Because most physicians have no background in business management or accounting, medical practices can be easy targets for occupational fraud. But at a time when reimbursement rates are being squeezed, the last thing your practice needs is employee theft. Here are the risks and how to prevent fraud schemes from starting.
Risk factors
According to the Association of Certified Fraud Examiners, embezzlement is the most common form of occupational fraud in medical practices. For example, crooked employees might steal receipts or cash on hand, alter or forge checks, submit fictitious invoices, pay personal expenses with practice funds or cheat on their expense reimbursement requests.
Unfortunately, the complexity of medical practice paperwork discourages many physicians from involvement in the administrative side of their practice. This can result in unsupervised office staff and accounting processes that receive little oversight.
Prevention is the best medicine
To prevent fraud from getting its foot in the door, implement sound internal controls. These include:
Assessing risk. Examine your practice’s policies, procedures and processes for any faults in your system for protecting integrity and ethics. Conduct a risk assessment every two years or whenever there’s a major system or personnel change.
Separating staff duties. Avoid having one employee in charge of both approving vendors and purchasing. Although it may be difficult to spread duties among multiple employees in smaller practices, this control is critical to preventing fraud. Also, never let a nonphysician employee sign checks.
Monitoring employee behavior. Look for signs that an employee is involved with or considering fraud. For example, employees who never go on vacation or take a day off may not want you to have access to their work files.
Screening employees. Get criminal background checks for all new hires. It’s also a good idea to conduct credit checks on new hires and current staff. However, be aware that you generally need the person’s permission to run a credit check, and in some states credit checks are allowed only for positions with certain financial responsibilities.
Conducting surprise audits. Employees should know that unannounced audits are possible, but they shouldn’t know what they’ll cover. They could be top-to-bottom audits or cover only specific areas. Also, periodically reconcile overlapping financial records. Someone other than the person who prepares the records should conduct the reconciliation.
Keep your practice healthy
These are only some of the ways to maintain the health of your medical practice. We can help you develop a comprehensive system of internal controls and train your employees on what constitutes fraudulent and illegal actions.
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