LAS VEGAS – The key to preventing healthcare fraud and embezzlement is strong internal controls that target all levels of employment, according to an expert.
According to Angela Morelock, a partner at BKD, LLP, fraud issues – such as creating fictitious suppliers, accepting kickbacks, ordering personal items, stealing from petty cash funds and employee expense accounts and abusing company credit cards – costs the country about $652 billion annually, hitting about 5 percent of revenues.
Approximately 42 percent of those hit by fraud recover nothing after the scam is discovered, according to Morelock, because they don’t have insurance to cover it, or, if they do, they don’t have enough insurance.
Cash fraud is the most popular of the options because it’s harder to trace.
“There aren’t nearly enough internal controls,” said Morelock, speaking at the Healthcare Finance Management Association’s ANI conference last month in Las Vegas. “And no one should ever have access to accounts receivable and cash and checks.”
“This is not just a large company problem,” said Morelock. “Small to mid-sized companies seem to be a big problem.”
The best way to combat fraud is to eliminate the opportunity, according to Morelock. And forensic data mining can help locate the problems.
Morelock offered a profile of a potential embezzler: Male or female, usually without any prior criminal history and well-liked by coworkers. He or she likes to give gifts in the office, Morelock said, and displays habits of a compulsive shopper. Gambling and drug problems are not unusual, and many rationalize by starting small or “borrowing” from the company.
Those who have been at the company for a long time, are very loyal and have informal authority are candidates for embezzling, Morelock said. Bust the best early-warning sign is a drastic lifestyle change by an employee.
Other symptoms of fraud, as a company, include unusual bank statement items, increases in refunds or write-offs, missing documents, complaints, out-of-balance accounts and large adjustments.