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In the Headlines

“Checkout Fees” for Credit Card Purchases

As of last Sunday, stores in most states can now start charging a “checkout fee” when you pay for something using a credit card. These new fees stem from a multi-billion dollar settlement announced in July 2012 between credit card companies and millions of merchants.

Visa and MasterCard, along with nine other major banks, settled on a $7.25 billion deal after charges that they were fixing credit card processing fees. Credit card issuers agreed as part of the settlement, to reduce these “swipe fees” paid by merchants to issuers when credit cards were used, but only for eight months.

Additionally, this settlement also gave retailers the option to add a surcharge to purchases made on credit cards, given that the charges were only enough to cover their processing costs, about 1.5%-3% of the total purchase.

Of course, these fees do not apply to debit card purchases, and are still illegal in 10 states, including New York, California, and Texas.

Many big retailers claim that this agreement is, in essence, transferring the wrongdoings of credit card issuers to the consumers, and they are up in arms over the settlement. In fact, in November, the National Retail Federation and more than one dozen retailers pled with a judge to reject the proposed settlement. In a case brief submitted to a U.S. District Court, the trade organization wrote that these new fees threaten a merchant’s ability and desire to keep prices low for consumers.

Among those retailers who joined the NRF in claiming that, “raising consumer prices by adding an ‘interchange tax’ is no remedy for Visa’s and MasterCard’s continuing monopoly abuse,” are Wal-Mart, Macy’s, JCPenny, Limited Brands, Gap Inc., and The Neiman Marcus Group.

Merchants have the choice to implement the surcharge or not, but this poses a dilemma for them: They’ll either get stuck paying the bill for swipe fees, or risk transferring these costs to consumers in an already competitive environment. MasterCard says that it doesn’t expect most merchants to put the surcharge into effect, since this may result in driving traffic away. 1

Do Hospital Bonuses Help Improve Health?

Recently, the CEO of an HCA-owned hospital posed as a patient in his own hospital, with the intent of spotting service flaws and taking them back to his board to be fixed. The reason for this mission was to improve his hospital and in time to win some of the $1 billion in government payments for hospitals with top-ranked service. In the U.S., this program is encouraging cleaner hospitals and quieter hallways at the hospitals that participate in these “patient experience” surveys.

Though these improvements are likely welcome by both employees and patients alike, studies based on previous attempts to tie bonuses to performance have shown that this doesn’t always improve patient care. Doctors and economists even say that rewarding hospitals based on patient’s experiences could have unforeseen repercussions. It has been shown that these incentives often discourage hospitals from treating the elderly and mentally ill, further harming the patients most in need of care.

Nancy Foster, vice president for quality and patient safety policy at the American Hospital Association says, “Patients who are critically ill, are less likely to rate hospitals as highly as those going home with a healthy newborn.”

The surveys arose as part of a shift by the federal government and private insurers to pay doctors and hospitals based on performance rather than numbers of tests and procedures. Karen Ignagni, CEO of America’s Health Insurance Plans, the industry’s lobbying group, claims that insurers are counting on the shift to help lower costs. “Right now, the way the traditional fee-for-service program has worked is it is a piece-rate system, body part by body part. You get paid for how much you do and you are incentivized to do more.”

With this new bonus plan, the Medicare program is withholding 1% of payments in 2013 to hospitals. This equates out to about $964 million in services. The United States will collect the money and give it out to hospitals based on how they perform on benchmarks related to clinical care and patient surveys. In 2017, this pool of Medicare payments will increase to 2%. 2

Hasbro’s Holiday Sales Less Than Ideal

The country’s #2 toy maker reported disappointing fourth-quarter sales and full-year profit last week. As a result, Hasbro says it must cut its 5,500-person staff by 10% in order to save $100 million by 2015. The company also says it will focus on fewer and more significant global properties, aiming to develop “content-rich brand initiatives consumers and retailers are responding to.”

Hasbro’s shares fell 3% in trading last week, while larger rival Mattel Inc. traded down 1.3%, and Jakks Pacific Inc. and LeapFrog Enterprises Inc. lost 1.2% and 1.6%, respectively.

CEO Brian Goldner claims, “We had a number of strong product initiatives, but consumer demand through much of the holiday season was less than anticipated in both the U.S. and certain international markets.” Hasbro’s spokesman Wayne Charness said that when it comes to product sales, toys for boys and preschoolers were the weakest. 3

Citations:

1. http://money.cnn.com/2013/01/27/pf/checkout-fee/

2. http://www.bloomberg.com/news/2013-01-25/billion-dollar-hospital-bonuses-not-seen-improving-health.html

3. http://articles.marketwatch.com/2013-01-25/industries/36538187_1_classic-toys-preschool-toys-toy-maker

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