Is There a Thief in Your Practice?

Mark Crane

January 24, 2013

Introduction

Are any of your employees robbing you? Perhaps even one who smiles at you, seems like a team player, and is the last one you'd suspect? Although many physicians think it can't happen to them, embezzlement and theft at medical practices of all sizes have been a constant drain for decades, say fraud prevention experts.

Thefts can range anywhere from an office worker pocketing a $20 copay or stealing medical supplies to a large group practice administrator scheming to divert millions of dollars.

Physicians are typically shocked when the crime is discovered. "She was like a sister to me," one doctor lamented after he discovered that his office manager of 16 years had embezzled more than $300,000. She'd taken out credit cards in the name of the practice but with her home address, then used electronic funds transfers to pay both the practice's bills and her own. "This manager reconciled all bank statements, and there was little to no oversight in the practice," said Michael S. Lewis, MBA, an accountant with Cowan, Gunteski & Co., a CPA firm in Toms River, New Jersey. "Sometimes physicians deserve part of the blame for what happens to them."

How Often Do Employees Steal?

Medical practices lose $25 billion annually because of theft and embezzlement, according to a 2010 report of the Association of Certified Fraud Examiners.^[1] And an astounding 83% of practice administrators had been associated with a practice where there was employee theft or embezzlement, according to a 2009 Medical Group Management Association (MGMA) survey.^[2]

The median loss was $5000, but 18% of these incidents involved the theft of $100,000 or more. The embezzlement typically went on for 8 months before being detected, whereas 17% of thefts went undiscovered for more than 2 years. Nearly 45% of practice managers reported cash stolen before or after it was recorded on the books.

Embezzlement Always Starts Small

Fraud prevention specialists weren't surprised at the survey's findings. "Physicians tend to be very trusting and are reluctant to spend money or the time to put in place systems to deter theft," said Denise McClure, president of Averti Fraud Solutions in Boise, Idaho. "They often turn over all their financial and billing issues to 1 person.

"Embezzlers come from all economic levels," she said. "Some are serial thieves, but most are otherwise honest people who see the opportunity for easy money. They may learn their 'trade' by accident, when they made an error that slipped by unnoticed."

Keith C. Borglum, a healthcare consultant based in Santa Rosa, California, agrees. "Embezzlement almost always starts small and mushrooms. A staffer gets into some financial trouble and 'borrows' money with the intention of paying it back," he said. "Once he or she crosses the line with no one noticing, it's easy to keep going. This is less likely to happen if staffers know that accounts are being reconciled, records are being spot-checked, and someone is paying attention to the process."

Physicians may ignore signs that an employee is angry with them. "Many employees are jealous of the doctor's earning capacity," said Michael Lewis. "They are sometimes angry at how physicians treat the staff or patients. I don't recommend that physicians invite employees to their homes. They see how well you live and figure you won't miss what they're stealing."