Unfortunately, fraud is all too common place in physician offices; not fraud committed against the patients, but against the medical professionals who own and operate the practice. As a financial consultant to medical professionals, I see too many cases of theft and embezzlement that, slowly but surely, drain crucial dollars from the bottom line.
That's not to discount incidents where expensive office equipment or tens of thousands of dollars in cash are stolen by trusted members of the office staff. The horror stories about employees embezzling small fortunes, however, are the extreme cases of fraud.
The stories you don't read about in the newspaper are the ones that ultimately cost employers billions annually. Consider these sobering statistics from the 2004 Report to the Nation by the Association ofCertified Fraud Examiners:
- Fraud and related workplace abuse cost U.S. employers more than $600 billion annually.
- The average company loses six percent of its revenue to fraud and abuse committed by its own employees.
- Losses caused by managers are nearly double those caused by employees.
- The most costly abuses occur in organizations with fewer than 100 employees.
These ordinary, everyday crimes go by many different names – internal theft, employee fraud, asset misappropriation, and the like. Whatever their name, these cases almost always can be prevented with some financial safeguards and common–sense office practices.
Physicians are especially vulnerable to workplace theft. There are several reasons for this. Patients often pay in cash, which is easily misappropriated. Most practices these days bill patients through computerized records – charges that can be changed with relative ease by anyone with access to the computer system and financial database. A shortage of $20 here, $100 there and soon thousands of dollars have disappeared with a few simple keystrokes.
Longtime employees become like family in a medical practice, but criminal behavior can happen in even in the best of families. The roots of the problem are numerous, but the opportunity is provided by a lack of good business controls. Employees who embezzle often rationalize their actions: "I deserve it because I'm not paid enough" or "I've worked so hard and I'm so valuable." Also, catastrophic personal events, such as a major financial hardship or divorce, can prompt an otherwise ethical person to make the move toward theft.
The best way to remove the opportunity for fraud, and avoid an uncomfortable costly personnel situation is to set up effective internal controls. These are controls over who does what with cash and other assets. The more you can separate duties among various personnel, the better control you will be able to exercise. Here are some other simple steps you can take to deter theft.
- First, the unopened bank statement should go directly to the owner–physicians. Check the deposit slips to see if cash has been deducted form any of the deposits. If so, do you know what happened to that money? Do the deposits show substantially less cash than the office collects in a day in co–payments? Check the date on the deposit slips; are any deposits made much later than the day the slips were made out? Your staff could be using the cash collected to "finance" their personal shortfall for a period.
- While you are checking the bank statement, look at the checks as well. Do you recognize the vendors? If you don't know who your office is paying, or what service they provide to your practice, it's time to take a close look at those cancelled checks and start asking questions. And look at "your" signature –– is it really yours?
- Don't sign checks in a hurry. Require supporting documentation to be provided with each check you sign.
- Maintain a petty cash log and require that it be reconciled before it is replenished with cash.
- Review the reports generated by the billing software. If your billing report says that you collected a certain amount of money for the month, does that amount match the month's deposits to the bank? And look at the adjustments report. In one office, I found that a regular pattern of "miscellaneous adjustments" that just happened to match the usual insurance co–pay amount. A member of the staff was pocketing the co–payment and adjusting the patient's balance to $0 on the computer.
- That brings up another important step you can take to deter fraud: Control access to certain parts of the computer system. Employees who collect cash should not have access to the portions of the system which would allow them to manipulate patient accounts.
- Most thefts are discovered by accidents or by complaints made by other employees. So investigate anything that seems out of the ordinary or unusual.
Try to keep in mind that "it can happen to you." Most fraud perpetrators are trusted employees. In fact, in a high number of cases, the embezzler is the very last person you would suspect.
Many medical professionals, however, have a limited staff and cannot segregate all duties. They want to practice medicine, not run a business. It is a business, however, and physicians who offer quality healthcare should also have a healthy business model for their practice, and that includes deterring fraud to the extent possible.
Whatever the right move may be for your office, remember that the prevention of fraud is good for everyone. You keep more of the money that you earned through long years of schooling and hard work. It benefits your patients by allowing you to focus on quality healthcare services with peace of mind that your house is in order. Finally, preventing fraud protects your employees by discouraging illegal activity that can lead to grave, legal consequences.
