Guest Author: Laurie M. East, CPA

Theft and embezzlement are widespread in healthcare, and according to the Association of Certified Examiners, approximately $25 billion annually is lost in medical practice offices from theft and embezzlement by employees. According to a 2011 Marguet Report, physician practices suffer from some of the highest money mishandling amongst service industries.  In fact, three out of four physicians will suffer embezzlement during their professional career with a median annual loss of $450 thousand per occurrence while three out of five dentists will be embezzlement victims of roughly 7% of their monthly income.

According to “The 2013 Marquet Report on Embezzlement,” [1] embezzlers tend to fit a particular profile. Typically, they are women (64%) with no criminal history who have worked their way up through the practice. [2]  They generally start at entry-level positions, perhaps as a front desk clerk and later move into accounting, billing or to the office manager position. The embezzlement starts small, escalates and can go undetected for 10 or 15 years or even longer. According to “The 2016 Hiscox Embezzlement Study,” 66% of employees who embezzle from physician practices are office managers. Whether the person is a trusted family member or friend generally has no bearing on whether they will remain loyal and honest and thus not steal from you.

The reasons for embezzling are like other industries with one exception. Sometimes the crime is triggered by unexpected financial hardships, such as a job loss for a family member, a sickness in the family. Other times, the theft is driven by an addiction to drugs, alcohol, gambling, or a desire to live a lavish lifestyle. Additionally, in the medical/dental practices, employees feel underpaid in comparison to what the physician earns. [3] They believe that without them, the physician would not be successful and thus they deserve a piece of the pie.

Too much trust by the physician, too much demand on their time and lack of internal controls are the leading reasons why it is so easy to embezzle from a physician or dentist. Physicians and dentists have been trained in medical/dental school on clinical care only. They have never been trained in how to run a business. They tend to over trust those running the practice while they focus on what they enjoy doing. With the increasing demand on them, physicians don’t think they have the time to review the finances and operations of their practice. Add all this together, and you have a disaster waiting to happen. [4] 

Employee theft starts by doing any of the following at a small scale as the employee tests the waters. If they perceive no one is watching, they gradually test it a little more, perhaps weekly or monthly until eventually the embezzling is fully escalated and can go on for years.