Thursday, March 1, 2012

Embezzlement in Doctors Offices

I just read an article that talked about more medical practices being victims of embezzlement.  In a 2009 survey of members of the Medical Group Management Association (MGMA), 83% of 945 respondents said they had been the victim of employee theft.  I guess this means I can come out of the closet now.  I have always been ashamed that my practice of 5 Internal Medicine doctors was embezzeled by our trusted long-time book keeper.  It made me feel so stupid and I didn't know how prevalent the problem is.

Our medical practice was a small business with about 100-150 patient visits a day.   Each of us ran an individual business with shared overhead and employees.    At that time patients paid small copays of $5-20,  mostly in cash.  We thought we had good record keeping but Medical Practices are actually easy to rob from because doctors have no idea what they are getting paid for a patient visit.  The documented visit charge is seldom paid in full by the insurance company.   Partial payment arrives months later...or not at all.  Many charges are "written off" when it is clear no-one is going to pay it.  The partial payments are not standardized so a $80 visit could be paid $12.53 or $45.01 or $62.33 and there was no way to know.  The lag in payment not only kept us on the edge financially, it lent itself to fraudulent practices.

I thought I could tract accounts receivable by getting monthly reports from the bookkeeper but the holes in payment are just too big.   How can disparities between billing and collections be identified when there is no standard payment for a charge?

I tracked overhead expenses, signed all checks personally when attached to an invoice and did not use credit cards for office expenses.  I often opened my own mail and spot checked insurance payments and denials. I thought I had a handle on the business of Medicine.

All of us were working very hard and our incomes were pretty poor.  But as primary care doctors, we were used to that.  I went years without self-funding a retirement account (much to my dismay now that I'm older!)

I can't remember how we uncovered the fraud but our trusted bookkeeper, Steve, had a separate account at the bank where he was depositing money for himself.  He took the cash co-pays from all of us.  Not enough to be noticed,  but enough to add up to tens of thousands of dollars over time.  We never knew how much cash was stolen.  He also deposited insurance checks and patient checks into his own account and reconciled the books so we never saw it.  That amount totaled over $180,000 that we knew about...meaning there was much, much more that we will never be able to discover.   Why the bank allowed a business check to be deposited into his personal account we will never know.

Did we prosecute?  Yes,  but the judgment we got against him never amounted to any reimbursement.  The money was long gone.  He never served jail time and is probably out there somewhere working in another medical practice.

Embezzlement can happen to anyone in business and apparently happens frequently to doctors in private practice.  some say it cannot be prevented and given the crazy way medicine is reimbursed I would have to agree.


10 comments:

Anonymous said...

I knew a doctor whose receptionist stole co-pays and another one where they were embezzled thousands of dollars by the receptionist who handled the money and payments. This is such an important subject because it is so hard for medical offices collect payments that are due from insurance companies anyway. Thanks

Anonymous said...

This happened to my brother in law who owns several fast food franchises. It's way more common than anyone realizes, especially in small businesses. This person was a trusted friend who frequently babysat his kids. It was such a long and emotional process to have her tried and convicted. I also worked on an audit once where we discovered the long time accountant had embezzled over $100,000 over 5 years. He stole from the Sacramento Children's Home!! Some people are just sick and evil.

Raymond Bouchayer said...

Terrible ......when I had a Dinner house at one time my employee's wre basically my "partners" ..and did better than I . They drove better cars than mine .....so I guess we are all pray to dishonest people

Anonymous said...

My father was an MD in California for many years and died a few years ago. He practiced until he was 85 years old and was loved by his patients. He was an admittedly poor business man however and despite my own distrust of his receptionist and bookkeeper (I work in HR), his view was that she was dedicated and supportive. The lack of expertise in business and legal affairs made him a sucker for exploitation. So while it can happen to anyone, even those saavy in business, it happens more often to doctors, architects, artists, and other professionals who typically have a distaste for "business". Are medical schools addressing this better today than they used to?

Diane said...

embezzlement to Doctors I have a question. My husband switched to a medical that has drugs in it to go with his medicare. I do not understand a bill for a Doctor could be $5,000 and they pay $2,000. A Doctors visit could be $150 and they pay a very small amount. I pay my Vet more when I go take my dog in. How do insurance get away with it? Than a doctor has to sign to be in Network or the insurance doesn't want to pay at all. The hospital can be in network but the ER doctor is not in network. I now have a full time job arguing with insurance companies. The insurance companies are not paying the Doctors what they have coming.

Toni Brayer, MD said...

Anon March 2: You asked if medical schools are addressing the business side of medicine. The answer is "no". Just learning the millions of facts and science it takes to be a good doctor completely fills med school time. Some residencies address medical economics but those are broader issues about health care financing and cost of care, rules and regs. Running a practice is not addressed.

The business of medicine is self taught. Very few doctors are now entering private practice. The great majority will be practicing in large groups in the future where businessmen/hospitals, corporations handle the business side. This has pluses and minuses. Doctors won't be on the hook for embezzlement so that is a good outcome of the new world of practicing medicine.

Anonymous said...

This is such an important topic, Dr. Brayer. I know it is common among dentists also and really anyone who has their own business.

Cary said...

There are days when I think thieves' hands should be removed as they are (used to be?) in some countries.

Lenora Morgan said...

White collar crimes like embezzlement are, indeed, a big no-no for business employees, especially those who handle money. The story about the fate of that bookkeeper is sad, but I'm optimistic that there are many bookkeepers and other accounting practitioners out there who are still trustworthy and honest with their jobs.

Lisa researching medical receptionist said...

It is so hard to find employees that can be trusted these days. Has it always been like this?