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Are employees embezzling funds from your medical practice?

Embezzlement is easy in a medical office because little amounts come through every day, many of them in cash, and $5 here or $10 there doesn’t get missed.

The scheme can be as simple as a staffer walking off with a bit of cash now and then. But it can also be elaborate. Somebody sets up a fictitious vendor and writes checks to the bogus company. Or somebody sets up a bank account in the name of the practice and deposits some of the checks into it instead of into the practice’s real account.

Safeguards to set up

The only prevention is separation of duties so that no one person has control of the money.

Set up these procedures:

  • At least two people handle the receivables. One opens the mail and lists the payments; the other posts the money to the account.
  • One person authorizes write-offs and another posts them.
  • Every employee who handles cash is bonded.
  • Every check has to have an approved invoice attached before it can be signed.
  • Everybody has to take a least one continuous week of vacation each year. During the absence, another staffer has to take over the job.
  • Tally the balance sheet and income statement every month.
  • Pre-number the superbills and account for them at the end of the day. That way, nobody can destroy a superbill and pocket the payment.
  • Reconcile the sign-in sheet with the appointment book and with the charges and payments posted each day. Every cash payment must have a receipt, and the receipt has to be included in the reconciliation.

How to catch a culprit red-handed

If a manager suspects embezzlement, she or he should make a surprise visit to the billing department and say, “We’re going to run all the statements right now and mail them out today.”

Include a letter with each bill that reads, “Please verify your balance, and if there is any discrepancy, call Person A.”

If checks have been diverted to a secret account, there will be calls from people who have paid but whose payments have not been posted.

Another approach: Compare the payments to the explanation of benefits (EOB) forms. This will show if contractual write-offs are being manipulated.

Yet another approach: Call some of the patients whose accounts have been written off and verify that they did not pay. This will show if their checks are being deposited elsewhere and their accounts written off.


Implementing office procedures and separating job duties will help close loopholes that can lead to unscrupulous employee behavior. However, ongoing auditing is required. It is the manager’s responsibility to make sure procedures continue to be followed, and, that in the rush to get work done, the separation of job duties isn’t compromised. The manager should do her or his best to make sure there are no opportunities for staff to steal money from the practice.

A final word of advice for managers: Trust your instincts. If you think an employee may be embezzling from the practice, follow that hunch. But do so in a professional, methodical manner. One of two things will happen: you’ll find the safeguards you have in place are working or that you were right. Either way, you’ll have the information you need to move forward.

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