Embezzlement, Could it Happen in Your Medical Practice?

Embezzlement, Could It Happen In Your Office?

Embezzlement is not something most of us consider; unfortunately, though, it happens more often than we’d like to think.

It goes on everywhere: in businesses, education, government, and healthcare. Within healthcare, embezzlement occurs in insurance companies, in hospitals, and of course in medical offices. 

To the Tune of Billions!

A quick Google search reveals US businesses and organizations lose an estimated $400 billion per year to embezzlement.

Yes, that’s B for Billion!

And according to a report by the Association of Certified Fraud Examiners medical practices lose $25 billion per year to theft and embezzlement. Given that the report is from 2010, it’s almost certain, that this number is much higher today. 

What is Embezzlement?

But what is embezzlement? Isn’t it the same as employee theft?

While it seems they are the same, there are some differences. One of the key differences between the two is the element of trust that’s commonly present in embezzlement.

Now please remember, my explanation is not a legal definition…

Employee theft refers to the theft of items and perhaps money. Often employees may steal office or medical supplies, equipment, medications, vaccines, or money from petty cash. As such employee theft is a broader term and may refer to the theft of anything.

In contrast, embezzlement most often refers to the diversion of money or assets from the business. Typically, the embezzler is in a position of trust and has access to money and assets of the business.


The embezzler has the opportunity to withhold or divert money and assets from the business unnoticed. Additionally, the embezzler may take a number of steps to complete the diversion of funds to take ownership.

Some examples of these steps include:

  • Withholding cash and falsification of records
  • Manipulation of bookkeeping and accounting records
  • Falsification of checks and expense accounts
  • Purchase of personal items with business credit card
  • Setting up a vendor account and making payments to it

Frankly, I had to do a bit of digging to come up with the above examples. At first glance, it seemed that fraud and embezzlement in the mostly cash-free office would be difficult.

But unfortunately, that’s not the case. The saying: “Where there is a will, there is a way…” still holds true.

Could it Happen to You?

By now you’re probably wondering if this could happen in your practice. Unfortunately, embezzlement could happen anywhere and to anyone. But…

  • How would you know?
  • What could you do to minimize the risk?
  • What steps could you take to discourage someone stealing from you?

Luckily, there are steps you can take that make it less likely you become a victim of embezzlement.

Implement Controls

Personally, I believe most people are honest and not out to “get you,” including employees and business partners.

However, if a person experiences a problem and finds an opportunity in your business that could fix that problem, it may be a different story.

What does that have to do with you and your office?

Well, you don’t want to provide that opportunity to solve or fix a problem! No, not like this!

You want to discourage theft and embezzlement by implementing controls, checks, and balances that make embezzlement risky and hence unattractive.

Take away the element of opportunity; make it hard for someone to embezzle from you.

Here are some general suggestions of what you might implement in your office workflow.

Separation of tasks:

If there is more than one employee to handle front and back office tasks, organize the workflow so that different people handle various aspects of a process.

For example:

  1. One employee prepares the deposit, another person makes the entry in the billing system, and a third makes the deposit.
  2. One person takes money and credit card payments, issues receipts and enters totals into a ledger. Another person checks the accuracy of the ledger against receipts issued and balance in petty cash.

Paper Trail:

But what do you do if you have one employee who handles everything in the office? The employee takes money, prepares deposits, issues receipts, opens mail, and posts to accounts?

You design ledgers and checklist to create a detailed paper trail. A paper trail is a tool to cross check and trace what actions were taken.

Let’s take the task of collecting money at the front desk. Here are some of the forms you might utilize.

  • A daily log of patients scheduled for a visit; note patient responsibility (even if there is none), outstanding balances, and expected payments.
  • A log to record each transaction, cash or credit.
  • Utilize an old-fashioned, carbon copy receipt book and write out a receipt for every transaction, regardless if the patient asks for a receipt or
  • Reconcile the above logs each day at the end of business.

Instruct the employee to batch logs, reports, and receipts for your review. Insist that the employee fills out all required paperwork.

Make sure that the money in your business is treated seriously and handled with care.

Of course, you must take the time and check that things are done properly. If people know you’re paying close attention to what’s going on, they are less likely to abuse your trust.

Practice Management System:

Know and understand the accounting portion of your practice management system. Even though you may not be the person to use it on a day to day basis, you must understand it enough to extract feedback about your business.

Pull reports on a regular basis and learn how to read them. This will alert you to any irregularities in the flow of money and expenditures in your office.

The key to success is consistency! Over time you’ll develop a “feel” for the numbers and when something is “off.”

Audit/Review of records:

If your business is a medium or even larger practice, you may choose to have your accounting records reviewed by a third party. Perhaps you may also want their input about implementing effective financial controls.

Chances are you’re already busy with day to day tasks of running your office. And the busier your practice gets, the more complexity sneaks into the business. That’s why it may be beneficial to have a professional come in to do a review.


So here’s the million dollar question: what controls should you implement in your office?

Unfortunately, there is no “one size fits all” answer.

Your decision depends on your business: size of the business, number of employees, any controls currently in use, the complexity of systems, etc.

You must develop and implement controls that make sense for your business and that you’ll actually use.

Are systems and controls a guarantee you’ll never be a victim of embezzlement? No… However, you can make it difficult and unattractive for someone to steal from you.

Do you feel a bit uneasy about implementing controls and cross-checks? Do you worry about what your employees may think or how they will feel?

If that’s the case, I certainly understand. But let me encourage you to think of it more as being proactive rather than being suspicious and distrustful.

I hope you found this article helpful and most of all, that you’ll never come across embezzlement in your office.

We’d love to hear from you…

Tell us what you think and share what YOU do to discourage embezzlement in your office.


By Johanna Hofmann, MBA; regular contributor to the NPBusiness blog.

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