Although information regarding embezzlement that takes place specifically in orthopaedic offices is not currently available, several characteristics of orthopaedic practices may make them even more vulnerable to theft than other medical practices.
Because many orthopaedic offices stock supplies such as orthoses as a courtesy to patients, and because many practices have multiple locations, establishing internal controls is more challenging—and all the more necessary. The following ten key measures are steps all orthopaedic practices should take to minimize theft of all kinds.
1. Everyone (including physicians and staff) should receive training about theft on an annual basis. The training should make it clear that theft is grounds for immediate dismissal and that anyone caught stealing will be prosecuted, regardless of who it is. This information should be included in the employee handbook.
2. Offices should employ a qualified practice executive who understands the ways that people steal and who has experience in detecting these kinds of crimes. If an office is too small to employ someone with this knowledge, then it should contract with a third party (consultant or accountant) to perform this task part-time.
3. The practice’s outside accountant should conduct regular financial reviews. He or she should audit selected transactions, and staff should be made aware (during annual training) that these audits will occur with no notice. For example, a sampling of checks should be reviewed to determine if the amount is correct and the payee is a legitimate vendor.
4. Duties relating to check processing should be separated; that is, for example, the person who submits a check request should not be the person who approves it or signs the check. Ideally, bills should be paid online or via an automated check-writing system.
5. In the billing and accounts receivable area, duties should be separated as well. Charges should be posted by one person and receipts posted by someone else. Write-offs should be approved by a third person. Staff working in billing and accounts receivable should not be related to one another. Receipts should be issued for all onsite patient copayments.
6. All staff involved in the handling of money should undergo a background check and be covered by bonding insurance to protect the practice against theft or fraud losses caused by that employee. Bonding, however, does not cover “financial neglect” by practice principals. Staff who handle money should be required to take a vacation at least once every year, enabling someone else to step in and perform their duties.
7. Procedures should be implemented so that management knows when staff arrive and are performing their work duties. The intent of such procedures is not to make people feel they need to look over their shoulder every moment, but to make them aware that falsifying time cards and/or performing an excessive number of personal tasks at work costs the practice money.
8. An inventory control system for durable medical equipment (DME), drugs, computer equipment, and other supplies should be in place. On a regular basis, the office manager should check to be sure that equipment on the books is still present and accounted for.
9. A responsible individual should review all bank statements on a monthly basis. The statements should be sent to a physician’s home—or at least to someone who has nothing to do with either depositing money or issuing checks—to avoid the situation of “the fox guarding the henhouse.”
10. Cash and checks need to be carefully monitored. If the office has a petty cash box, it should be reconciled daily, and no one should be permitted to “borrow” from petty cash. Checks from patients and payers received via mail should be deposited in a lock-box. Wherever possible, electronic remittance for payment from third parties should be implemented.
The bottom line is that orthopaedic practices of all sizes need to take steps to protect their own bottom line. They need to improve their internal control or face the fact that, sooner or later, they will be the victim of theft and/or embezzlement—and the amount stolen could be significant, especially for smaller offices.
For more information, see the Practice Management Center.
Steven E. Fisher, MBA, was manager of the AAOS Practice Management Group until his retirement in December 2011.