E-Mail Bulletin
August 2007
Employee fraud in the medical workplace
E-Mail Bulletin
Hello, everyone. If employee fraud in the medical workplace has not affected you yet, it almost certainly will at some point. Here's an interesting story about the need to maintain constant vigilance, and the possible penalties for not keeping your eyes on the ball.
This story is from the August 29, 2007 on-line version of HealthLeaders News.
Gil Weber
Employee Dishonesty Major Headache for Healthcare Providers
Larry B. Childs and Jennifer Weaver, for HealthLeaders News, Aug 29, 2007
Fraud and dishonesty by employees has become a huge problem for American business in all industries. A report by the Association of Certified Fraud Examiners estimated that the cost of employee fraud in this country exceeds $660 billion per year. No segment of society is immune from the epidemic of fraud. The Catholic Church reported embezzlement in 85 percent of U.S. parishes, including the theft of $8.6 million by two priests in Florida.
The healthcare industry has to deal with all the usual risks of employee dishonesty. For example, physicians frequently entrust their finances into the hands of a single office bookkeeper, who manages all incoming and outgoing funds. Cash co-pays make a tempting target for embezzlement that leaves little or no trail of evidence. Other ways to embezzle in doctors' offices include diversion of insurance reimbursements and padding the office payroll with fictitious paychecks.
The best insurance against simple embezzlement remains basic accounting controls. Embezzlement by someone with access to cash or accounts is easy. The difficulty that embezzlers face is in covering their tracks. If the healthcare provider has good accounting controls with divided employee responsibilities for handling accounts, an embezzler has a far harder task to conceal his thefts.
In addition to the usual dishonesty hazards that face other industries, healthcare providers confront monumental risks that require expensive preventative measures. Healthcare fraud costs the federal government billions of dollars each year--as much as ten percent of the nation's total healthcare spending, according to the General Accounting Office. To fight the mounting drain on federal revenues, the Justice Department has established healthcare fraud task forces around the county. These teams of prosecutors seek stiff prison terms for perpetrators of healthcare fraud. In addition to devoting millions of dollars to prosecution of healthcare fraud, the federal government has taken aggressive action to shift the responsibility and cost of preventing and discovering healthcare fraud to the providers themselves.
Congress enacted legislation last year requiring healthcare providers to institute costly programs to prevent fraud and waste. As of Jan. 1, 2007, healthcare providers that receive at least $5 million in Medicaid reimbursements were required to establish a False Claims Employer Education Program. This new Employer Education Program requires extensive policies and employee handbooks specially designed to educate healthcare employees to detect and prevent waste and abuse. Companies must train employees about the federal statutes that encourage and protect whistle-blowers.
Indeed, when employee fraud impacts Medicare or Medicaid payments, the employer may be held vicariously liable under the federal and States' False Claims Acts. False Claims Act liability can result in the imposition of treble damages and significant penalties of up to $11,000 per claim for payment submitted to the government. In many instances, the government will argue that each separate item on a Medicare cost report constitutes a separate "claim," and thus, the multiplication of penalties can reach into the millions. Most serious, however, is the risk that False Claims Act liability will result in exclusion from federal healthcare programs, which amounts to the death penalty for most healthcare providers.
Given these grave risks, it is imperative that healthcare providers institute policies requiring employee training on Medicare and Medicaid billing requirements and employee certification that they understand and will abide by these billing requirements. Employees should also have access to a confidential hotline or other reporting source where the employee can report suspected fraud, and company policy should make such reporting mandatory. During exit interviews for terminated employees, the employer should inquire into whether the employee knows of any instances of healthcare fraud. If employee fraud occurs nonetheless, the government is likely to take a more favorable view of an employer with rigorous compliance policies and procedures in effect.
Identity theft constitutes yet another major dishonesty problem confronting healthcare providers. Because of advances in technology, the theft of a single computer disk can jeopardize the privacy of health information and social security numbers of thousands of patients. Recent thefts of patient computer data have generated class action lawsuits against healthcare providers even before a single patient has suffered personal damage from the lost data. The hazards of identity theft require providers to consider extensive security measures, including encryption of data and limiting access to customer files.
Employee fraud constitutes a growing problem and a major expense that is felt by all providers in today's healthcare market. The expense of employee dishonesty and preventative measures ultimately results in higher healthcare costs for everyone.
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