Stop Bounced Checks

June 1, 2009

Most practices still accept a lot of paper checks from patients - and it costs money when they bounce, as they too-often do. But electronic check services can help you get rid of the rubber.


Let’s face it, today’s economy requires medical practices to utilize technology to cut expenses and maximize reimbursement. More employers and insurers have shifted costs to consumers in the form of higher copays, coinsurance, and deductibles, making those payments an increasingly larger share of physician’s incomes.

Now let’s take a look at a couple statistics that affect physician practice collection efforts:

In 2008, many workers had high deductible health plans - including a growing number with annual deductibles of at least $1,000 - that’s 18 percent of all covered workers, up from 12 percent in 2007. This was partly, but not entirely, driven by growth in consumer-directed plans and health savings accounts.

During the period from 2005-2008, Bankrate.com surveys indicated that the number of debits presented against insufficient funds soared to 1.28 billion (checks and electronic), an increase of 16.3 percent.

Although seemingly outdated, paper checks are one of the most common financial instruments utilized to complete a financial transaction. And if those checks bounce, they cost your medical practice bad-check fees, plus the time and cost of collection.

Most medical practices accept checks as payment for services in good faith; physicians believe the patient has the necessary money in his account to cover the check. If the money is not in the account, unfortunately, the practice does not get paid.

To understand your recovery options, it helps to understand what happens when a patient’s check is deposited into your account.

1. After a check is deposited into your account, you receive a credit and your bank begins the process of collecting the amount from your patient’s bank.

2. Banks utilize clearinghouses to rout checks to the appropriate financial institutions. Your bank’s clearinghouse sends the check to your patient’s bank. If the funds are not available in your patient’s account, the request for payment is declined. Checks can only be sent through this clearinghouse process twice, after that, the check is returned to your bank.

3. After approximately four to five days your bank will debit your account and send the check back to the practice, stating the check was returned for insufficient funds. The bank’s responsibility is concluded and you are now responsible for collecting the funds.

While this may seem like an unfair situation, you can help prevent bad checks in the first place and improve collection efforts in several ways: First, don’t accept post-dated checks. Period. Second, have written and updated collection policies that are communicated to patients and staff. Also be sure to train your employees regarding your collection policies and have ongoing training regarding how to correctly utilize any added payment technology. Finally, utilize electronic check services. If your practice accepts many checks or unknowingly accepts a great deal of “bad checks” then a check service can be a great way to improve your collection efforts. Here are a few to check out:

  • Check conversion/e-deposits. This allows your practice to convert a paper check into an electronic transaction similar to a credit card transaction. To utilize this service, the check must be physically run through a check imager or a magnetic check scanning device. After scanning, these deposits are transmitted over the Internet to your bank, where they are posted and the check images are sent electronically for clearing. The check is credited into the practice’s bank account within a few days.

  • Check guarantee. This program guarantees the value of the check to your practice. If the check is returned insufficient, the practice will receive the full value of the check, and the check processing company takes further action against the check writer.

  • Check verification. If your patient has a history of writing bad checks this service will alert you to this problem. Checks are scanned through a magnetic check reader which compares the check writer with a national list of check writers. This service does not electronically deposit a check, but it will reduce the chance of accepting a check from someone known to write bad checks.

Check service costs differ depending on the actual service that is being used. Different services have completely different fee structures. Some charge a processing and transaction fee like credit cards, and others charge a flat rate per transaction. Talk with your bank representative and thoroughly research your options before you sign up. Make sure that you accept enough checks to justify the cost, and research different companies to find the best service for you.

Also keep in mind the majority of these electronic services require additional equipment to process a check. The cost of the additional equipment can range from minimal to highly expensive. Additionally you must use caution because some of the companies have contracts with long term of service requirements.

Finally, if your practice accepts credit and debit cards through a credit card terminal, check with your bank as there is a good chance that checks can be processed through your existing terminal with an additional check scanner.

Look at all of your options before making your decision. But don’t be discouraged; there is a check service available that will help you improve your ability to collect from your patients.

Cindy Dunn, RN, FACMPE, is a senior consultant with the Medical Group Management Association (MGMA) Health Care Consulting Group and has more than 32 years experience in the healthcare industry. Her background and experience covers administration, technology, and operations. She can be reached at physicianspractice@cmpmedica.com.

This article originally appeared in the June 2009 issue of Physicians Practice.