Over the course of seven years, a Buffalo-area bookkeeper stole approximately $723,000 in cash from the dermatology practice where she worked.
In another practice, a wife working in the office was found to be stealing to set up a cash cushion before filing for divorce from her physician husband.
Despite sophisticated cash management and billing software, embezzlement still happens with alarming regularity in physicians' offices, experts say.
"It happens all the time," says Vicki Rackner, a former general surgeon who founded Medical Bridges, a consulting firm. Rackner recalled a friend, a fellow surgeon, who was so distraught by an act of embezzlement that she had to take a mental health leave from her practice. "Some of us are so bad as business people that we don't take a look at the numbers to make sure they make sense."
Staying vigilant about protecting your practice from all forms of embezzlement is a must, Rackner and other experts say.
"Every doctor right now is looking at how to generate more revenue, but the first thing they should be thinking about is not losing money" to fraudsters and inaccurate claim denials, Rackner says.
A majority of embezzlement cases in medical practices involve a trusted employee who has been with a practice for a number of years, says Carl Frost, founder of Frost & Co., a healthcare consulting and accounting firm.
"There will be others, but doctors in particular will say, 'She's been with me for years and I trust her implicitly,' and there's the problem," says Frost. "It was President Reagan who said it: 'Trust but verify.'"
Count the ways
So, how are thieves plying their trade at your practice?
Stealing from the petty cash drawer is one of the most common offenses, said George Indest, a Florida attorney and president of The Health Law Firm. That may be changing, however, as consumers' use of credit and debit cards grows, he says.
"If you can minimize cash handling in the office, that's good because it's just an invitation to steal. Employees, [contract] janitors, night staff — they all find out where the cash is kept," he says.
Another fairly common method involves staffers who prepare checks for invoices but never submit them and then use the money for their own expenses.
"A bill will come in, say for a $3,000 medical malpractice insurance premium. The person in the office prepares the check and the doctor signs it," he says. "Then the office person destroys the check, [and] starts writing other checks for personal expenses that add up to $3,000. The doctor doesn't realize the money hasn't gone to pay the premium and the office person is throwing away the past-due notices."
Using practice credit cards for personal purchases, creating false invoices and diverting the payments, and applying for company credit cards for themselves are a few other ways employees may be stealing from the practice, Indest says.
"I once had a client who had a staff person who was stealing in five different ways," says Frost. "If these people spent as much time and energy on work they would be phenomenal employees."
And it may not just be employees you need to watch, Rackner says. "The truth is there are just a lot of ways doctors can be taken advantage of," she says, noting a time she gave some money to someone who approached her in the parking lot of her hospital saying his son was in the hospital and someone had stolen his wallet. The next day when she mentioned it to colleagues, they told her the same person frequents the lot with the same story.
She says she felt foolish because it's such an old scam, but her story illustrates a point that physicians should keep in mind: Patients — and even partners — can present real threats.
A partner who mentions a questionably aggressive tax-deduction strategy, or in some other way demonstrates a comfort level with stretching the rules could put other partners in jeopardy, she says.
"I've seen situations where a physician partner was stealing from the practice retirement plan," he says. Also not uncommon: Partners who run their own home utility bills through the practice or overuse a company credit card.