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Take the bounce out of rubber checks


Converting paper checks to electronic ones reduces risk and increases efficiency.


Take the bounce out of rubber checks

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Choose article section... The cost of processing electronic checks Who can process your checks?

Converting paper checks to electronic ones reduces risk and increases efficiency.

By Robert Lowes
Senior Editor

Balanced Care for Women of St. Louis, a three-doctor ob/gyn practice, used to get 180 worthless checks a year, on average. It was bad enough that staffers had to chase down deadbeats to collect what they owed, but the practice also had to pay the bank a $25 fee for every bad check—about $4,500 a year.

Those financial insults are history. The St. Louis practice now uses a check-processing service that approves checks and makes good on them if they bounce. What's more, the service converts paper checks into electronic ones, automatically debiting the patient's account and streamlining office operations. And for far less than $4,500 a year.

The cost of processing electronic checks

The simplest type of check processing is authorization without electronic conversion. When a customer pays this way, a clerk enters identification information, such as checking account and driver's license numbers, into a terminal. (It can be the same terminal used for processing credit cards.)

If the customer doesn't appear in a database of bad-check writers, the check's cleared for acceptance. You're left holding the bag if the check does bounce, but you can opt for a more expensive service that guarantees payment. Sounds good, but you have the hassle of submitting the bad check to the processing company for reimbursement, and you still may owe a bank penalty.

The advent of electronic checks has made it safer to accept checks, even if they're not guaranteed. Because electronic transactions are speedier, you have a better chance of getting to the front of the line and taking money out of a patient's bank account before it's drawn down to zero. If the check doesn't clear the first time, it can be submitted automatically a second or third time to tap the account when it's flush. And the bank may charge you nothing or very little if the electronic check never clears.

An electronic check transaction begins with the patient tendering his paper check. The doctor's office scans the check using a terminal similar to a credit card reader. If approved, the check is returned to the patient to keep as a receipt and his bank account is debited. The money is electronically deposited in the doctor's bank account.

You can buy a check reader that plugs into an existing credit card reader—provided it's a relatively new model—for $100 to $400. If your credit card reader can't accept a plug-in check reader, consider upgrading to a device that reads both cards and checks as well as prints receipts. Expect to pay from $500 to $1,000 for a combo terminal.

Then there's the cost of the check-processing service. The structure of the deal varies by vendor, the number of checks processed, and the level of service. Guaranteed payment with electronic conversion, the most expensive service, generally costs as much as credit card processing—usually 2 to 5 percent of the charge. Ann DeRousse, office manager of Balanced Care for Women of St. Louis, says her practice does better. It pays a company called Certegy—a spinoff of Equifax—1.4 percent of the face value of each check, plus a $10 monthly fee.

Who can process your checks?

If you're one of the many doctors who currently accept credit and debit cards, the bank or company that processes them may offer check services, including electronic conversion. These companies typically partner in turn with check processing firms such as Certegy, TeleCheck, SafeCHECK, and VISA USA (the last two firms merged their electronic check services last summer). You can also choose to do business with the check processors directly.

One company in this field has a special connection to medicine. First National Merchant Solutions, a subsidiary of First National Bank of Omaha, is recommended by the American Medical Association for credit card processing, and the company processes checks as well. Last year, First National began offering electronic check conversion through Visa USA. The conversion process can be coupled with check authorization or guarantee. In many transactions, Visa can determine whether a patient has enough money in his account to cover a check, which greatly reduces the risk of accepting it.

Three-quarters of the physicians signing up for the new electronic check service have opted for authorization only, says Jennifer Phelps, First National's assistant vice president of business development. "Physicians get hit by bad checks only half as often as the average merchant, so they're less interested in check guarantee, which costs more," says Phelps. "But they are interested in a more efficient office.

"Electronic checks make it easier to close the books at day's end, because you don't have to add up a stack of paper checks— the check reader does that for you," continues Phelps. "Plus, you have that many fewer checks to list on a deposit slip. If you don't receive cash or checks in the mail on any particular day, you can sometimes eliminate a bank deposit run."


Robert Lowes. Take the bounce out of rubber checks. Medical Economics Dec. 5, 2003;80:74.

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