The COVID-19 pandemic has put enormous pressure on medical practices and healthcare workers. The last thing they need right now is to worry about financial losses and other negative repercussions of occupational fraud. To help make sure physicians and their employees can focus on patient care, they should take a little time now to ensure strong internal controls are in place.
Elements of Embezzlement
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
- Cheat on their expense reimbursement requests
Unfortunately, the complexity of medical practice paperwork discourages many physicians from involvement in the administrative side of their practices. This can result in unsupervised office staff and accounting processes that receive little oversight.
To prevent fraud, medical practices (as well as other businesses) should make sure they have done or plan to do the following as soon as possible:
- Assess risk: Examine practice policies, procedures, and processes for any faults in systems for protecting integrity and ethics. Conduct a risk assessment every two years or whenever there is a major system or personnel change.
- Separate 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 or nonowner employee sign checks.
- Monitor employees: 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 managers to have access to their work files.
- Perform background checks: Screen prospective employees for criminal records and be sure to check their references. Be aware that you generally need someone’s permission to run a credit check, and in some states, they are allowed only for positions with certain financial responsibilities.
- Conduct surprise audits: Employees should know that unannounced audits are possible, but they should not know what they will cover. They could be top-to-bottom audits or cover only specific areas. In addition, periodically reconcile overlapping financial records. Someone other than the person who prepares the records should conduct the reconciliation.
Depending on their size and nature, medical practices may need additional controls to keep fraud at bay. Contact us for help determining the best prevention plan.