Practice Management Alert

Bad or bounced checks from patients cost practices revenue and can cause havoc for billing departments that are unaware how to address the problem. Several procedures should be followed and stated in a practice's policies that will determine the course a practice takes when confronting a bad check.
 
Your practice's financial policies and procedures should spell out how you will handle bad or bounced checks from patients. Give the financial policies and procedures to patients in writing when they register as new patients with your practice. The policy should cover whether you will charge the patients a fee if they write you a bad check, and the amount of the fee. It should also state what kind of payment you will accept after a patient has written you a bad check, such as cash, money order, credit card or debit card.
 
If a patient's check bounces, contact the patient and find out what the problem is. It's possible that the bad check resulted from a bookkeeping error on the patient's part, and was not done intentionally to defraud you. You could also contact the bank and ask whether the money is available. If it is, ask to redeposit the check. If it is not, try to work with the patient to collect the money. When contacting the patient about the check, explain that your practice's policy on bad checks states that once the practice has received a bounced check, it will not accept another check. Then, tell the patient what kinds of payment you will accept. Try to get a credit-card or debit-card number over the phone so you can obtain payment immediately.

 
When a patient's check bounces, your practice's bank will charge you a fee, and the patient's bank will also charge the patient a fee. You can charge the patient a fee for bouncing a check to cover your bank fee, but to do so you must have stated the fee in your financial policies and procedures. State law may govern how much you can charge in bounced-check fees, so you may also want to check with your attorney about the amount of the fee. When determining whether to include a bounced-check fee as part of your policies, realistically consider whether you will be able to collect the money. A patient with financial problems who lacks the money to cover the bill will have even more trouble trying to pay your bill plus a bounced-check fee.

 
Some practices are unwilling to pursue patients who have deliberately written bad checks because they want to maintain good patient relations. Others maintain that failure to follow up and press for prosecution of worthless check writers provides no incentive for patients to pay their bills. If your practice is having problems with checks returned for insufficient funds, contact your local police agency and ask them how you can pursue bad-check writers.
 
Some sheriff's departments will provide a form to use when notifying a patient about a bad check. Returned-check notices state the check number, the amount of the check, the bank from which it was drawn, the reason the check was returned, the number of days the patient has to satisfy the debt before prosecution, and the statutory penalties for conviction of bad-check writing. Practices often add a section to the letter that requests payment of the bounced check and a returned-check fee be made by cash or money order to the practice's address.
 
Practices pursuing prosecution may want to send their returned-check notice to the patient by certified mail, and a copy by regular mail to increase the chances that the patient will receive it. If the patient fails to pay the amount due in the time period allotted by state law, some practices turn the worthless checks over to the local district attorney's office. The district attorney then pursues the bad-check writer through the legal system. If the patient is fined and ordered to make restitution, the district attorney sends a check to cover the worthless check and the practice's fee to the practice. Even if the offender is prosecuted and convicted, it is possible the practice will not be paid for the worthless check. That can occur in cases in which the offender chooses jail time rather than paying the penalties, is already in prison for another offense, or skips town.
 
If your practice intends to pursue prosecution of a bad check, it's important that you not reverse the original payment in your billing computer system when the check turns out to be bad. If you change the original payment back into a debt, the amount is a receivable, not a bad check. For example, a patient owed you $100, and wrote you a check for $100. You accept that check, and enter into your billing system a payment of $100, leaving a balance of zero. Later, you get a notice that the check was bad. If you reverse the payment in the system and show the patient owing you $100, you cannot legally pursue it as a worthless check because you have said it's a bill due. You could, however, pursue it as a bad debt and turn it over to a collection agency.
 
Practices that decide to pursue prosecution should record the payment by check as a payment, and add a notation in the billing system that the check was bad. The patient will be listed with a zero balance and will receive no statements. But, the account will be annotated as having a bad check, and pursued through the district attorney's office.