Promissory Note Sample for Hospital Bill

INSTITUTIONAL PROMISSORY NOTE & MEDICAL DEBT SETTLEMENT AGREEMENT

Document ID: PN-MED-202X-01
Effective Date: [Effective Date]
Version: 4.2
Governing Jurisdiction: State of [State]

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1. STATUTORY & LEGAL COMPLIANCE NOTICE

CRITICAL LEGAL & CLINICAL NOTICE: This Promissory Note is an institutional-grade financial instrument designed to evidence and secure an unsecured healthcare debt owed to a medical institution. Enforceability of medical debt instruments is subject to rigorous federal and state statutory frameworks, including but not limited to the Health Insurance Portability and Accountability Act (HIPAA), the Fair Debt Collection Practices Act (FDCPA), the Truth in Lending Act (TILA), and state-specific hospital care transparency and financial assistance laws (e.g., California Fair Pricing Policies, New York Financial Assistance Law).

Execution of this document does not waive the Maker’s statutory rights under applicable charity care regulations, nor does it supersede mandatory cooling-off periods required prior to legal collection actions. Legal counsel for both the Provider and the Maker should review this instrument to ensure compliance with local medical debt reporting restrictions and interest rate caps (usury laws).

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2. PARTIES & RECITALS

This Promissory Note and Medical Debt Settlement Agreement (the "Note") is entered into and made effective as of [Effective Date] (the "Effective Date"), by and between:

MAKER (Patient / Responsible Party):
[Client Full Legal Name], having a principal residential address at [Principal Address] (hereinafter referred to as the "Maker").

HOLDER (Medical Provider / Institution):
[Company Full Legal Name], a [State of Incorporation/Organization] [Corporate Entity Type, e.g., non-profit hospital corporation], having its principal place of business at [Company Principal Address] (hereinafter referred to as the "Holder").

RECITALS:
WHEREAS, the Maker received certain medical, surgical, clinical, and/or emergency healthcare services (the "Services") from the Holder at its medical facility;
WHEREAS, as a direct result of said Services, the Maker incurred a lawful financial obligation and outstanding balance totaling [Amount in USD] (the "Principal Amount");
WHEREAS, the Maker acknowledges receipt of a complete itemized statement of charges, has been evaluated for (or has explicitly waived) financial assistance and charity care policies of the Holder, and desires to defer payment of the Principal Amount pursuant to the amortization schedule and terms set forth herein; and
WHEREAS, the Holder has agreed to forbear from immediate extraordinary collection actions, reporting to credit agencies (subject to statutory waiting periods), and civil litigation in exchange for the execution and delivery of this enforceable Promissory Note.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the forbearance of collection, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Maker covenants and agrees as follows:

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3. EXHAUSTIVE OPERATIVE CLAUSES & LEGAL TERMS

Section 1. Principal Amount and Promise to Pay

For value received, the Maker promises to pay to the order of the Holder, at its principal place of business or at such other address as the Holder may designate in writing, the principal sum of [Amount in USD], together with interest accrued thereon, in accordance with the payment schedule set forth in Section 2 of this Note.

Section 2. Compensation & Payment Terms (Amortization, Invoicing, and Late Interest)

1. Amortization Schedule: The Principal Amount shall be paid in [Number of Installments] consecutive monthly installments of [Monthly Installment Amount in USD], commencing on [First Payment Due Date], and continuing on the same day of each successive month thereafter until [Final Payment Due Date] (the "Maturity Date"), at which time the entire remaining unpaid principal balance, together with all accrued and unpaid interest, shall be due and payable in full.
2. Interest Rate: The unpaid principal balance of this Note shall bear interest at the rate of [Interest Rate, e.g., 5.0]% per annum, calculated on the basis of a 365-day year and the actual number of days elapsed, or at the maximum rate permitted by applicable state usury law, whichever is less.
3. Invoicing and Payment Delivery: The Holder may, as a courtesy, issue monthly billing statements to the Maker; however, the Maker’s obligation to make timely payments is absolute and independent of the receipt of any such invoice. All payments shall be made in lawful money of the United States of America via electronic clearinghouse (ACH), credit card, certified check, or wire transfer to the account designated by the Holder in writing.
4. Late Charges: If any monthly installment is not received by the Holder within [Number of Grace Period Days, e.g., 10] calendar days of its due date, a late charge equal to [Late Fee Percentage, e.g., 5]% of the overdue installment, or [Flat Late Fee Amount in USD], whichever is greater, shall be immediately assessed and payable by the Maker to cover administrative collection costs, to the extent permitted by applicable law.
5. Application of Payments: All payments received by the Holder shall be applied first to the payment of any accrued late charges, second to the payment of accrued and unpaid interest, and third to the reduction of the outstanding principal balance.
6. Prepayment: The Maker reserves the right to prepay the principal amount outstanding under this Note, in whole or in part, at any time without penalty. Any partial prepayment shall not postpone the due date of any subsequent monthly installment unless expressly agreed to in writing by the Holder.

Section 3. Scope of Services & Healthcare Acknowledgment

1. Nature of Obligation: This Note strictly evidences the financial settlement of medical debt arising from clinical care provided by the Holder. It does not govern the provision of future medical services.
2. Independent Billing: The Maker acknowledges that this Note covers solely the institutional charges of the Holder and may exclude independent professional fees (e.g., fees billed by radiologists, anesthesiologists, emergency physicians, or pathologists) which are contracted separately.

Section 4. Term & Termination (Default, Acceleration, and Cure Periods)

1. Term: The term of this Note shall commence on the Effective Date and shall continue in full force and effect until the Maturity Date, or until the Principal Amount and all associated fees and interest are paid in full.
2. Events of Default: The occurrence of any one or more of the following shall constitute an "Event of Default" under this Note:
   • Failure of the Maker to pay any monthly installment within [Number of Default Days, e.g., 30] calendar days of its scheduled due date;
   • The filing of a petition by or against the Maker under the United States Bankruptcy Code or any state insolvency law;
   • The making of a general assignment for the benefit of creditors by the Maker; or
   • Any material misrepresentation or breach of warranty made by the Maker in connection with this Note or any financial assistance application submitted to the Holder.
3. Notice of Default and Cure Period: Upon the occurrence of an Event of Default (other than payment default exceeding statutory notice requirements), the Holder shall provide written notice of default to the Maker. The Maker shall have a period of [Cure Period Days, e.g., 15] calendar days from the date of such notice to cure said default by paying all past-due sums.
4. Acceleration: Upon the expiration of the applicable cure period without cure, the Holder may, at its sole option and without further demand or notice, declare the entire unpaid principal balance of this Note, together with all accrued interest and late charges, to be immediately due and payable.
5. Termination for Convenience: This Note is a binding unilateral obligation and cannot be terminated for convenience by the Maker prior to full satisfaction of the debt, except through full financial settlement or judicial discharge.

Section 5. Intellectual Property Ownership & Work Made for Hire

Not Applicable. This agreement involves the settlement of a financial debt for healthcare services rendered and does not entail the creation, licensing, or transfer of intellectual property, proprietary software, patents, copyrights, or works made for hire.

Section 6. Mutual Confidentiality & Regulatory Compliance (HIPAA)

1. Confidentiality of Patient Data: The parties acknowledge that information exchanged in connection with the underlying medical services and this financial settlement is subject to the privacy and security standards of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act.
2. Nondisclosure: The Holder agrees to maintain the strict confidentiality of the Maker’s medical records and financial details, disclosing the same only as necessary for debt servicing, credit reporting compliance, or pursuant to valid judicial process or statutory mandates.

Section 7. Representations & Warranties

1. Maker Representations: The Maker represents and warrants that:
   • They possess full legal capacity, power, and authority to enter into and execute this Note;
   • The execution and delivery of this Note do not violate any agreement, contract, or judicial order to which the Maker is a party; and
   • All financial and personal information provided to the Holder for the assessment of this payment structure is true, accurate, and complete in all material respects.
2. Holder Representations: The Holder represents and warrants that it is a duly organized and legally operating medical entity authorized to render the underlying Services and collect the associated financial obligations within the governing jurisdiction.

Section 8. Limitation of Liability & Indemnification

1. Limitation of Liability: The Holder’s liability arising out of or related to the administrative servicing of this Note shall be strictly limited to direct actual damages not to exceed the total payments actually remitted by the Maker under this Note. In no event shall the Holder be liable for consequential, indirect, special, or punitive damages.
2. Indemnification by Maker: The Maker agrees to indemnify, defend, and hold harmless the Holder, its officers, directors, agents, employees, and successors from and against any and all claims, liabilities, losses, damages, or costs (including reasonable attorneys' fees) arising directly or indirectly from any willful misrepresentation, fraud, or breach of the terms of this Note by the Maker.

Section 9. Dispute Resolution & Binding Arbitration

1. Negotiation and Mediation: In the event of any dispute, controversy, or claim arising out of or relating to this Note, the parties shall first attempt in good faith to resolve the matter through informal executive negotiation. If the dispute is not resolved within thirty (30) days, the parties agree to submit the dispute to non-binding mediation administered by a mutually agreed-upon alternative dispute resolution provider.
2. Binding Arbitration: If mediation fails to resolve the dispute, the matter shall be settled by binding arbitration administered by the American Arbitration Association (AAA) in accordance with its Commercial Arbitration Rules. The place of arbitration shall be [City, State]. The arbitrator's award shall be final and binding, and judgment upon the award rendered by the arbitrator may be entered in any court having competent jurisdiction.
3. Waiver of Jury Trial: EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 10. Governing Law & Jurisdiction

This Promissory Note shall be governed by, construed, and enforced in accordance with the substantive laws of the State of [State], without regard to its conflict of laws principles. Subject to Section 9, each party irrevocably submits to the exclusive personal jurisdiction of the state and federal courts located within [County] County, [State], for any action or proceeding arising out of this Note.

Section 11. Miscellaneous Provisions

1. Severability: If any provision of this Note is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such provision shall be modified to the minimum extent necessary to make it valid and enforceable. The remaining provisions of this Note shall remain in full force and effect and shall not be affected.
2. Waiver: No failure or delay by the Holder in exercising any right, power, or privilege under this Note shall operate as a waiver thereof, nor shall any single or partial exercise preclude any other or further exercise of any right, power, or privilege.
3. Entire Agreement: This Promissory Note constitutes the entire agreement between the Maker and the Holder with respect to the subject matter hereof and supersedes all prior negotiations, term sheets, discussions, and preliminary agreements, whether oral or written.
4. Amendments: No modification, amendment, or waiver of any provision of this Note shall be effective unless set forth in a written instrument executed by both the Maker and an authorized representative of the Holder.
5. Assignment: The Maker may not assign, transfer, or delegate any of their rights or obligations under this Note without the prior written consent of the Holder. The Holder may freely assign, pledge, or transfer this Note, in whole or in part, to any financial institution, debt purchaser, or corporate affiliate without notice to the Maker.
6. Cost of Collection: If this Note is placed in the hands of an attorney for collection, or if suit is filed hereon, or if collection is pursued through bankruptcy or other judicial proceedings, the Maker promises and agrees to pay all reasonable costs of collection, including reasonable attorneys' fees and court costs incurred by the Holder, to the maximum extent permitted by applicable law.
7. Notices: All notices, demands, or communications required or permitted under this Note shall be in writing and shall be deemed delivered when delivered personally, sent by confirmed facsimile or electronic mail, dispatched by reputable overnight courier, or sent by certified mail, postage prepaid, return receipt requested, to the addresses set forth in the introductory paragraph of this Note (or to such other address as a party may designate by notice to the other).

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4. EXECUTION & FORMAL SIGNATURE BLOCKS

IN WITNESS WHEREOF, the Maker has executed this Promissory Note, and the Holder has caused this instrument to be executed by its duly authorized officer, effective as of the Effective Date written above.

FOR [COMPANY FULL LEGAL NAME] (HOLDER):
Signature: _____________________________________
Printed Name: [Authorized Signatory Name]
Title: [Title / Role, e.g., Chief Financial Officer / Director of Revenue Cycle]
Company: [Company Legal Name]
Date: [Date]

FOR [CLIENT FULL LEGAL NAME] (MAKER):
Signature: _____________________________________
Printed Name: [Client Full Legal Name]
Title: [Title / Role, e.g., Patient / Responsible Party]
Date: [Date]

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5. STEP-BY-STEP EXECUTION & FILING GUIDE

1. Document Customization (Microsoft Word / Google Docs):

   • Locate all bracketed placeholders enclosed in square brackets (e.g., [Client Full Legal Name], [Amount in USD], [State]).
   • Replace every placeholder with exact, verified data matching the patient intake records and billing ledger. Ensure the principal amount matches the itemized hospital bill post-insurance adjudication.
   • Verify that all interest rates and late fee provisions comply with local state usury ceilings and healthcare debt collection regulations.

2. Legal & Compliance Verification:

   • Confirm that the patient has been provided mandatory disclosures under state law regarding financial assistance policies (FAP) and charity care before executing this binding promissory note.
   • Route the drafted document through the hospital's Revenue Cycle or Legal Operations department for internal compliance sign-off.

3. Digital Signature Execution (DocuSign / Adobe Sign):

   • Upload the finalized document into an enterprise-grade digital signature platform compliant with the Electronic Signatures in Global and National Commerce (E-SIGN) Act and Uniform Electronic Transactions Act (UETA).
   • Designate routing order: First to the Maker (Patient/Responsible Party) for execution, and subsequently to the Holder’s authorized revenue cycle officer for countersignature.
   • Ensure audit logs capturing IP addresses, timestamps, and cryptographic hashes of the signatories are securely archived alongside the executed agreement.

4. Record Retention & Accounting Integration:

   • Export the fully executed PDF/A document and store it within the secure Electronic Health Record (EHR) financial module or Enterprise Resource Planning (ERP) revenue cycle management database.
   • Link the Document ID (PN-MED-202X-01) directly to the patient account ledger to automate monthly amortization, invoice generation, and delinquency tracking.
   • Retain the executed record for the statutory document retention period prescribed under state medical and financial recordkeeping laws (typically not less than seven (7) years post-full-satisfaction).