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how to prevent embezzlement in a medical practice

OUR GOAL 

Preventing employee theft in medical practices.

 

Welcome to Embezzle-Proof Practice, a how-to guide for preventing employee theft and dealing with it if it happens.

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Employee theft is a subject most doctors would prefer not to think about; however, studies have shown that there is a very high incidence of embezzlement in the medical field. The four industries that lose the most to embezzlement are non-profits, healthcare, banking, and government. With banking, government, and non-profits, the monetary loss is shared by hundreds, thousands, or even millions of people. Unfortunately, in medical practices it is often the case that a single individual suffers the entire loss!

Consider the following:

 

  • In a recent survey, 83% of medical office managers said they have dealt with discovered cases of embezzlement. If suspected cases are included, this figure approaches 100%.  

 

  • Studies have shown that 5 – 10% of your employees are constantly looking for opportunities to steal.

 

  • Given the right circumstances, up to 95% of your employees will steal.  

 

  • Sadly 8% of medical professionals admit to discovering embezzlement schemes in their practice four or more times.

It’s time for medical professionals to get their heads out of the sand and become proactive in preventing theft.

The reality is that all medical practices fall into one of three groups:  

  1. Those that have already been embezzled

  2. Those that are being embezzled 

  3. Those that will be embezzled

There are several reasons why medical practices are particularly susceptible to embezzlement:

 

  • Most doctors typically have a nurturing personality and are more concerned with proper patient care than with the bottom line.

 

  • They work closely with their employees and develop very trusting relationships, often too trusting.  

 

  • Most doctors lack formal fiduciary training.

 

  • Doctors are perceived as having a very substantial income.

 

  • Fraud tends to breed in situations of “controlled chaos”, a condition that occurs in every medical office at least occasionally.

 

  • Virtually all activities in the office that involve money are handled by the staff.

Many doctors assume using an accountant will prevent fraud and theft.  However the typical accounting engagement does not include services related to discovery or prevention of embezzlement. External audits, both expensive and intrusive, can’t be relied upon either, only uncovering fraud about 3% of the time.

 

Regardless of the reason, you must be careful not to let it become an excuse. The cost to the practice is just too high. The ACFE Occupational Fraud Report for 2024, just released in March, shows the median loss for each theft scheme is now $145,000, a 24% increase in the last two years! The following table illustrates the shocking monetary losses that occur over the life of the average practice.

range of average loss to embezzlement in a medical practice

As you can see from the table, if you are a medical practitioner averaging $400,000 in annual gross revenue, and you practice for 30 years, you can expect to lose between $600,000 and $960,000 to embezzlement. Keep in mind, this loss represents 5 – 8% of your gross income. If you compare the loss to your net income, the percentage is significantly higher and could easily equal 15 – 25% of what you actually take home. Adding insult to injury, you may even have to pay taxes, interest, and penalties on the stolen money! Stopping fraud in your business would be similar to having a side gig, only better. You would in effect be giving yourself a significant raise without doing any more work

 

There is more at stake though than just the monetary loss. As a result of the lost income, investments in your practice such as new equipment, improved or expanded facilities and services, or well-deserved employee raises may not be possible. Ultimately, even your retirement plans may have to be modified or postponed. According to doctors who have been the victim of this crime, having to deal with embezzlement can be time-consuming and extremely stressful. In some cases, doctors have even had to take extended time away from their practice just to deal with the emotional effects and the financial fallout.

 

Please don’t make the mistake of thinking that practicing in a group offers some added protection. Empirical evidence shows that embezzlement opportunities are often even higher in group practices.

You may be aware of the problem and have already taken steps to deal with theft in your practice. However, judging by the very high percentage of medical offices that continue to experience the financial and emotional damage that embezzlement inflicts, many doctors are either unaware of the statistics or, more likely, just choose to ignore them.

In my case, it just wasn’t something I even thought about. Thieves broke in to houses or put on masks and robbed stores. The people I employed, worked with daily, ate lunch with, even exchanged Christmas gifts with, were friends not thieves.

ACTUAL CASES

These are actual cases of embezzlement. The amount of money reported as stolen in each case was just what could be proven. In many cases the actual amount was more, and in some cases much more.

  • The newly hired receptionist in a dental practice was able to embezzle more than $50,000 in her first 15 months of employment. 

  • Over a 21-month period, an employee of an Illinois podiatrist was able to treat herself to Chicago Bears tickets, cruises, and trips to Las Vegas with the $130,000 she managed to embezzle.
     

  • During seven years as a trusted employee of an internal medicine practice, the office manager was able to steal over $1,000,000.
     

  • An employee of an optometric practice pocketed $94,000 in stolen funds in less than three years. 
     

  • The receptionist at a medical clinic embezzled $664,000 in patient co-pays, insurance reimbursements, and personal credit card charges before being caught.
     

  • A mother and daughter, both employees at a Florida chiro-practor’s office, were jailed for embezzling more than $170,000.
     

  • A Michigan pulmonologist lost $800,000 in an embezzlement scheme perpetrated by the office manager.
     

  • An audiology center in Lincoln, Nebraska was the victim of a 24-month-long embezzlement scheme that netted $137,000.
     

  • A physical therapy center in Georgia lost $322,000 in an embezzlement scheme that lasted just under 48 months.

  • The office manager for an optometric office, using multiple schemes, was able to steal over $200,000 in 36 months.
     

  • (My favorite) The lone front-office employee at a dental office, who was considered family by the doctor, had managed after 15 years of employment to steal $800,000, which essentially amounted to the doctor’s entire retirement fund. However, after finally admitting to the theft, she graciously gave up her $5,000 retirement savings as restitution.

 

Serial embezzlers, ones who steal from multiple employers, are not uncommon.

  • A woman caught embezzling from a Nebraska chiropractor was, at the time of her arrest, still on parole for a fraud she had committed in Colorado.

  • An employee charged with embezzling more than $40,000 from the optometrist she worked for faced revocation of the probation she was on for a theft of over $40,000 from the local chiropractor she had worked for previously. (At least she was consistent).

If you are still unconvinced,

please contact us. We will supply you with cases until you are convinced!

Now for the good news...

Suffering large financial losses in your practice is absolutely unnecessary. Fraud is not rocket science; most embezzlement schemes and techniques have been seen before. Usually, problems arise because there are no controls in place and nobody is watching. Very often, simple controls will prevent embezzlement from ever happening in the first place.  

 

In a recent three-way conversation with an FBI agent and an IRS agent who are both actively involved in fighting fraud in medical offices, they reiterated this same theme:  

 

“…most schemes seem obvious and easy to see if anyone is paying attention to the basics…”

 

“…the schemes are really straightforward and easy to detect, but nobody is looking…”
 

“…the doctors don’t want to believe anything is going on; they want to believe that everyone is honest and can be trusted…”

 

Doctors must realize that even though medicine is a calling, the delivery of medical care is a business, and being proactive about fraud prevention is critical. You can’t just sit back and hope that no one is embezzling from you. Remember hope is a feeling and trust is an emotion; neither one is a control!

 

Theft in a medical practice can never be completely eliminated; when an employee takes a personal phone call while “on the clock” or “borrows” a postage stamp from the office, technically they have committed embezzlement. However, our focus is on eliminating the ongoing fraud schemes that result in large financial losses, and our how-to guide will help you quickly and easily eliminate much of the risk. You will learn what you need to do in order to prevent most of your employees from even considering stealing from you. Just as it is in medicine, the best way to treat this problem is to prevent it in the first place.

 

The how-to guide is specifically geared to busy medical professionals and gets straight to the point teaching you exactly what to do to prevent theft in as little time as possible. Instead of getting into the "whys" of fraud, we deal strictly with the "hows" of fraud prevention. The guide consists of five simple, very specific components that can be integrated into your practice quickly and inexpensively. It is designed to “slip into place”, causing no disruption to the normal flow of the office. It will immediately impact any ongoing schemes and at the same time help prevent new schemes from developing going forward, giving you the opportunity to spend more time being a doctor, and less time worrying about theft.

Just as a sudden unexplained drop in practice income can mean an embezzlement scheme has started, a sudden unexplained jump in income after implementing our system can mean a scheme has just been stopped. Once the system is implemented, if you have an employee who is primarily working just for the embezzlement opportunities, (and some do!) they will usually find a reason to leave the practice within a few months. Conversely, if you have an otherwise good employee who has occasionally been taking advantage of an easy opportunity to steal, there is a good chance they will be “rehabilitated”. The system is easily implemented, and requires no additional time or extra bookkeeping chores on the part of the doctor. 

 

As an added bonus, we offer guidance on what to do if you already suspect embezzlement and what steps to take immediately if you uncover fraud. It is obvious to people working in fraud prevention that the chances of medical professionals being embezzled is extremely high, approaching 100%. Therefore, it is foolish to just hope that maybe it will not happen to you. Very few doctors would delegate important medical procedures for their patients without providing any oversight. However, many doctors have no hesitation about delegating important financial duties without requiring any accountability. You need a fraud prevention system in your office! The alternative is to wait until you suspect or know embezzlement is occurring in your practice. At that point you will have to hire an attorney who will likely require a forensic audit that will hopefully reveal who has been stealing and the approximate magnitude of the theft. However, forensic audits can be very expensive and intrusive, and won’t provide any protection against fraud in the future. 

 

If you feel that your practice can benefit from a comprehensive theft prevention strategy, or you just want to be sure you have the proper safeguards in place, this is for you. Priced at only $199, this can save you hundreds of thousands of dollars over the life of your practice, and will easily be the smartest financial decision for your practice that you will ever make.

To paraphrase an old Chinese proverb: “The very best time to address theft in your practice is the day the practice started; the second best time is today!” Don’t put it off any longer!

Our how-to guide covers the five areas that will give the most “bang for the buck”. These will eliminate up to 90% of employee theft, possibly more!

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