Now You See It Now You Don’t: Physicians Dealing with the Rising Trend of Credit Card Disputes


July 5, 2011

A 67-year old female artist walked in to see her plastic surgeon in the Los Angeles area for a facelift. This line could be the start of joke but its ending isn’t funny. It is a very serious matter that is part of a growing trend nationwide. Hundreds, if not thousands of physicians are being scammed by their own patients.

Dr. Michael A. Persky M.D. FACS is a well-known plastic surgeon in California. Persky has treated many celebrities and is frequently interviewed by national media outlets on his work. With Persky’s well- known reputation, who would think of him as an easy mark? The 67-year old female artist did.

“When I consulted with her we decided to do a face and neck lift and also do a fat transfer from her abdomen to her face,” Dr. Persky said.

A procedure at this level does not come cheap, so the 67-year old woman tried to barter with Dr. Persky by offering some of her artwork.

“Repeatedly, I said I don’t do bartering, the cost is the cost,” Dr. Persky said.

The charge was going to be $8,000 for the facelift not including operating room and anesthesia fees.

“The day of the pre-op, is the day we normally collect payment in full. She gave my office manager a credit card and said ‘Put $4,000 on this, and Dr. Persky said he would take the other $4,000 in barter’. My office manager said we don’t do that and there was a bit of conversation and finally she took out a different credit card and said okay, put the other $4,000 on this credit card,” Dr. Persky said.

According to Dr. Persky the 67-year old woman’s procedure went on as planned with no complications. After the first couple days she started complaining of pain in her jaw and tightness in her neck stating it was difficult for her to eat. Her complaining went on for about two to three weeks. One night she called Dr. Persky when he was on his way to a conference.

“I registered, went into the conference and sat down. Much to my surprise my patient was a row in front of me with a girlfriend watching the latest in plastic surgery procedures that my colleague was presenting and chowing down some dinner. I was pretty shocked and amazed but that was that,” Dr. Persky said.

Fast forward six months and Dr. Persky was looking over his bank statements. There is was, right in front of him, a debit for $4,000 dollars. Not knowing what had happenedDr. Persky went to his bank, who he has been doing business with for years about the debit.There he discovered that the 67-year old woman filed a chargeback. Dr. Persky contacted his merchant bank. They told him the bank sent out an appeal letter months before via fax. Dr. Persky claimed to never have received the fax.

“So I asked for the paper work to be sent to me and when they sent it to me the fax number that the patient had given to the merchant bank was erroneous, it was off by a few numbers so I never received the fax,” Dr. Persky said.

Meanwhile, Dr. Persky’s bank put a freeze on his account creating a $25,000 cash flow problem for his practice.

“After about a week of spending lots of time, they finally reinstated my banking,” Dr. Persky said.

But the chargeback was not reversed. Dr. Persky filed a small claim action against his former patient to recover the $4,000. She then counter claimed.
The case went to trial. There the judge looked at the before and after photographs, and things became more graphic. The 67-year old woman then lifted up her shirt and showed the judge her stomach. She told the judge she should not have to pay because she“could not wear a bikini” when she goes to the beach.

The judge ruled in Dr. Persky’s favor and the 67-year old woman would have to pay him the $4,000 dollars. It would be the better part of another year before Dr. Persky recovered the full $4,000 dollars.

Across the country on the upper east side of Manhattan, New York a similar situation played out for board certified dermatologist,Dr. Debra Jaliman.

“There are actually some people who come in and their actual intent is to defraud you. You see some people come in, have a procedure doneand then they will leave and charge it back immediately. So it was like a scam. Then I will speak to other colleagues and we will find out that they do this to other practices. It is like the same person with the same name. They just go around Manhattan and that is what they do to get free filler and free Botox,” Dr. Jaliman said.

From dermatologists to dentist offices the problem is spreading. Just ask Stacy Makenvich DDS, of Brooklyn, New York. Dr. Makenvich can recall in late 2010 when a patient she did significant work on filed a chargeback four to five months later, basically charging back all of the treatments.

“When we called her up she said that her insurance didn’t cover all the treatments and that’s why she doesn’t want to pay for them”, Dr. Makenvich said.

Dr. Makenvich says patients need to be reminded that the use of funding a medical procedure by a credit card is a convenience.

“Credit card transactions are there for the convenience so you don’t have to carry around all of the cash. If someone makes a cash payment then they would have to physically try and get it back from you whereas I think the credit cards make it kind of really easy for patients to have buyer’s remorse or whatever it is for whatever reason to say well I don’t feel like paying my bill, “ Dr. Makenvich explained.

The magnitude of this problem is hard to overstate. Customer chargebacks cost retailers $11.8 billion in the U.S. last year, according to BadCustomer.com. This figure includes charges for bank fees, credit card fees, loss of merchandise and loss of customer service agent time.

If you have never had a chargeback occur in your office count yourself lucky. But when, not if, it happens, here is what you can expect: According to Brian Manning a district manager of Allied Bancard in Indianapolis, Indiana, the merchant is notified by mail that there is a chargeback/dispute. The merchant then has 30 days to respond back to the notice. If the physician’s office is not at fault, then the office will only be responsible for the regular processing fees.

“If the chargeback goes in favor of the card holder the customer in another words or the patient, then the merchant is charged a charge back fee which can range from company to company. Typically there is a charge between$15 and $35 per occurrence. Most companies will only charge those if the merchant has a history of excessive chargebacks and they are getting charge backs every month. Then they will start charging that fee,” Manning said.

If you think you’re losing big money to credit card chargebacks, the banking industry is cutting their losses left and right, just to avoid hassle of finding out who is truly responsible. Manning says for every thousand dollars that is being spent on credit cards one hundred of it is subject to chargeback disputes.

“For something that is small a $50, $25, $100 transaction a merchant company is not going to put a whole lot of effort in going after it, disputing that and paying legal fees. If it is a charge exceeding a couple thousand dollars then they are going to start to pay some attention to it especially because there is a possibility that that merchant could have additional chargebacks,” Manning reports.

Those abusing the system need to be aware that the credit card companies are watching. Manning says there is a TMA (Terminated Merchant Account) list which people can be added to. It can be nearly impossible for a consumer to get another credit card once his or her name has been added to the TMA list.

Thankfully there are some things a physician can do to protect him or herself against improper chargebacks.

Makenvich has learned a few tricks of the trade over the past decade too. She has her patients sign a financial agreement, so if they file a charge back they will also be responsible for a $200.00 charge back fee.

A binding financial agreement has been designed by the company Medical Justice. While the form is proprietary it covers the following:
• If a patient uses a credit card, have him/her sign the receipt according to the vendor’s guidelines – amount, date, the credit card number masked by a collection of x’s except for the last 4 or 5 digits.
• Next, if you have a proposed treatment plan, have the patient sign the plan and the cost of the plan.
• Finally, if you have a policy on refunds or deposits, put it in writing and have the patient sign it.

Dr. Jeffery Segal, CEO and founder of Medical Justice explains, “So many of our members experienced this problem we developed a form to address it. This document has worked repeatedly in preventing chargebacks against our members. “

Dr. Jaliman suggests practices acquire plenty of signatures, especially if they are paying with an American Express Credit Card.

“They are going to say I am in a rush I got to go, if you don’t have the signature on the AMEX, AMEX is not going to side with you. People who are scammers are going to try not to sign the AMEX, they will give you their AMEX but then they will try and run out the door. They will say I am running out of time, I am late for a meeting and they won’t sign the AMEX, that is a problem. AMEX is a big deal about signatures,” Jaliman said.

“For American Express, our customers are both merchants and card members. We work very hard to ensure fair outcomes for both sets of customers. It’s also important to point out that merchants (in this case, physicians) who follow basic card acceptance procedures (obtain a signature, receive an authorization code, etc.) are not charged back,” said Christine Elliott the Vice President of Corporate Affairs and Communications with American Express.

Manning says it is also helpful to make the patient aware of how the charge will show up on their credit card statement.

“Sometimes when people get their billing statement and it will say ABC Company and they don’t immediately associate it with the “As Doing Business As Name”they will just call and chargeback a charge because they don’t recognize the vendor,” Manning said.

If you do get stuck in the middle of a chargeback dispute, you may have the option of hiring a third party for help. That is where people like the president and founder of idealcost.com, Robert Livingstone come in.

“As the economy has gone down, customers have been a little strapped for money and trying to find better ways possible to scam a lot of physicians, medical offices especially on elective procedures like plastic surgery,” Livingstone said.

Practice’s may also consider forming a partnership with payment plan companies like Care Credit. CareCredit is a healthcare credit card that can be used as a payment option for certain expenses not covered by insurance or to bridge situations when desired care exceeds insurance coverage. CareCredit is offered primarily for: dentistry, vision correction, veterinary medicine, hearing care, cosmetic treatments and surgery.

Plastic Surgeon Dr. Persky offers Care Credit to his patients as an option, instead of them having buyer’s remorse and possibly filing a charge back later.

“We have probably been with Care Credit for the last 5 years. I personally never wanted to put the patient in a position of going into debt for having something elective done to their face. I just felt that if they can afford it, then and I am not going to be the name they are looking at or the thought they are having when they are paying that check for years to come,” Dr. Persky said.

In the end, Drs. Persky, Jaliman and Makenvich all felt that fighting patient abuse was about more than money.

“It was worth about $4,000, but it was mainly worth it for what is right, is right and the principle of the matter. I just feel that if I let it happen once it will happen again, which is wrong,” Persky said.

“For me it is not even the money, it is so disgusting, yes sometimes maybe it wouldn’t be worth the money, but I get so angry that people take me for a fool,” Jaliman said.

“I think it kind of makes you disappointed with people overall. Especially for the doctors, I mean you have treated this patient, you care about your patients when you treat them, then for somebody to go and do something like that you feel almost blindsided,“Makenvich said.

Being defrauded by credit card charge backs will continue to harm physicians. With care and proper procedures, physicians can avoid being taken advantage of by some patients.