Financial fraud is when one or more intentional acts are designed to deceive other persons and cause them financial loss, typically involving misappropriation of assets. Unfortunately, financial crime is still prevalent in the healthcare space, with 40% of healthcare clinics surveyed being victims to some sort of financial fraud, according to the American Academy of Family Physicians.
Financial fraud can be carried out by a variety of sources such as vendors and patients, or even internally with team members or practice owners. Specifically for healthcare clinics and practices, it often results from inventory and/or timecard theft, as well as embezzlement.
Securing Against Inventory and/or Timecard Theft
With increased use of fillers, injectables and other aesthetic skincare products, inventory theft in practices has become easier and as a result, is on the rise. Implementing an inventory management system (often an added module in existing practice management software) can help prevent theft. With this added system, you can see what your inventory looks like at all times and where it’s located. You can also use it to set up automated reorders. Expensive products like Botox should be locked in the supply room and only accessible to a select few. Also, consider placing products for sale behind the counter where they are not easily accessible to the public.
When orders are made, use a prenumbered purchase order to place the inventory order. When the order is received, the order should be received against the purchase order and the order should be counted and verified. Segregation of duties is a key attribute to any good internal control design. For example, the person placing the order shouldn’t also be the person receiving the order. At the end of the month, complete inventory counts and reconcile to the inventory control system. Significant areas of loss should be carefully investigated.
Timecard manipulation can also be a cause of fraud. Paper-based systems can be easily manipulated, allowing team members to round up or down. If this is done continually over a large period of time, the amount you are overpaying can become substantial. Modern time and attendance management systems help ensure employers are compliant with properly paying team members, but also provide a higher level of security against manipulation.
Securing Against Embezzlement
According to the Medical Group Management Association, thefts over $100,000 account for the majority of embezzlement losses reported, with healthcare entities losing around 5% of annual revenue to fraud. Dermatology practices specifically can be among the most vulnerable in healthcare because they often have extensive retail product lines and therefore, have a large amount of cash transactions. Preventing embezzlement requires strong internal management, hiring and diligence, not to mention an insurance policy that protects against employee fraud.
Active engagement is key. Be involved and engaged with the business side of your practice when it comes to your checking account, petty cash drawer, reporting, receipts and disbursements. Building a set management process for this can be helpful for keeping you in the loop. Like your expensive supplies, keep your petty cash drawer locked and only accessible to you or a select few. When it comes to patient tickets, ensure all have billed charges and/or collected payments tied to them. Or if an appointment is canceled, the ticket should be closed out with that reason.
At the end of the day, patient tickets, payments and collected cash should all be balanced and in alignment with each other. This alignment should be reviewed before it’s signed off on. Following that, the daily bank deposit should be made with a balance receipt included. Any patient account that is adjusted or written off should be done by someone other than the person responsible for handling and posting customer payments. One of the most common forms of front desk fraud occurs when check payments are intercepted at the front desk and the corresponding patient balances are written off by the same person. Each month, complete a bank reconciliation with your monthly bank statement. Review the checks written and the daily deposits. You may even consider hiring an outside accountant to complete the reconciliation if you don’t want to take this on yourself.
Insurance policies, called employee bonds, can also be purchased to reimburse a practice in the event of a loss from team member fraud. These policies are typically inexpensive and offer practice owners some peace of mind.
Have you dealt with financial fraud in your practice or are fearful of it, and looking for support in staying secure? We’re here to help. Schedule a consultation with one of our practice management experts today!