An Unusual Case of Embezzlement

An Unusual Case of Embezzlement

Employee theft is rampant among medical practices, primarily because most physicians assign bookkeeping responsibilities to their staff while they remain focused on patient care. In many smaller practices, the person who collects copays and deductibles is often the same person who posts charges and makes bank deposits. Temptation therefore abounds, especially when work goes unchecked.  A 2009 study by the Medical Group Management Association (MGMA) found that 83 percent of the 945 practices that responded had at some point been the victim of embezzlement.

While embezzlement is most often thought of as the stealing of cash, this case study highlights a more unusual type of embezzlement…stealing of patients.


Usual Types of Embezzlement

“Dipping into the till” is commonly accomplished in 2 ways:

Overt Theft:

– This involves failing to record cash sales and pocketing the money by simply stealing from the cash reserves. Of course, patient payments may also be intercepted and stolen before the owner ever see them as well, so a watchful eye should be kept for unusual offsets in discounts and credits. If a practice sells or dispenses anything of significant value, inventory controls are obviously important as well.


Wage Theft:

– This is another very common form of fraud and mid-sized and larger providers must continually be alert to attacks on their payrolls with padded hours and false pay rates.


What to Look Out For

There are countless opportunities for unscrupulous employees to misappropriate funds. Nearly half of the MGMA survey respondents indicated that theft occurred from cash payments — employees pocketed copays or deductibles either before or after they were recorded on the shutterstock_403347847practice’s books. A receptionist who takes a $30 copay from a patient, for example, can easily pocket the money and write it off as bad debt. Employees may also write off the balances from office visits for friends or family — a less overt form of theft, but plenty costly to a medical practice.

Petty cash is another common target and often where stealing begins. Many smaller practices have drawers of money that staff members can use to buy stamps or other office supplies, and if they have more than one person who can get into petty cash, they don’t know who’s been in there and who took money.

Careful attention to policies and procedures can help preclude embezzlement. But careful attention to practice analytics is also required in order to prevent more unusual forms of embezzlement.


A More Unusual Form of Embezzlement

Perhaps even more impactful than stealing cash or supplies is the stealing of patients. How can this possibly happen?

The relationship between an associate physician and a physician/owner is often one that is bound by a comprehensive employee contract. Protective clauses often include restrictive covenants, non- solicitation clauses, and ownership definitions. For example, the practice “owns” the patient charts and upon termination, with or without cause, the employee is forbidden from direct solicitation of the practice’s patients.

The case of Acme Podiatry exemplifies embezzlement of the more unusual type.

Dr. X (name redacted) was an employee associate of Acme Podiatry. Dr. X’s brother owned a separate practice within the same geographic area as Acme Podiatry.

Due to Acme Podiatry’s careful attention to practice analytics (through their monthly Virtual Practice Optimization Analysis), they were able to detect a pattern that alerted them to actual thefts of patients.

In January 2016, Virtual Practice Optimization reported a sudden and severe decline in new patient encounters entered into the Acme Podiatry practice management system (TRAKnet® 3.0). This subsequently led to a rapid erosion of total patient visit trends, charge trends, and collection trends. As a result of this early detection, an investigation was launched and it was determined that Dr. X was seeing the patients at Acme Podiatry’s facilities, but creating the charge entry at his brother’s location under a different provider number…. not a theft of cash…but a theft of a different kind that had a profound effect on the cash flow and viability of Acme Podiatry.



Prudent policies and procedures and “checks and balances” are a crucial ingredient to help preclude theft of cash. But practice analytics and trends are also vital in order to keep a watchful eye on the practice.



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