To Catch a Thief

Many read the recent article on the alleged embezzlement at a local OB/Gyn office and wondered how things like this happen. http://www.courier-journal.com/apps/pbcs.dll/article?AID=/20070330/NEWS02/703300465/1025/NEWS02

Embezzlement is usually noticed with a few missing checks, a shrinking profit margin, and a sneaking suspicion that something is wrong.

Most physicians are busy with patients and rarely take the time to review their own accounts. Some have too much trust in their staff and managers.

Employee embezzlement has continued to increase and is estimated to cost U.S. businesses some $652 billion annually. This is according to the Association of Certified Fraud Examiners.

As they say, the best defense is a good offense for preventing such crimes. Physicians need to know their enemies and their friends

Common physician errors are not looking at credit card statements and giving office managers full signing privileges on the bank accounts.

There needs to be a healthy level of trust, but not full reign. Consultants in the Forensic consulting services believe physicians are at greater risk for being cheated than most other businesses largely because physicians rely on office managers and other employees to run their clerical business for them. Many fail to take the necessary precautions to keep their practices safe. One consultant said “Physician practices are the No. 1 choice victim [for embezzlers].” “There are just too many areas of opportunity.”

Knowing the most prevalent types of embezzlement will help safeguard the practice. The bulk of thefts occur at the front desk where employees simply pocket the cash paid for copays and other fees and with these rising, there is usually a lot of money in an office on a daily basis.

Some of the more common embezzlement schemes in medical offices include:

• Bad checks: An employee writes company checks for personal use and then records them in the check register as legitimate practice expenses.
• Secret accounts: Employees open a completely separate account in the practice name and deposit money into it using a signature stamp. They then treat it like their personal account.
• The ATM scheme: Patient refunds are another favorite among petty thieves. Especially in larger practices, this occurs when an employee process 5 or 6 fictitious accounts with their own name or an alias. The employees then take the falsified refund checks and deposit them into their own account using an automated teller machine (ATM). Crooks have learned that they almost always get away with it because by using the ATM machines there is not a teller to check it.
• The invisible write-off: Noncash adjustments, used to write off charges that insurance companies deny and cannot be submitted to patients, are another target for abuse.
• Employees can make payments virtually disappear by moving them off the “balance due” record and marking them as noncash adjustments under the patient’s account. This is a more sophisticated method and is harder to catch.

• High-tech crime: Physicians themselves have sometimes been caught moving charges from one provider to another creating more A/R’s for one and less for another. This can be done using the EMRs and may take a while to track down.

Tips to protect a practice:

• Do background checks on employees that handle money or billing systems.
• Check employee names against the Medicare and Medicaid exclusions list (http://www.oig.hhs.gov/fraud/exclusions/listofexcluded.html) maintained by the Health and Human Services Office of Inspector General.
• Consider a secure credit check on key employees as it could be a clue to how they handle money.
• Bonding employees who handle money
• Separate financial responsibilities by making certain the person who handles accounts receivable is not the same person handling accounts payable.
• Provide receipts for every transaction and implement a protocol for reconciling the receipts.
• Have your staff cross-trained so that multiple people actually share the responsibility of balancing the receipts at the end of the day.
• Physicians should also know how to use the accounting system to periodically check
• Enforce vacation policies as an employee not wanting to take off too many days in a row may be a red flag.
• Guard your statements by having them given to you unopened first and the physician keeps a running total. This would be a nuisance for some offices but is another safeguard.
• Sign your own checks or make it a policy to have two signatures.
• Keep track of monthly numbers on a simple flow sheet or excel spread sheet and look for trends or anomalies.
• Follow the numbers: A simple line graph in Excel or another software program that tracks monthly charge trends can be a lifesaver.
• Establish an office policy on theft and a mechanism for workers to bring concerns directly to the physicians.
• Routinely test the checks and balances you have in place as it sends a message to everyone that things are being watched.
• Check your statements on all credit card machines
• Depending on your office, if you know an employee is struggling financially, offer to help
• Protect your patients from potential identity theft as well. Give access to account information to only those employees with a need to know.
• One of the physician owners should take the time and actually balance the company’s monthly bank statement.

Although these are all suggestions, each practice has to define their limits and come up with a policy that balances risk and benefit.