It's relatively inexpensive and easy to implement the infrastructure needed to reduce the risk of practice embezzlement. Although physicians do not want to rule their practice with an iron fist, they should make it clear to the staff that someone is always looking at the books from the time the first co-pay is collected to when the last dollar is taken in at the checkout counter. This concept needs to be more than simply said; it has to be done, and the staff needs to know it is done.
Many office employees who embezzle when no systems and processes are in place to prevent it likely would not even consider stealing from their employer if they saw a real possibility of getting caught. Just making it known that there is oversight when money is exchanged and that consequences will be substantial for any misuse of funds or office supplies will deter a large number of employees from stealing.
To establish a system of oversight that will reduce the risk of embezzlement, physicians should consider taking these eight simple steps:
• Retain third-party oversight. If a manager or administrator completes the practice books, have a CPA or practice consultant provide outside, periodic reviews. Ideally, the CPA will have some basic knowledge in "forensic" accounting and should look periodically at bank statements and cancelled checks, ensuring consistency on check endorsement and payee.
• Make certain that a daily balancing routing is in place. All charges and payments should be in balance. This means the accounts receivable totals for the day should be the sum total, or minus the previous day's receipts. A "proof" of posting should be done. Bank receipts or copies should be attached to daily transaction journals. All good information systems should have a procedure or transaction report that is used to do daily balancing and proof of posting.
• Have a "tight" petty cash policy, and require that staff put vouchers or receipts in the petty cash fund when they withdraw money to pay for an item.
• Review your "adjustment transactions" to ensure that the appropriate amounts are adjusted off. In a large orthopedic practice, for example, a payment poster wrote off balances due from two his relatives who were patients of the group's physicians.
• Use a lockbox when feasible so checks that clear from payers and patients are directly deposited. If you don't use a lockbox, make sure the person posting payments is not also responsible for opening the mail. Lockboxes enhance cash flow, as well.
• Make sure you are paying the right people. Look at the check when signing (many physicians sign checks without reviewing the payee because they are rushed). Run a payables or vendor list from your payables software, and read it periodically. One physician, for example, routinely signed checks to his office manager's sister, whom he thought was a supply vendor.
• Background-check all employees prior to employment. That means a criminal background check, as well as a credential and credit check. It is worth spending the $150 to $200 on this crucial task.
• If using super bills or charge tickets, make sure they are numbered and in sequential order. If one is missing, a valid explanation should be provided.
According to the U.S. Department of Justice, employee theft accounts for several billion dollars annually. A physician practice is not immune. In fact, given how hectic many medical practices operate, employee embezzlement may be worse in medical practices than in other industries.
Consider carrying a fidelity bond. This is a type of insurance that allows you to recover some of the money lost from embezzlement and removes the burden of whether to press charges against the offending party.
Regardless of whether or not you purchase this type of insurance, adherence to the above steps can make an enormous difference in preventing this costly problem.
Jamie Claypool, CMPE, CPC, is a board-certified medical practice management professional who consults on many operational and billing topics associated with physician practices. She can be contacted at www.jcassociates.org.
