Do you have a Medical Practice?  You may be the victim of embezzlement.

At a Glance

• The main takeaway: The median loss per medical practice due to employee theft is $437,000, so Practice owners must educate themselves on the key warning signs to watch for internally.
• Impact on your business: To properly detect a case of employee fraud, owners should know which areas of their Practice are most vulnerable in the eyes of malicious actors.
• Next steps: Aprio Forensic Services team members have the knowledge, skills and experience owners need to not only uncover employee defalcations and fraud but to recover successfully.

The full story

When you hear stories about fraud in the medical world, the first thing that comes to mind may be physicians filing false insurance claims — but the data paints a broader picture.

According to a 2017 HISCOX Embezzlement study, the Healthcare industry ranks 4^th overall in embezzlement losses with an annual median loss of $437,000 per organization. Moreover, the Association of Certified Fraud Examiners revealed in their 2022 Report to the Nations that the Healthcare industry ranked 4^th overall in total fraud cases by industry.

Below, we summarize the most common types of employee fraud, red flags to watch and the areas of your Practice that are most vulnerable.

What types of fraud can occur?

Internal theft can take many different forms, but the common denominator is that it can be hard to detect and increase in scale if you are not vigilant. Some of the most common types of employee fraud in medical practices include:

• Abuse of business expenses – For instance, an employee who creates fake business expenses and files expense reports for reimbursement.
• Credit card fraud – Employee uses the Practice’s credit card to pay for personal expenses.
• Cash larceny – When an employee steals a payment from the Practice after it has already been recorded in the books.
• Check fraud or falsifying checks – Employee with recordkeeping duties alter  or forges checks to make themselves the recipient.
• Suspicious deposits – Practice’s bank or cash deposits are routed to personal checking accounts.
• Fake invoices – Similar to check fraud, we often see these crimes in recordkeeping departments, perpetuated by individuals in charge of creating and managing invoices.
• Payroll fraud – Employees can give themselves unauthorized payrate changes or raises.
• Skimming  – When an employee steals a payment before recording it in their company’s books.
• Loan fraud – Where the employee acquires a loan on behalf of the Practice and transfers funds to their personal checking accounts.

Aside from these methods, some nefarious employees have also started committing cyber theft, including stealing critical company data and business intelligence from internal systems. It is important to practice due diligence in determining which employees gain access to systems that store your most critical data, especially data that relates to your customers and their personal, identifiable, and financial information.  A HIPAA violation is the last thing your Practice needs.

Common warning signs

Since most fraud crimes and activities are challenging to detect, working with a qualified forensic accounting team to conduct investigations. Aside from enlisting professional help, it would help to be mindful of the most glaring red flags for employee theft:

• Previous disciplinary infractions: Employees with past behavioral issues are more likely to commit financial misconduct. According to the Society for Human Resource Management, 40% of workplace theft cases have experienced HR red flags. Employers should take necessary measures to prevent this.
• Employees who are not taking PTO: When an employee is committing fraud, it is common for them to stop taking PTO to avoid others possibly identifying their fraudulent activity.  Often, companies overlook this behavior in longstanding employees. Employers should be vigilant when monitoring this type of activity in all employees, whether they are tenured or new.
• Lack of internal controls: When a company does not have internal controls in place, employees are allowed ample opportunities to commit fraud. Consider the example of a Practice Office Manager that has bookkeeping functions and also prepares and reconciles payroll with no one else involved in the process; the opportunities for payroll fraud in these situations are endless.
• Missing items or inexplainable transactions: If your banking transactions do not reconcile with your financial records, these indicate process gaps. Something else could be happening under the surface.  Bank statement reconciliations should be performed every month.
• Profit Margins are not as good as expected: If you notice that your Practice is serving more clients year over year, but the profits are not increasing proportionately with revenue, this is a potential sign that expenses are overstated due to employee theft or embezzlement.

Aprio is here to help you recover from fraud

When you are looking for advice to help you investigate and recover from fraud, experience matters. At Aprio, our Forensic Services team members have the knowledge, skill, experience, training and education to support businesses in the most challenging disputes and fraud cases. We deliver proven collections, interviewing, forensic document analysis and investigative techniques to determine the extent of alleged wrongful acts for internal matters, including employee defalcations and fraud.

If you suspect you have been a victim of employee fraud and need professional help, schedule a consultation with our team today.

About Aprio Forensic Services

Forensic & Investigative Services Overview

You’ve Discovered a Case of Employee Fraud: Now What?