Protect Your Practice from the Many Forms of Fraud

In its Occupational Fraud 2022: A Report to the Nations, the Association of Certified Fraud Examiners estimated that the average organization loses 5% of its annual revenue to fraud.

Physician practices are no exception. Various types of malfeasance can not only hurt your practice financially, but also severely damage its reputation. That’s why you’ve got to protect your practice against fraud by employees, vendors, patients and other individuals.

Preventive measures

Fraud prevention starts at the top. Physicians need to set the tone. For example, if you routinely pull money from petty cash to buy lunch for yourself or others, staff members may feel it’s OK for them to do so. Be sure you and your fellow physicians are acting appropriately so employees don’t think they can take liberties, too. Other ways to show that you take fraud seriously and won’t tolerate it include:

Creating an employee manual. It should outline, among other things, your policies and procedures regarding money handling and fraud prevention. Require every staff member to read it, sign it and undergo training as necessary. Regularly review and refresh the manual as needed.

Implementing strong internal controls. These commonly include:

  • Delegation of duties so no one completely controls every aspect of financial transactions,
  • Monthly bank account reconciliations, generally done by an independent individual who doesn’t have bookkeeping or check-signing responsibilities,
  • Restricted use of practice credit cards that allows verification of all charges on existing credit cards or other business-related accounts,
  • Limited access to petty cash funds, and
  • Safeguards regarding the handling of cash and checks.

Cross-training appropriate positions. Appropriate cross-training is vital to any medical practice, but limit access to cash and financial data. At the same time, as mentioned, it’s important to make sure that no single person has full and sole responsibility for major transactions.

Self-auditing your financial controls. Regularly test the systems you’ve put in place for effectiveness.

Providing training and taking action. Educate staff on the potential consequences of fraud. Create channels they can use to report wrongdoing, waste and abuse. If employees are struggling financially, you might be able to help them get proper counseling by offering an employee assistance program.

Finally, in the event you catch someone committing fraud, immediately take the appropriate legal and employment actions under the advisement of an attorney — with no exceptions.

Specific dangers

Two particular areas of medical practice fraud that should be on your radar are making improper Medicare claims and violating the anti-kickback statute.

Medicare payment abuse includes billing for unnecessary medical services, overcharging for services or supplies, and upcoding or unbundling codes on a claim. These can be intentional or honest mistakes. Improper claims can include incorrect coding, providing medically unnecessary services, upcoding or unbundling, and billing for services or supplies that weren’t provided.

The anti-kickback statute, also known as the Stark Law, makes it a criminal act for a health care provider or insurer to knowingly and willfully offer, pay, solicit or receive any kickback or bribe in return for furnishing goods or services. For example, a provider might be paid cash or below-fair-market-value rent for a medical facility in exchange for referrals.

An ongoing concern

By taking some or all the steps suggested here, you can discourage employees from committing fraud and help them spot potential wrongdoing. It’s also important to continuously educate yourself and your staff about the different types of fraud affecting physicians’ practices.

Contact us if you would like to discuss your internal controls.

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