Chandresh Shah

Practice Financial Analysis – Part 8 – Possible Embezzlement

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This week is a continuation of the high-level financial analysis of your practice.

Part of this analysis involves looking into your collections and related gross collection percentages. However, collections do not always meet expectations and there are a few possible reasons you should look for:

1. Shift in your payer mix (click here for last week’s article)

2. Decline in reimbursement rates

3. Poor follow-up on unpaid insurance receivables (Insurance A/R)

4. Poor front desk collections

5. Poor claim filings

6. Not sending out patient statements

7. Poor patient receivables management (Patient A/R)

8. Possible embezzlement


This week I will be focusing on the 8th and last reason : Possible Embezzlement

Declining revenue and rate of collection is certainly possible because of employee embezzlement. Although this is not common, it is not entirely uncommon either.

Is there a possibility of embezzlement in my practice?

If your revenue is declining despite having  a good payer mix, while your production has either stayed the same or increased from the previous year and nothing else has changed in the practice, you can look into the possibility of embezzlement. However, it will not be wise to jump to an unfounded conclusion. Looking at this possibility will require that you look carefully  into a couple of things and before looking into  employee embezzlement.

What reports do I need to review to evaluate objectively?

To help evaluate this, you should have comprehensive reports that lists month over month the practices’:

  •   Production

  •   Collections

  •   Gross collections percentage

  •   Adjustments

  •   Adjustments percentage

  •   Net collections percentage

Once you have these reports, you should then compare amounts written off as contractual’s against your payer mix. Evaluate if this appears reasonable. If your contractual adjustments appear larger than they should be, ask yourself if embezzlement is possible.

Embezzlement through contractual adjustment is a common way for money to be stolen in the medical office. The simplest way to prevent this situation is to make sure the staff who posts payments into the billing system never touches checks and currency. These two must be separate people with separate responsibilities.