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Suspect embezzlement? Here’s what to do

A column about keeping your practice in good health

By — Posted Aug. 13, 2012.

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Embezzlement is a recurring problem at medical practices. If you think money is sliding out the door with an employee, whom do you call and what do you do?

The knee-jerk reaction is to contact the police, but experts who advise medical practices say this should be one of the last, rather than first, calls in most situations. With only a suspicion but no hard evidence of a crime, law enforcement is unlikely to take action.

“If you see your office manager taking checks from the safe and putting them in her purse and running out the door, call the police,” said Bill Fox, director of health care at LexisNexis Risk Solutions, who works with medical facilities to prevent fraud. “But they are not going to conduct an investigation for you.”

No employee should be accused of a crime before proof has been collected, because doing so may damage workplace morale. Voicing suspicions before having a good handle on the situation might provide an opportunity for an embezzler to destroy evidence.

“You don’t want to jump to conclusions without gathering the facts,” said Jason D’Cruz, chair of the employment practice with Morris, Manning & Martin in Atlanta.

But while physicians or other heads of medical practices are somewhat limited in what they should do when embezzlement is suspected, they can take actions to identify where money is going and determine ways to stop the loss. Recovering some of the lost money is possible.

The first step, medical practice consultants say, is to back up any relevant electronic data and make photocopies of key paperwork. If embezzlement is an ongoing problem, this may prevent evidence from vanishing before an investigation can be completed.

“You don’t want the hard drive to have a terrible accident and data to disappear,” said Benjamin R. Skjold, partner with Foley & Mansfield in Minneapolis.

The next step is to discreetly call an attorney, certified fraud examiner or forensic accountant to discuss any suspicions. These experts may be found through their relevant professional associations.

“You could bring in your accountant unless you suspect it’s your accountant” embezzling the money, Fox said. “Generally you want to have somebody new look at the books.”

The goal is to have some type of investigation to figure out where money is going. This may reveal, for instance, that a front desk staffer is pocketing co-pays or that theft is occurring in other ways. But it may reveal that the front desk staffer is not collecting the required co-pays in the first place.

“It could be that somebody is not doing their job, but they are not necessarily stealing from you,” said Cheryl Yarbrough, an accountant with Windham Brannon in Atlanta who works with medical practices.

If theft is the cause of the practice taking in less money than expected, the investigation most probably will bring to light processes allowing theft to occur. Are there appropriate checks and balances for handling cash that need to be implemented? How are accounts reconciled? The practice should improve protocols for handling money. This may put a stop to embezzlement, if it is occurring.

“In my experience, after such controls are put in place, the person or persons taking advantage of the situation will probably leave and go work somewhere else,” said Mark Rust, chair of the national health care department at Barnes & Thornburg in Chicago.

Taking these initial steps may be enough to get the practice back on financial course. If not, it’s time to consider whether to call the police. A survey of 945 medical practice staff, carried out by the Medical Group Management Assn. in 2009, found that nearly 83% had been affiliated with a practice that had been a victim of employee theft, but most did not lead to prosecutions. The average amount of money stolen was $1,000, and it may make more sense for a practice to fire the responsible employee and end the situation then and there without involving law enforcement.

“If you’re owed $200 or $300, it may not be worth it to press charges, but you may want to protect yourself and protect other practices that may hire this person in the future,” said David Mitchell, chief consultant with PMR coaching and consulting in Bremerton, Wash. Any conversations with the alleged embezzler should occur in the presence of several people to reduce the risk of provoking a charge of unfair dismissal or physical violence.

For large amounts of embezzled money — some cases run into the hundreds of thousands of dollars — calling the police or the economic crime division of your attorney general’s office may be the best option. The practice should be prepared to present any evidence gathered.

When the criminal prosecution issues are settled, practices may be able to recover some of the money. Criminal courts may require that the embezzler pay back money as restitution. Practices can sue the person in civil court, although as a practical matter it may be difficult to collect the money. Many practices have insurance policies that protect against worker dishonesty, and insurers are the most likely sources for any recovered money.

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