Protect Your Physician Office from Embezzlement
Put safeguards in place to make it harder to be a thief’s target.
Embezzlement happens in large and small practices, often because there are few checks and balances to catch theft. An employee who is determined to steal will find a way, but some simple steps could prevent an employee from giving into the temptation.
Offices maintain a cash drawer to make change for patients and to pay for small office expenses. This drawer should be balanced each night, and secured. Cash and checks should not be left on desks waiting to be posted: All monies need to be accounted for and balanced to the system or day sheet daily, then locked up until deposited.
All patients who pay on their account should receive a receipt, regardless of whether they ask for one. This is an effortless way to track front desk collection. If the money is not posted to the system a numbered receipt system should be used to confirm and balance. Cash collected at the front desk is a tempting opportunity for employee theft if there is no accountability for receipts or the cash drawer.
Mailed payments are a risk if an employee decides to deposit the checks in their own account. The best process is:
- Employee 1: opens the mail, stamps checks for deposit only, and totals the amount received; and
- Employee 2: posts the payments to the system and balances to that original total.
The ideal option for depositing checks is to use the in-office check scanners provided by banks, which eliminates the need to go to the bank and provides a reconciliation. Cash deposits still require trips to the bank. Other options are bank lock boxes that provide an address for payments and go directly to the bank to be deposited; and electronic fund transfer/direct deposit by payers, which also eliminates paper checks mailed to the office. Whatever system you use, one person should never have control over the entire process.
Case Example: The biller in a small practice opened the mail, posted to the system, and did the banking. She would take insurance checks and deposit them to her personal accounts. She would post the payments to the billing system, in most cases, but checkbook balancing was not catching the differences between the deposits made and money posted. Eventually, she missed posting some payments and the billing company identified the theft.
Review your policies for:
- Cash drawers
- Patient receipts
- Mail checks
- Check writing and signing
- Account reconciliation between billing systems, bank accounts, and the practice accounting system
The balancing of the business checking or savings account should identify discrepancies between the amount deposited and the amount posted to the system. Billing system reports should balance to banking reports, and office should work with billing companies and their internal billers to ensure this is true. Accountants and bookkeepers should also play a key role in the account reconciliation.
Case Example: An office manager for a practice in a large healthcare organization did the banking and removed all cash from each deposit over several years. The payments had been posted to the system, but there was no consistent balancing of the bank account to the billing system.
Check Writing Authority
The practice should require dual signatures on checks, and should never sign blank checks. Employees writing checks to themselves is one of the easiest and most frequent methods of theft. By requiring dual signatures, there is a chance to confirm to whom the checks are addressed and what expenses they represent. Never use signature stamps, and set up your bank account to require original signatures. Another way to help identify problems is to have regular reconciliation of bank accounts to the practice accounting system with a review of written checks.
Case Example: A long-time office manager wrote checks to herself for more than $100,000 a year, for many years, by logging those checks as payable to a medical supply company. A new office manager (replacing the manager who retired), questioned the medical supply company on their excessive costs and quickly found the theft.
Knowing there is some oversight in cash flow may discourage an opportunistic thief from even trying to embezzle.