Keeping rubber checks from clogging revenue flow

While poring over her family practice's finances, Elizabeth Pector, MD, was upset to discover that the weakened economy had caused yet another drain on her already slowed revenue stream.

She found the number of bounced checks from patients had doubled in December 2008 from November and most other months that year.

Dr. Pector conceded both the number of bad checks received and amounts they were written for were relatively small -- less than 10 checks a month covering $15 to $25 co-pays. But they still cost the Naperville, Ill., practice time and money.

She said the bank usually sends a returned check through a second time, but in most cases there still is no money to cover it, and her practice is then charged a $25 fee. She recently began tacking the fee onto patients' bills. Dr. Pector hopes that the fee will be paid too, or at least help discourage people from writing bad checks.

An October 2008 Federal Reserve Bank report on recent payment trends in the U.S. shows the number of returned checks dropped from 187 million in 2003 to 153 million in 2006, largely due to an increase in electronic payments. However, experts say the number of returned checks has begun rising again along with the unemployment rate.

Medical practices are particularly in danger of receiving bad checks, consultants say, because higher deductibles and health savings accounts -- as well as greater numbers of the uninsured -- are creating a large pool of patients who struggle to afford their portion of care costs.

David Namerow, MD, a pediatrician and founder and senior partner of three medical practices in New Jersey, has seen an increase in bounced checks since October 2008. With his offices located in bedroom communities near Manhattan, where many newly unemployed former bankers and corporate CEOs reside, he said it is easy to trace the reason for the increase. "The parents were making a good living, and now they're not. They were getting health insurance, and now they're not."

So how can you protect yourself?

Experts say the best way is to stop accepting paper checks. Encourage more credit- and debit-card payments, suggests Steve Rhode, a former medical practice administrator, now president and founder of Myvesta.org, a Rockville, Md.-based credit counseling service. Rhode said that although the practice must pay a fee with each transaction, it is less than the cost of not getting paid. Plus, the payment is guaranteed. "When you take these cards, you push the problem of nonpayment on to someone else," he said.

If you still feel you need to accept paper checks, experts say there are ways to improve your chances of the checks clearing.

Dr. Pector uses a practice management software program that alerts her office staff if a patient has previously bounced a check.

Practices also can use a check verification system, said Mark Neeb, president and CEO of The Affiliated Group of Rochester, Minn., a credit and collections company.

Neeb said major credit bureaus such as Equifax and TransUnion, as well as other companies, have a system where checks can be immediately debited. He said the transactions cost pennies each.

Dr. Namerow said he continues to take paper checks, in addition to offering discounts and setting up payment plans. He also accepts credit cards.

"Our policy is, when your child is sick, he or she needs to be seen. We will turn no child away because of inability to pay," he said.

Like Dr. Namerow, Dr. Pector also has patients with unpaid balances, and she continues to accept paper checks when necessary. But the software program has helped her be more discriminatory at a time when she can't afford many more losses of income. She also accepts credit cards.

"People can't even make their $25 co-pay, but we can't afford to see people for free either," she said.