Ten Steps Medical Practices Can Take Avoid Business and Employee Fruad

Ten Steps Medical Practices Can Take Avoid Business and Employee Fraud

Small and mid-sized physician and healthcare practices are more vulnerable to fraud than larger organizations, and the financial effects can have a bigger impact. Business fraud generally falls into three categories: theft, financial statement fraud and asset misuse.

Theft, or misappropriation of assets, makes up the majority of fraudulent activity according to the Accountants in the Association of Certified Fraud Examiners. Employees are directly stealing cash, claiming bogus expenses, or taking other property. These actions can be hard medicine to swallow when staff has previously be dedicated and loyal over the years, and now considered friends. The other primary types of fraud involve financial statement reporting and general corruption, such as kickbacks or other schemes in which the employee benefits personally.

The reason small and mid-sized healthcare practices face a greater risk from fraud is due to many factors:
  • Employees performing many functions across the organization,
  • The close relationships between staff that leads to less scrutiny,
  • Few formal oversight procedures,
  • Less expertise on financial matters, and
  • The large impact on cash flow that even a small fraudulent event can have on the fiscal health of the practice.

It’s is vital that physicians, clinicians, and healthcare practitioners take steps to prevent fraud before it happens, or detect fraud as soon as possible and deal with it directly!.

1. Segregate Accounting Duties

Most small practices have one person that always handles bookkeeping functions such as patient receivables, processing patient/third party payments, paying invoices, managing petty cash and recording these functions or posting in their accounting system. This makes it easy for cases of fraud to go unnoticed. At least two persons should be handling these functions interchangeably, or keep the handling of cash and accounting functions totally separate, or have the functions performed through a virtual CFO relationship with an accounting firm.

2. Know Your Staff  

Every practitioner strives to hire honest staff! Consider having a formal hiring routine to help prevent fraud like background checks. They should be performed for all staff handling cash or managing payments (and bank account information). As the employee’s level of interaction with finances increases, so too should the scrutiny paid to their past, and present, situations.

Although it may seem counterintuitive, employees committing fraud are often found to be the most endeared by their coworkers, because the person will go out of their way to help and gain trust, often working longer hours and rarely taking time off. This results in them handling several duties, and with less oversight. Likewise, employees facing sudden financial challenges in their personal lives may succumb to temptations. Requiring staff to take their vacations can help expose fraud, if it is occurring, and also can help relive overworked honest employees.

3. Maintain Internal Controls

Create and maintain internal controls that can prevent or detect fraud. This includes restricting access to financial account data, inventory access, establishing multi-person sign-off on expense reimbursements, overtime, all check writing functions, and other accounting or payroll functions, and performing an overview of audit logs to ensure the integrity of the books. Your Fuoco Group healthcare accountant can be of help here.

4. Scrutinize Business Bank Accounts

With online banking options, it’s easy to view account activity and statements whenever is convenient, and practice partners should do this frequently to make sure that paper-based statements in the office have not been manipulated. The key items to look for are missing or out-of-order checks, unknown payment recipients, and checks that were signed over to a third party instead of deposited in a business account. Simply letting staff know that reviewing check activity is part of the accounting review process can help prevent fraud.

5. Audit the Books Regularly

 Routinely audit areas that deal in cash, refunds, product or device returns, inventory management, and accounting or financial functions. Additionally, occasional non-scheduled audits can also help detect fraud in high risk, critical business areas. Fuoco Group offers fraud prevention services to help practitioners identify the risk of fraud and develop controls to prevent losses.

6. Train Employees to Prevent Fraud.

Employees should know the warning signs of fraud, prevention skills and how to report suspicious behavior or actions by coworkers and patients. Establishing an anonymous reporting system or process can also set their mind at ease about letting their bosses know about a fellow coworker. Create a culture and code of ethics that makes it clear that unethical behavior will not be tolerated.

7. Protect Credit Card Information

Credit card fraud is everywhere. Start by firmly separating the business and your personal accounts. Mingling of business funds with personal finances is not only prone to very costly errors, but can expose doctors and healthcare practitioners to lost funds on both sides if the credit card information is breached. Separating accounts also makes tracking expenses much easier. Be wary of who you provide credit card information to, and should use secure, online bill payment services when possible, eliminating the potential for check fraud or theft.

8. Know Your Partners.

Before entering into a relationship or partnership with another entity or individual, make sure you at least know the basics about them and take time to do some due diligence and develop a level of trust. Don’t rely on simple web search of a company to provide information as to whether they are really in business, and for how long.

9. Check Into Every Case.

If you’ve set up fraud prevention policies and reporting procedures, but you don’t follow through by looking into reports or suspicions, then you’re defeating your own security. In order to reinforce the policy of no tolerance for unethical behavior, each case should be looked into, regardless of size.

10. Get Expert Help.  

If a business has implemented fraud prevention steps and the numbers still aren’t adding up, or when there are larger legal implications, in may be prudent to hire a Fuoco Group healthcare accountant to come in and perform a more extensive review and audit of the books and control processes. CPAs can provide extensive help in fraud detection.

Contact Us: As you work for the health of your patients, the professionals at Fuoco Group work for your financial health. If you are worrying about fraud, internal controls, and staff issues, perhaps the prescription is customized accounting and financial services from a CPA firm well versed in the challenges of medical practices. Let us take the burden off you and your physician partners because worrying fraud and finances shouldn’t be keeping you awake at night! Contact one of our offices in New York or South Florida, toll free at 855-534-2727.


In The News

The New York Real Estate Journal recently featured a "Ones To Watch" Spotlight, focusing on both up and coming professionals as well as industry veterans across all areas of real estate. Congratulations to Lou Fuoco CPA, CEPA, for being included in this prestigious group of “OTW” for 2019!

Press and Events

Fuoco Group and TFG Related Entities are proud to announce that Managing Partner Lou J. Fuoco, CPA, CEPA, CVB, has received the 2020 Palm Beach Post Community Choice Award for Best Accountant in Palm Beach County. Lou Fuoco and the Fuoco Group won this award in 2019 as well.
Fuoco Group and TFG Related Entities are proud to announce that Fuoco Group’s Hauppauge Office, was voted #2 overall in the category of “Accounting Firm Less Than 100 Employees” in the 2019 Long Island Business News Reader Rankings. The Firm was also honored to be recognized as a “top three” Best Accounting Firm Finalist.