Tracey Wilson MD

By Howard Bogard 

As credit card processing fees continue to rise, many healthcare providers are exploring whether they can pass those costs on to patients. The answer depends on a complex interplay between individual payor agreements, credit card network rules and state law. This article provides an overview of the key considerations Alabama providers need to know before passing credit card fees on to patients, known in the industry as surcharging.

Commercial Payor Rules and Requirements

Effective January 30, 2026, BlueCross BlueShield of Alabama allows PMD providers to impose a credit card surcharge on covered members who use a credit card to pay their copayments or coinsurance. However, the surcharge may not exceed the lesser of the provider’s credit card transaction processing cost or three percent of the payment amount. In addition, the provider must offer members at least one payment option that does not incur a surcharge, such as cash or check.

This announcement has generated considerable interest among healthcare providers. Many providers have long absorbed credit card processing fees, which typically range from 1.5 percent to 3.5 percent per transaction, as a cost of doing business. With rising transaction volumes and thinning margins, the ability to pass these costs to patients is understandably appealing.

However, BlueCross’s announcement applies only to its PMD providers and insured members. Each commercial payor maintains its own distinct standards, contract terms and restrictions. A provider that participates in multiple commercial networks must review each payor agreement and associated rules and policies to determine whether surcharging is permitted. Some payors may expressly prohibit surcharging; others may be silent on the issue (but silence should not automatically be interpreted as permission). Before implementing a credit card surcharge for any patient population, providers should conduct a comprehensive review of all applicable payor contracts.

Medicare’s Prohibition: A Hard Line

While the recent BlueCross policy change offers providers flexibility for BlueCross commercial patients, the rules governing Medicare beneficiaries are far more restrictive. The Medicare program’s statutory and regulatory framework strictly limits what a provider may collect from a beneficiary and credit card surcharges are not permitted.

When a physician or other provider participates in Medicare, the provider enters into a Medicare Participating Physician or Supplier Agreement (Form CMS-460), under which the provider agrees to “accept assignment” from Medicare. By accepting assignment, the provider agrees to limit its charges to Medicare beneficiaries to the deductible (if not yet satisfied) and the 20 percent coinsurance applied to the Medicare-approved amount. Specifically, the Agreement states: “The participant shall not collect from the beneficiary or other person or organization for covered services more than the applicable deductible and coinsurance.” Further, under 42 U.S.C. § 1395cc, a provider that enters into a Medicare provider agreement commits “to limit its charges to beneficiaries and to other individuals on their behalf” to the amounts permitted under Medicare law.

Physician compliance guidance issued by the United States Department of Health and Human Services Office of Inspector General (“OIG”) states: “It is legal to charge patients for services that are not covered by Medicare. However, charging an ‘access fee’ or ‘administrative fee’ that simply allows them to obtain Medicare-covered services from your practice constitutes double billing.” While this statement was not issued with respect to credit card fees, it is instructive as to how the OIG might view surcharges. In 2004, the OIG published an alert warning physicians that charging additional fees for covered services would constitute a violation of their assignment agreements and could lead to civil monetary penalties or exclusion from the Medicare program. 

Imposing a credit card fee on top of allowed payments causes the Medicare beneficiary’s total payment to exceed the approved amounts and therefore violates the provider’s agreement with Medicare and relevant statutory requirements.  The regulatory framework focuses on what the beneficiary actually pays, not if the provider categorizes the payment as a “pass-through” expense.

The consequences of violating these Medicare prohibitions are significant. Providers who charge Medicare beneficiaries impermissible fees face potential exclusion from the Medicare program, fines and potential criminal sanctions for knowingly, willfully and repeatedly charging amounts not permitted under assignment rules.

Credit Card Network Rules and State Law Limitations: Additional Compliance Layers

Even where commercial payor rules permit surcharging, providers must also comply with the contractual rules imposed by the major credit card networks. The Visa, Mastercard and American Express networks each permit merchants in states without anti-surcharge statutes, including Alabama, to impose surcharges on credit card transactions. However, providers must satisfy several conditions. First, the surcharge cannot exceed the provider’s actual cost of processing the card or three percent of the transaction amount for Visa and four percent for MasterCard, whichever is lower. American Express rules revolve around an “Equal Treatment” mandate, meaning a provider cannot surcharge American Express cards at a higher rate than other credit card networks. Second, the provider must give advance written notice to the card network before implementing the surcharge. Third, the surcharge must be clearly disclosed to the patient or customer at the point of sale and separately itemized on the receipt. Providers should review their merchant agreements with each network for specific terms.

Critically, Visa and Mastercard network rules prohibit surcharging debit card transactions. This ban applies nationwide, regardless of state law, and covers both PIN-based and signature-based debit transactions. Providers who surcharge a debit card violate their network card acceptance agreement. Therefore, providers must ensure their systems distinguish between credit and debit transactions.

Alabama law does not prohibit merchants, including healthcare providers, from imposing credit card surcharges on customers and patients. However, some states have enacted prohibitions or heavily restrict surcharges, including Connecticut, Maine and Massachusetts, while other states, including Colorado, Nevada, New York, Minnesota and Virginia, impose disclosure requirements and/or fee limits. Thus, from a state-law perspective, an Alabama provider may impose a credit card surcharge on patients for non-Medicare transactions, subject to specific commercial payor requirements and the card network rules discussed above.

Practical Compliance Steps

Providers that elect to surcharge non-Medicare patients where permitted by the applicable payor should: (1) register with applicable card networks before implementation; (2) post clear signage at the point of sale disclosing the surcharge; (3) ensure the surcharge appears as a separate line item on receipts; (4) cap the surcharge at the lesser of the provider’s actual credit card processing cost, or three percent or four percent as applicable to the card network; and (5) never apply surcharges to debit card transactions.

Howard Bogard is a Partner at Burr & Forman LLP and works exclusively with health care providers on corporate and regulatory matters. He can be reached at (205) 458-5416 or at hbogard@burr.com.