Published 2/1/2012
Steven E. Fisher, MBA

Catch the Thief in Your Office

Admitting the possibility is the first step in prevention

What would you do if you were told there was a 100 percent chance that you as an orthopaedic surgeon would be the victim of fraud or embezzlement at some point? What would you do if you were told that your chances were “only” three out of four? In fact, no one really knows the extent of the problem because most incidences of embezzlement are never uncovered. Further, many incidences of embezzlement that are uncovered are never reported to the authorities or prosecuted.

This article covers the basics of theft in orthopaedic offices, including who does it, why they do it, and what they steal. A subsequent article will outline 10 steps you can take to prevent embezzlement.

Theft and embezzlement have consequences far beyond lost money. These consequences include increased staff turnover, the cost to recruit and train new employees, and increased tensions among practice principals.

A likely suspect?
Who is likely to steal from your office? A common misconception is that only staff steal. Such is not the case; doctors steal as well. When I worked as a consultant, I uncovered numerous instances of theft by physician employees and physician owners.

A second misconception is that you only have to worry about people you do not trust. In reality, the people you do not trust know that you do not trust them. It is the people you do trust, and who know that you trust them, who are most likely to steal from you.

A widely accepted rule of thumb among forensic accountants, auditors, and those who write employee dishonesty insurance coverage states that 10 percent of people in an office (including physicians) will steal whenever they have the opportunity to do so, another 10 percent will never steal, and 80 percent will steal under the right set of circumstances. Even if the amount stolen per year is small, the total can add up. Yet doctors routinely refuse to believe it can happen to them!

What’s to take?
What is it that people steal from you? The simple and trite answer is “everything that is not locked down and much of what is.” Money, of course, tops the list, but a frequently overlooked item is time—when staff arrive late, leave early, and/or perform personal tasks at work, you lose their productivity.

Other items include office supplies, computer hardware and software, telecommunication equipment (including physicians’ and staff cell phones), drugs, prescription pads, and—an item gaining increased media attention—people’s identities.

Money can easily disappear by siphoning off funds the office should be receiving in connection with work performed by physicians and allied health personnel (the “revenue” side). Similarly, funds can trickle away by “padding” outlays by overstating time on a time-sheet or by creating a fictitious supply vendor and submitting bogus bills from that vendor (the “expense” side).

The theft of other items can also be accomplished in a variety of ways. Most frequently, theft occurs because the office does not have a protocol in place for keeping track of its various assets.

Motive and opportunity
Why does someone steal? That is a much more complicated issue, but research undertaken many years ago by criminologist Donald R. Cressey suggests that white collar crime occurs as a result of three simultaneous factors or conditions (
Fig. 1)—social pressures, rationalization, and perceived opportunity.

Businesses—including orthopaedic offices—do not have any control over the “social pressures” that affect people. An employee may need money or goods for a variety of purposes ranging from overdue medical bills to a gambling addiction.

Nor do businesses have much control over “rationalization,” except insofar as it is always good business practice to maintain morale at as high a level as possible so as to generate a positive working environment. People are less likely to steal from a person or an organization for which they have positive feelings.

The factor that businesses do have complete control over is “perceived opportunity.” This can best be summed up by another aphorism, “While the cat’s away, the mice will play.” If people think they can get away with stealing something, then they will often do so. They will do so even when they do not really need the item or items they steal, and—amazingly—when they realize on some level that stealing could result in termination.

Note that prosecution is not a real deterrent. Most instances of theft are not prosecuted and potential thieves know this. Prosecution involves publicity and no one wants to be perceived as foolish.

What orthopaedic practices can and should have is a detailed theft prevention strategy. Regardless of the size of the practice, the office culture and expectations must value honesty, integrity, and ethical behavior.

In addition, the same person should never have both the responsibility for recording receipts and access to the checkbook to pay expenses—even if the individual is a long-time, trusted employee. Even the most trusted employee, under the right circumstances, may carry out fraudulent activities. Bank statements and cancelled checks should be reviewed by a physician on a regular basis.

Each practice must also have internal controls for handling cash receipts, billing and receivables management, and account payable procedures.

To assess your IQ on embezzlement and employee theft, take a quick 10-question quiz from Averti Fraud Solutions (www.avertifraudsolutions.com/quiz/). You may be surprised at your score.

Steven E. Fisher, MBA, was manager of the AAOS Practice Management Group until his retirement in December, 2011.

For more information on fraud and abuse:
2010 Report to the Nation on Occupational Fraud & Abuse. Association of Certified Fraud Examiners.
(accessed Dec. 29, 2011)

See MGMA Connexion, September, 2010, Medical Group Management Association. (accessed Dec. 29, 2011)

Statistics are per FTE orthopaedic surgeon, according to the 2010 AAOE Orthopaedic Practice Benchmarking Survey. For more information, call AAOE at 847-384-4249.

For more information about Averti Fraud Solutions, see www.avertifraudsolutions.com/.

Cressey DR. Other People’s Money: A Study in the Social Psychology of Embezzlement. Wadsworth Publishing Company, 1971.

Did you know…?

  • The “typical organization” loses 5 percent of its revenues to fraud each year, according to the Association of Certified Fraud Examiners.
  • Although 86 percent of perpetrators were first-time offenders, that only means that the person had not previously been convicted in court.
  • According to a recent Medical Group Management Association survey, 82 percent of respondents reported embezzlement and/or theft totaling more than $94.6 million.
  • Groups of 10 or fewer physicians accounted for 70 percent of the cases and 63 percent of the amount stolen.
  • Although theft of $100,000 or more represented just 18 percent of the cases, those thefts accounted for 93 percent of total losses.

True tales of theft
“Our Accounts Payable (AP) person embezzled more than $100,000 over several years. She was having an affair with one of the physicians and we chose not to prosecute in order to protect the doctor’s identity—and save his marriage.”

“One of our doctors who spent all his time in a one-person satellite of the practice skimmed off thousands in cash payments and set up his own deals, keeping the money in his desk drawer, until one of our employees turned him in.”

“A long-time staff person in our practice’s surgery center failed to follow mandated procedures relating to the handling of cash payments. She did not herself steal money but a colleague, realizing she wasn’t following procedures, stole more than $60,000.”

The results? The AP person got away with it. The light-fingered doctor is no longer with the practice, but he was not charged either. The two surgicenter co-workers were both terminated and the thief was prosecuted; however, the practice never recovered any money.