Don't Bury Your Head in the Sand: Embezzlement in the Medical Field - Part 1

Wednesday, July 30, 2014

By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

When his American Express Platinum Card with an unlimited credit line was declined, a doctor in DeBary, Florida, realized he had a big problem. According to the Orlando Sentinel, the office manager of the doctor's medical practice allegedly embezzled more than $136,000. For more than two years, the middle-aged woman who managed the doctor's finances allegedly used the doctor's money and credit to support her lavish lifestyle. The accused fraudulent purchases include theme park visits, airfares, tanning sessions, boat rentals and personal housekeeping services. That wasn't all though. The doctor unknowingly funded his office manager's bills as well, including cell phone, auto insurance, cable TV and health insurance.

The doctor confronted and fired his office manager the day his credit card was declined. He called investigators and helped them secretly record a conversation with the manager. As the woman was escorted from the building, the doctor learned that the mortgage for his office had not been paid for several months and foreclosure proceedings had begun.

On July 16, 2014, one day after authorities went public with the allegations, the accused office manager was charged with an organized scheme to defraud and fraudulent use of a credit card.

The Extent of Embezzlement in the Health Care Industry.

Many health care professionals put their finances on the back burner. When running a medical office, considerations of embezzlement and fraud are the least of your concerns. Your patients and daily procedures are in the forefront of your mind. However, you are making a gigantic mistake. In fact, The Association of Certified Fraud Examiners (ACFE) lists the health care industry as the fourth most prevalent industry that falls victim to fraud.

Jeff Holt, vice president of health care business banking for PNG Financial Services Group, Orlando, Florida, frequently lectures to various health care groups on the dangers of embezzlement in the health care industry. According to Mr. Holt, embezzlement victimizes almost 60% of health care practices. Annually, medical and dental practices lose $25 billion. You could potentially be looking at a 5% loss of revenue due to fraud each year.

This is not a topic to overlook. You or some colleagues you know have most likely been the victim of occupational embezzlement already. Unless you don't mind losing a substantial amount of revenue to criminal activity, incorporating regular monitoring of your business finances should be at the top of your to do list.

Financial Indicators of Embezzlement.

It is easy to believe that this type of crime could NEVER happen to you. It's when you get a complete sense of security that you turn naive and overlook indicators of fraud. The following list outlines some financial indicators of occupational embezzlement:

    -    Large or unusual adjustments on bank reconciliation;
    -    Low collection percentages;
    -    Discrepancies between bank deposits and posting;
    -    Abnormal number of expense report items;
    -    No cash in deposits;
    -    Missing documents, invoices, or payments;
    -    Late or overdue notices from vendors and contractors concerning accounts payable;
    -    A large petty cash fund or shortages of petty cash;
    -    Absence of receipts, invoices, or purchase orders for supplies;
    -    Unusual patterns in bank deposit statements;
    -    Large amounts of overtime pay or payroll costs are increasing; and
    -    Increase in patient refunds.

To read further on embezzlement in the medical field, click here to read one of my articles published in Medical Economics.

Office Criteria of the Perfect Embezzlement Set Up.

According to Orlando Medical News, small businesses are disproportionally victimized by employee fraud. Small organizations lack the robust anti-fraud controls that many larger hospitals and banks have, making them a vulnerable entity. The U.S. Chamber of Commerce reports that one out of every three businesses fail as a direct result of employee theft.

The culprit of fraudulent crimes in your office will most likely be a long time employee who is very familiar with your procedures and is trusted by you. According to ACFE, more than 85% of fraud criminals have never been previously charged or convicted of a fraud related offense. In most cases, such as the story from DeBary, embezzlers are middle aged. These people are typically going through a life change such as divorce, health issues, or a mid-life crisis. The availability of unlimited funds can be very tempting in this scenario.

Employee behavior is another strong indicator of embezzlement in your business. Some red flag characteristics of the employee who manages your finances are:

    -    The employee is very protective of their job and despises operational changes;
    -    The employee never takes a vacation;
    -    The employee works many hours of overtime, often alone;
    -    The employee never cross trains a substitute;
    -    The doctor often depends on this employee in office emergencies;
    -    The employee is clearly living beyond their income means; and
    -    The employee exhibits lifestyle and behavioral changes.

Being alert to these indications gives you an opportunity to notice occupational embezzlement in your office before it gets out of control. It is important to note, if you notice any embezzlement indicators, do not jump the gun. Do not immediately confront this employee that you suspect. This will tip them off that you are aware of their potential crime. You want to have verifiable proof that your hunch is correct before coming forward with accusations.

Keep a Lookout For My Next Blog in the Two Part Embezzlement Series.

In my next blog of this two-part embezzlement series, I will be discussing how employee embezzlement takes place, what preventative steps you can take to avoid being victimized by this fraud, and how to react should you find yourself in an embezzlement situation.


Have you been victimized by embezzlement? Why do you think occupational embezzlement is so frequent in the health care industry? Please leave any thoughtful comments below.

Contact Health Law Attorneys Experienced with Investigations of Health Professionals and Providers.

The attorneys of The Health Law Firm provide legal representation to physicians, nurses, nurse practitioners, CRNAs, dentists, pharmacists, psychologists and other health providers in accusations of disruptive behavior, Department of Health (DOH) investigations, Drug Enforcement Administration (DEA) investigations, FBI investigations, Medicare investigations, Medicaid investigations and other types of investigations of health professionals and providers.

To contact The Health Law Firm please call (407) 331-6620 or (850) 439-1001 and visit our website at


Connolly, Kevin P. "DeBary Doctor Helped Catch Woman Accused of Ripping Him Off for $136K." Orlando Sentinel. (July 18, 2014). From: Local News. Page B3.

Jeter, Lynne. "Minimizing Embezzlement." Orlando Medical News. July 2014. From: Page 9.

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

Tag Words: Embezzlement, health care embezzlement, occupational embezzlement, employee embezzlement, fraud, health care fraud, employee fraud, health care business, health care banking, indicators of embezzlement, indicators of health care embezzlement, health attorney, defense attorney, defense lawyer

The Health Law Firm" is a registered fictitious business name of George F. Indest III, P.A. - The Health Law Firm, a Florida professional service corporation, since 1999.
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