chargeback disputes and recovering your funds, we recommend that health care providers present the following evidence: 


  1. Cover Letter  
    Write a one-page cover letter that outlines the service you provide, lists the evidence attached, and states the reason why the bank should reverse the chargeback in your favor. 
  2. Invoice/Statement 
    Provide a copy of a statement that outlines the service provided. To protect the patient’s privacy, redact their date of birth, social security number, and the details of the specific test or service performed. Ensure that the statement or invoice does include their full name, address, phone number, email, cost of service, and the total charge. 
  3. Transaction Receipt 
    Provide a copy of the transaction receipt which shows an AVS and CVV match. This document can be obtained from your payment gateway if the transaction was made online or via phone. 
  4. Agreement 
    If the patient was required to sign an agreement prior to receiving service, provide a copy of the signed agreement. Ensure your document contains the payment agreement along with the cancellation and refund policy. Highlight the policies that you think are favorable to your case. If your agreement is more than five pages long, we recommend attaching just the terms that are relevant to your case. 
  5. Customer Service Interactions 
    If the patient has interacted with you over email or via phone and you have notes to prove it, provide a copy of the communication and notes as well. If the communications contain sensitive information like date of birth, social security number, or test/procedure details, redact that information prior to attaching the evidence. 

How Do You Prevent Chargebacks in a HIPAA-Compliant Industry? 


As effective as chargeback representment can be, the most efficient way to fight chargebacks is to prevent them from happening in the first place. These strategies can help you avoid disputes before they ever reach the chargeback stage: 


  1. Root-Cause Analysis 
    In order to put together a truly effective plan of defense, you need to understand the true reasons behind your chargebacks. Cardholders frequently dispute charges because they’re confused or mistaken about the transaction, and not all of them tell the truth to their banks when they’re making dispute claims. That means you can’t take the bank’s reason for the chargeback at face value. Every chargeback tells a story, and provides you with an opportunity to fix your business processes and prevent future chargebacks from happening due to avoidable mistakes.  
  2. Order Insight 
    Cardholders often dispute transactions as “not authorized” because they are unaware that the charges were made by family members. Sometimes, they forget charges they themselves have authorized. Order Insight, now offered by Chargeback Gurus, allows health care providers to provide service details to issuing banks via real-time integration. This tool can help you proactively prevent Visa disputes by confirming the validity of the charge before the bank escalates an inquiry to a chargeback. 
  3. Prevention Alerts 
    If you are approaching your chargeback threshold or have already exceeded the 1% maximum chargeback ratio, prevention alert services will allow you to avoid chargebacks by issuing immediate refunds during a brief window of time after the dispute is filed. This will prevent the chargeback from happening. 

When Should I Consider Hiring a Chargeback Management Company? 


If you can agree to any of the statements below, you should consider hiring a chargeback management company: 


  1. I don’t have the resources to fight chargebacks in time. 
  2. I don’t have the expertise to comply with card network dispute regulations. 
  3. I do not have the analytics or the software to track my chargeback ratio, the root causes of my chargebacks, or my recovery rate in one dashboard. 
  4. My representment win rate is below 40%. 
  5. My chargeback threshold is close to 1% or has already exceeded it. 

The chargeback management company you hire should have a solid understanding of your industry, understand HIPAA compliance, and have experience working in your industry assisting providers with recovering lost revenue and proactively preventing disputes using proven defense strategies. 


Please note: The recommendations provided above are not intended to replace any advice provided by your HIPAA compliance team. We highly recommend you talk to your compliance team prior to implementing your chargeback defense strategies. 

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