80% of practices will experience embezzlement every five years. To protect yourself, one expert advises: Avoid blind trust; rely on written checks for refunds; separate employee duties; routinely audit financial systems; and consider going cashless.
Most dermatology practices accept cash on a daily basis and have employees that have access to cash, checks and credit card information. Thus, it is important that the business and its patients be protected from theft and financial mismanagement of credit card information.
“Everything related to the financials of an office needs to be guarded carefully,” Sarah Jackson, M.D., F.A.A.D., co-founder of Audubon Dermatology in New Orleans.
Dr. Jackson says that over a five-year period, it is projected that over 80% of medical practices will experience embezzlement in one form or another. “Many physicians in practice are too trusting of employees. Due to a familiarity with them, we become lax with policies and controls. We should not have blind trust of our employees and we must stay abreast of the ongoing business aspects of our practices,” she said.
To reduce the likelihood of employee malfeasance, a background and drug test prior to hiring is advised. Most embezzlers, though, move from one practice to another because charges are not filed, “so make sure your human resources manager always calls for references and prior employers before hiring,” Dr. Jackson said.
All employees must follow the checks and balances of a practice to limit access to employees.
Handle cash judiciously. Employees that have access to cash should always have two people signing off when balancing the drawer, never have access to posting the payments or adjustments into the electronic medical record (EMR) system, and never be able to return items onto credit cards. Rely on written checks for refunds.
Employees with access to cash should not be the ones depositing the money into the bank, and should never be able to delete a bill or an electronic medical note.
If there is a breakdown with proper financial processes in place, “you will catch it sooner and be more likely to pinpoint who’s at fault,” Dr. Jackson said.
Recently, Audubon Dermatology stopped accepting cash as a form of payment. “This has greatly reduced the opportunity for theft within the office and has dramatically decreased the amount of time and effort spent on auditing,” said Deirdre Hooper, M.D., F.A.A.D., of Audubon Dermatology. The practice also directly deposits checks into its banking account with an in-office check scanner, reducing the opportunity for these deposits to be stolen.
If an employee is delegated to apply insurance payments, that employee should not have access to the physical checks from insurance companies, not be the one writing refund checks, be monitored monthly for account receivable (AR) trends, and never be able to create any bills.
Likewise, the employee who physically goes to the bank for the practice should not have office computer access to any financial part of the practice.
“A separation of duty is crucial,” Dr. Jackson said.
One method to discover fiduciary weakness and prevent theft is for practices to routinely audit their financial systems. “It is better to prevent than to wait and see if it is going to happen to you,” Dr. Jackson says.
A practice might remove a deposit and observe if its billing department detects the missing deposit, and, if so, how long it takes.
“You might also remove some cash and see if it is discovered when closing the drawer that night. You can also remove some products, and see if it is caught in your inventory,” Dr. Hooper said.
Routinely auditing the financial system during the year as part of regular business practices will reduce the opportunity for theft
There is no immunity from theft in private practice. While larger system operators have whole departments and budgets dedicated exclusively to stopping waste and theft, in private practice it falls to the practitioner themselves.
“Despite the best internal controls, there is no theft proof system to prevent embezzlement from never happening. However, with proper management and auditing, it can be minimized and dramatically reduced,” Dr. Hooper said.
“No one starts their journey to become a physician with a goal of double-checking product inventories or setting checks and balances for financial aspects of their practice. From our medical education, through residency and fellowships, there was little focus on business training. We are running businesses though, and an important part of our financial success is achieved by maintaining strict financial procedures and controls,” she said.
Disclosure: Dr. Jackson is a consultant to Allergan.