Protecting Your Practice

Even in the best of times, protecting your practice and its assets should be at the top of your priority list. The fact is, however, given the choice (especially when things seem to be running smoothly), you’ll choose to treat patients over dealing with business matters virtually every time. But these are far from the best of times – probably the most challenging you’ve faced – and protecting your practice must be at the top of your list.

Who’s Minding the Store?
By now you’ve probably taken every measure you can think of to reduce expenses and increase revenue. But one issue that most physicians ignore until it’s too late is employee fraud.* Ranging from theft of office or medical supplies and making long distance phone calls to skimming cash, creating fictitious refunds or over-billing, the possibilities are almost limitless. You’d like to think that you hired good people who would never do anything like that to you, but the sad truth is that some experts estimate three of four physicians will suffer a significant loss due to employee dishonesty at least once in their careers. And, once again, don’t underestimate the potential impact of today’s dismal economy. Any doctor who has experienced this situation knows that the discovery of fraud is just the beginning. Oftentimes the monetary value of the fraud is outweighed by the accompanying employee morale problems, personal grief, loss of productive time, administrative burden, and litigation costs.

∗ For purposes of this article, the term “fraud” is used to cover various forms of employee dishonesty including theft and embezzlement. The Law.com Dictionary defines fraud as “the intentional use of deceit, a trick or some dishonest means to deprive another of his/her/its money, property or a legal right.”

The “Fraud Triangle”
Researchers have identified three key factors commonly known as the “fraud triangle” that are typically present and usually determine whether someone will commit fraud:
• Need or pressure – this can be financial in nature (e.g., high debt due to overspending or reduced household income), personal (e.g., a chemical addiction), or work-related (e.g., feeling underpaid or underappreciated)
• Opportunity – when an employee feels he or she has gained a substantial level of trust and/or the organization’s internal controls are weak, the employee could see an opportunity to commit fraud and get away with it
• Attitude/Rationalization – is the employee’s rationalization of the dishonesty strong enough to outweigh his personal moral code? (e.g., “I’m only borrowing the money; I’ll pay it back.” “They make so much money; they’ll never miss it.”). An individual can perceive both a need and an opportunity, but a strong enough moral code can stop them from rationalizing the dishonest behavior.

Some Schemes
In 2008, we saw an increase in the number of clients where, through practice reviews, we uncovered some internal schemes that were undetected. These included, but were not limited to:
• Paying a relative who was not employed by the practice
• Paying for overtime not worked
• Paying vendors for services not performed; vendors were related to the employee
• Paying for services to a company owned by the employee; where no services were rendered
• Processing refunds to an employee via the credit card machine
• Using practice credit card to make personal purchases
• Endorsing checks and depositing them to a personal account
• Skimming co-pays
• Purchasing office equipment and having it delivered home
• Posting payments to patient accounts and pocketing checks & cash

Physicians need to understand the business of medicine, what is going on in their practices and how to prevent what can be financial disasters. Annual reviews and unannounced spot checks by professional advisors are recommended; even with the most trustworthy employees. Ask how VantagePoint consultants can help.