Embezzlement – Part 2 – How to protect your practice….

January 10, 2016 | By Ami Tucker

Last blog post we discussed the significant risk of embezzlement that is posed to small and medium medical practices today. This month I am providing you with specific procedures and solutions to be employed to safeguard your practice revenue.

It’s easy to become disillusioned and lose faith in all employees. A more effective long-term approach is to protect your practice from embezzlement before it starts. This is done by establishing a formalized system of controls that every member of the practice (doctors included!) abides by. Employees will know that honesty is expected and valued, and no form of embezzlement will be tolerated.

Such a system of controls should include:

  1. Ensure the owner/physician doesn’t contribute to the problem by –
    • Setting a good example and being fair and respectful to your employees.
    • Don’t “borrow” from the petty cash drawer (even though it’s yours) unintentionally giving license to others to do the same.
  2. Separate financial responsibilities –
    • Have different employees handle Accounts Receivable and Accounts Payable.
    • Don’t let the same person who generates bills to the patients, post payments to patient accounts.
    • Require written, numbered receipts for every payment (cash, check or CC) received over the counter from a patient.  Keep a permanent copy in your receipt book for reference. Post a sign alerting patients that they should expect a receipt for any payment made.
    • Only a physician /owner should have signature authority on checks.
  3. Cross-train staff so multiple employees know how to balance the books. Rotate job responsibilities periodically.
  4. Enforce vacation policies, requiring all employees take a minimum of 5 consecutive days off per year. This enables management, coworkers and/or a 3rd party, to review work while employees are away.
  5. Monthly bank statements should be mailed to the physician/owner home, and reviewed by the physician on a monthly basis. Physician should reconcile his own bank statement periodically.
  6. Follow your practice numbers. Develop a “practice at a glance” graph or excel spreadsheet that easily identifies trends in charges, adjustment or payments that may indicate a problem.
  7. Write a formal policy on embezzlement as part of your Employment Manual, including defining theft, expectations of staff, and the consequences.
  8. Test your checks and balances periodically (at least quarterly.) Review employees on their procedures. The best deterrent to fraud is employees knowing that the employer is aware and involved. If this proves too time-intensive for you, ask your accountant to provide this service.
  9. Periodically review all accounting subtotals, not just totals.  Focus on adjustments.
  10. Consider an outside billing company. Having an ethical and competent 3rd party billing service is a highly effective way to prevent employee embezzlement.

No controls are fool-proof. Dishonest people will go to great extremes to get around your preventative measures. They may set up a separate set of books, falsify documentation, create bogus patient accounts, and tell some amazing stories to cover their trail. They may even enlist the help of others, although this is less common. That said, just eliminating opportunities by creating a formal anti-embezzlement plan that is visibly enforced and reviewed will encourage honesty in your practice.

2 Responses to “Embezzlement – Part 2 – How to protect your practice….”

  1. judith lake says:

    Great articles. Where do I go for help? I am a victim of embezzlements by my dentist office of $13,000 in the past 3 years. Same trick you wrote about: required full payment up front ; and then “credits” my account with the incorrect insurance adjustments. I can prove this. After he bullied me about the last claim, I requested my financial records… I’m good at math. ..

    The Maryland Insurance Administration won’t help because the problem is NOT with the insurance company. The Board of Dental Examiners wont help
    because the dental work was fine. Small Claims Court is too small.
    PLEASE ADVISE. Thank you, Judith

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