AVOIDING EMBEZZLEMENT IN THE MEDICAL PRACTICE
This is the first in a series of articles on avoiding fraud
and theft in healthcare professionals’ offices. The article is meant for medical
professionals including physicians, dentists, home nursing and mental health
professionals. If you have any questions about this series, feel free to
contact attorney Matthew L. Kinley, a healthcare lawyer in Long Beach,
California at 562.901-3050.
DEFINING THE PROBLEM
OF FRAUD AND THEFT IN THE HEALTHCARE OFFICE.
Medical provider offices are subject to fraud and theft as much any business. According to the Association of Certified
Fraud Examiners, the amount stolen annually from all U.S. business by employees
exceeds $50 billion. The Association
claims that as many as 75% of all employees have stolen from their employers. Most theft is caught by other employees
reporting the theft. Internal audits catch
a little less than 20% of all theft caught.
Accidental discovery accounts for the same amount of captured theft.
medical practice offers unique opportunities for theft. Certainly employees steal the usual from
their employers, like supplies and computer parts and money. Medical practices typically have a large
stream of money. Employees in the
medical practice also have the opportunity to steal identities of their
employers and patients. There is also the opportunity to steal prescription
pads and controlled substances.
medical facility also has unique risks.
Because of strict regulatory controls, not only does the medical
practice suffer the dollar lost for activities such as theft of co-payments and
identity, there is also the risk of penalties and fines. There is also the risk
of whistle blowers within your own ranks.
are also legal issues associated with confronting the person who is stealing
from your practice. Should you
electronically monitor employees? Should you fire an employee? Should you contact the police?
first article focuses on embezzlement from the medical practice. Embezzlement from the medical practice can go
unnoticed for several reasons. Often, the embezzler is also the person who
records the receipt of money. Usually it is a trusted employee. Usually, there
is general surprise that the individual caught has committed the crime.
avoid employee theft, the office should have internal controls that immediately
record all transactions. There should
also be a system of checks and balances to make sure that your employees aren’t
manipulating the system.
1. Record all transactions: accounts
payable, accounts receivable, refunds, adjustments, copayments and even write
Reconcile receivables and charges every day.
3. Issue a receipt with every
transaction; balance receipts every day with a second person verifying the
Immediately stamp checks “for deposit only.”
Retain charge sheets and explanation of benefit statements to support
6. Routinely verify petty cash
7. Periodically hire an accountant to
conduct an audit.
8. Keep duplicates of all deposit
9. Periodically review all accounting
entries rather than just checking totals.
10. Require signatures from the
appropriate managers for all large checks.
11. Do not allow anyone to sign blank
11. Cross train employees for all
12. Have an outside book keeper
reconcile bank statements.
13. Have inventory cross checked by
strict controls over business credit cards.
Carefully review all statements.