Tips and tricks to help prevent embezzlement in your practice

June 1, 2012

Motivation, opportunity and rationalization. This may sound like the title of a new James Bond film, but in reality, it's the triad of factors that provides fertile ground for the internal fraud that is an all-too-common occurrence in dermatologists' offices. A recent survey by the Medical Group Management Association (MGMA) revealed that 82.8 percent of managers had worked in a practice that experienced embezzlement.

Key Points

With the economic doldrums that started in 2008, more employees are motivated to steal. Some might rationalize that you owe them something for their loyalty and hard work; others may have an addiction or personal situation that seemingly necessitates a desperate, irrational action.

Your efforts to dramatically increase cash collections at the time of service in today's world of high-deductible health plans can add the final ingredient: opportunity. While there's not much you can do to control an employees' motivation or rationalization, you can drastically reduce the opportunities for employees to take advantage of you.

In addition to being very protective of their position, it's not uncommon for employees committing internal fraud to refuse to take vacation. They may also be the one who is always the first to arrive and last to leave the office each day. Coincidentally, these characteristics can be perceived as diligence and loyalty, which is why so many physicians are devastated to learn that their "best" employee has been robbing them blind. While loyalty is to be commended, being a team player is equally important, and employees committing fraud are anything but.

Root out the problem. Always run background checks, including a credit report, on the job candidates to whom you offer employment. These checks require the candidate's permission, which often scares away a potential perpetrator. Verify credentials and speak with references. A common scheme for candidates with bad intentions is to provide their friends' or family members' cell phone numbers and fictitious company names as references. These "references" are always positive but completely fraudulent. Instead, ask potential hires for the names of previous employers, call the main number and ask to be transferred to the reference.

Remove the opportunity. Even an employee with motivation needs an opportunity. It pays to establish policies and procedures for internal controls, including segregation of duties. Do away with the signature stamp and require two signatures for any expenses over $1,000. Always require payments to be balanced each and every day. Route bank statements to your home address. Review each monthly statement from your bank and credit card vendors to spot unusual charges or credits. Request a financial audit from your accountant at least every other year.