The Efficient Ophthalmologist

Embezzlement: A Crime of Betrayal

By Steven M. Silverstein, MD, FACS

The sad truth is that if you have been in practice five years or longer, you either know of someone who has been the target of embezzlement or your office, past or present, has been criminally victimized by this crime. It is hard for us to imagine that the people we surround ourselves with in positions of deep trust would be so detached from the relationship that integrity and loyalty to the practice would be undermined by self-serving sentiments of either entitlement or jealousy.

Thankfully, our practice has not been faced with this crisis (that we know of). However, I certainly know several colleagues, both in ophthalmology and other specialties, who have suffered at the hands of such white-collar criminals. They have helplessly witnessed this criminal act nearly bankrupt their businesses and certainly cause tremendous despair in their professional and personal lives.

Why Embezzlement Happens

Regardless of the specialty, certain commonalities that drive embezzlement are evident.

Long-term relationships, especially those which feel more like family than that of an employer/employee, are especially vulnerable, as the person in power has an extreme degree of trust and decision-making on behalf of the practice, and often, on behalf of the physicians and their families' assets.

It is not unusual, for example, for the administrator or personal assistant to have access to all passwords, banking and credit card information, and relationships with the ancillary personnel and businesses that surround our private lives. Why do we allow this level of access? First, we already trust these staff members to make key decisions concerning the operations and finances of our practices and associated entities. Second, this is what we pay them for — to save us time. Finally, we genuinely care about each other's well-being; we are friends and members of a workplace family.

This degree of trust without separation of key accounting measures is often our downfall. Worse, because of most doctors' inherent trusting nature and the often decades-old duration of these relationships, we do not generally suspect or personally examine for financial discrepancies until the culprit is far, far down the path of embezzlement.

By this point, the perpetrator typically could never recover the stolen money or assets to make restitution. The practice and the shareholders are forced to pay other staff members or vendors who have been collaterally damaged, and finally, the most difficult and painful decision of all is illuminated: filing criminal charges and the prosecution of someone for whom you have cared deeply for many years.

Temptation at Every Level

The larger the organization, the easier from which it is to shift, hide or steal. The lower on the food chain the employee is, the fewer the assets he or she has access to, yet there is no position in the organization that is immune to the temptation of embezzlement, and it has been repeatedly reported to occur at every level of the corporate structure. Whether it is a secretary stealing petty cash, an administrator diverting hundreds of thousands of dollars, or a partner who has access to the company's reserves, systems must be put in place that trigger an alert to aberrant behavior or changes — even gradual ones — in business trends. Oh, and by the way, a multiple-family-member-owned practice is not exempt from the risk of embezzlement. Remember that embezzlement comes in many forms. It does not necessarily mean that cash money has been stolen. For example, those in our billing and collections departments are responsible for filing tens or hundreds of thousands of dollars of charges per day in goods and services. This is an overwhelming and often frustrating task.

In our practice, it is always this group of people who leave the office last, sometimes in the late evening, so that all charges may be entered on the day services are delivered. Fighting with the insurance companies, getting co-pays and deductibles from patients, interfacing with Medicare and Medicaid is stressful, especially when a claim is returned denied, or they are hopelessly behind on the day's filings, let alone following up on the charges from prior weeks and months.

Watching aging accounts receivable (AR) mount is difficult, and some employees fool themselves into believing that they are not actually hurting the practice (let alone participating in a form of stealing) by writing off charges rather than scrubbing and re-filing, zeroing out a patient account rather than calling them repeatedly to reconcile their account, or downgrading charges so that they will most likely be paid the first time without having to add modifiers or raise questions that will only contribute further to their workload in the weeks ahead.

Stolen merchandise is the same as stolen cash, and is a multi-million dollar problem in practices across the country every year. Secretarial supplies, medical items such as pharmaceuticals, contact lens inventory and larger-ticket items, including eyeglasses and items from optical shops, are usually poorly monitored. Psychologically, they often become a form of self-entitled benefit for working in a medical practice.

Guard Against Embezzlement

Every business, both for security and good business practices, must institute several layers of checks and balances in order to detect even small changes in cash flow, or to suspect misappropriation.

Statistically, most episodes of embezzlement do not occur acutely or in large volume; rather, they are patiently siphoned gradually, often over years, so as not to raise suspicion. I have known practices that, once they learned of the deceit, uncovered hundreds of thousands of stolen dollars, sometimes over a span of 15 to 20 years or more. The employee, when confronted with the indisputable evidence, is typically quite remorseful and often has a sad story to tell as a rationale for their criminal behavior.

Following are several basic steps a practice can take to protect against embezzlement.

► Mandate a system whereby one manager-level staff member is responsible for accounts payable (AP), and the bills are reconciled by the practice administrator or CEO.
► Have the monthly AR, AP and record of Day Sales Outstanding (DSO) reviewed by the practice's outside accountant/consultant for further agreement. This will also help to detect negative trends in profitability aside from the concern of illicit behavior. If you suspect that embezzlement is a possibility, immediately institute a policy of personally signing the checks for any justified expenditure, and order an independent audit of the practice.
► Keep tight inventory on all goods of the practice, so that there is personal accountability in every department of items that have a tendency to “walk out” of our offices.
► Strictly limit the number of people in the practice who have check-writing privileges and access to company accounts. Consider a two-person check-signing rule, perhaps the administrator and one shareholder of the practice.
► Obtain a police report and background check on new hires. We cannot prevent embezzlement absolutely, but we can be aware of common schemes and make it clear that those who violate our trust will be charged and prosecuted. OM

Steven M. Silverstein, MD, FACS, is a cornea-trained comprehensive ophthalmologist in practice at Silverstein Eye Centers in Kansas City, Mo. He invites comments. His e-mail is ssilverstein@silversteineyecenters.com.