PDF: MGMA embezzlement survey

Even years later, Chattanooga physician Deborah Poteet-Johnson still feels the sting of a trusted employee's embezzlement at her former medical office.

"It was just like a knife sticking through me when I found it out," she said. "It would be really hard for me to put into words exactly how sad it made me feel. It was something I still haven't gotten over."

She said the office manager at her small practice stole $10,000 over two years. Talking to others in the medical field, Poteet-Johnson realized she wasn't alone.

"A lot of times doctors just feel isolated, like I'm the only one this has happened to," she said. "Then you talk with others and find out almost everybody, at least in private practice, has been [a victim of embezzlement]."

Poteet-Johnson declined to file charges, but she fired the employee and worked out a repayment arrangement out of court.

Embezzlement is surprisingly common at medical offices, experts say, particularly at smaller offices where one employee may handle both receipts and deposits.

According to a survey released in November from the Medical Group Management Association, almost 83 percent of practices surveyed indicated they had been victims of employee theft, and 45 percent reported employees stole cash.

About 18 percent of 679 practices surveyed nationwide had lost more than $100,000 to employee theft, and 83 percent involved a person acting alone.


• Get a fraud-risk assessment to identify and address areas at greatest risk of fraud.

• Establish a proper segregation of duties (checks and balances) to ensure more than one person is involved in billing and payment collection.

• In a smaller office, if segregation of duties isn't possible, add physician monitoring procedures.

• Implement surprise audits and make it known to employees that the audits are coming. Look at cash receipts and disbursements.

• Realize that, given a set of circumstances, most people are capable of being tempted and committing fraud.

• Require mandatory vacations and have other staff switch job functions periodically. Fraudulent activity could be identified during the switch-ups.

• Trust your gut. If something doesn't seem right, consider the possibility of fraud.

Source: Bill Acuff, Decosimo

The risk tends to be higher at the beginning of the year, when patients haven't met their deductibles and are paying more of their medical expenses with cash, said Bill Taylor, Chattanooga practice administrator and certified public accountant.

That risk is lessened when patients use debit cards attached to health savings accounts, tax-exempt accounts often used with high-deductible health plans, some local office administrators said.

Bill Acuff, director of forensic services and certified public accountant at Decosimo, a Chattanooga accounting firm, called embezzlement "a special type of fraud."

"Not only do people lose money, but they suffer the loss of trust," said Acuff, who said he has investigated cases involving from $20,000 to $250,000.

Local family medicine specialist Cari Page was "dumbfounded" when she discovered that an employee she had known for more than 15 years had been stealing from her.

Page said she found out when she got a notice saying property taxes hadn't been paid on her solo practice, even though she recalled seeing the check stub for the payment.

When she looked at the check, Page saw the employee had made it out to herself.

Page brought in an investigator and learned that the employee had embezzled at least $21,000. Though she did not file charges, Page said she is working with an attorney in hopes of getting restitution, and she is exercising more oversight of billing in her office.

"I went to medical school because I wanted to help people," she said. "I did not know when I went to medical school that I really needed to have a considerable business background if I was going to try to go it on my own" in a solo practice.


Craig Sarine, practice administrator at University Surgical Associates, thinks the Medical Group Management Association survey overstates the incidence of embezzlement.

"I have a hard time believing it's as prevalent as what that article showed," he said. "Technically, embezzlement is somebody taking a pencil home that they shouldn't have."

Taylor said it's hard to know how often medical office embezzlement happens because many physicians don't take the issue to court.

"A lot of times, physicians are embarrassed they let it happen to them, so very rarely is there prosecution for this stuff," he said.

Only 29 percent of medical offices surveyed by medical association prosecuted employees who stole, according to the study.

The study found that the vast majority of medical office embezzlers are female; most are receptionists, office administrators or a billing office employee; and 44 percent had worked for their employer for at least four years.

"I think it's more common than people know," said Dr. George McLean, a Chattanooga endocrinologist.

A few years ago, he discovered he had been cheated out of $100,000 by a 10-year employee. The woman is paying restitution.

For years, the employee used McLean's business checkbooks as her personal expense account and took cash from patients, he said.

"We went three years without having a cash deposit, which means anytime a patient gave her a $20 bill for a co-pay, she pocketed it," McLean said.

McLean said he understands the silence around the issue.

"Most physicians are embarrassed to say they were so sloppy, they didn't know what was going on. ... I had not reviewed my financial records in 15 years, 20 years. I just presumed everybody working for me was honest," he said.

But he said getting the word out is more important than nursing his wounded pride. He has posted a photo of the former employee in his medical office's waiting room, alongside her confession to the theft.


At Plaza Urology Group, a six-physician office in Chattanooga, "we have worked really hard to prevent it," administrator Cherie McAllister said.

"I've got staff that are separate enough where it's not like I've got best friends checking best friends," she said.

It's a greater challenge for smaller practices with limited staffs, but even doctors at small or solo practices can lessen their risk by regularly checking their financial books to look for anomalies and occasionally conducting unannounced audits, Acuff said.

Minimizing temptation and exercising oversight is critical to deterrence, Acuff said.

"To me, trust is another word for temptation when it comes to money," he said. "People would not engage in this behavior if they perceived that they were going to be caught."

Make sure more than one person is involved in billing and financial recordkeeping, he said.

"Anytime someone can touch money, cash -- if they can also adjust the books, it's almost wide open already. Segregate those duties," he said.

Page said even though her new office manager, Lori Winnie, has been her best friend since age 12, she still conducts regular audits. Three times a week she compares bank deposits against the amount brought in from patients.

"I trust Lori with my life, but I still just double-check everything because I have to," Page said. "I've learned that you never give anyone full control of your finances. You keep your finger on everything."

Contact staff writer Emily Bregel at ebregel@timesfree or 423-757-6467.