Healthcare Employee Theft Fraud Defense Internal Controls

Published: Apr 20, 2016
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Fraud comes in many shapes and sizes, but the telltale signs of employee theft are fairly consistent. In particular, physicians and practice managers should be on the lookout for the following signs:

Unusual entries — A perpetrator enters a credit, which is then used to reduce recorded cash to reconcile with the cash on hand after a theft. Or, a credit is used to set up an account payable for a fake entity that the perpetrator will eventually cut a check to.

Action: Randomly audit journal entries to determine their legitimacy.
Suspicious vendor invoices — Of particular concern are vendors who always insist on dealing with the same accounting or administrative staff, as well as transactions in which the same person authorizes the purchase, approves the vendor invoice and makes the payment.

Action: Have a practice partner or office manager compare original vendor invoices, purchase orders and receiving reports. Also review cancelled checks. Legitimate vendors deposit checks into their business accounts — they don’t cash them or deposit them into a personal account.
Forged receipts — Co-payments are collected at the time of service but are not recorded to the patient’s accounts. The charge is later written off as an adjustment to the patient receivable.

Action: Reconcile deposits to patient records daily.
Diverted collections — Patient or third-party payments are diverted to a personal bank account and the patient receivable is written off as an adjustment. This scam typically shows itself when patients start calling regarding overcharging and inconsistencies in their billing.

Action: Verify adjustments to the explanation of benefits or chart documentation.

In the end, establishing good internal controls is a vital defense against fraud. And it typically requires an investment of as much attention as money.

Healthcare Practice Strategies - Spring 2016