There are no hard numbers for support, but itï¿½s widely acknowledged that physicians, perhaps more than any other profession, are frequent victims of financial fraud. In fact, says Michael Spencer, president of M.R. Spencer Financial Services, a Flint, Michigan-based financial advisory firm, physicians as a group are popular targets.
There are no hard numbers for support, but it’s widely acknowledged that physicians, perhaps more than any other profession, are frequent victims of financial fraud. In fact, says Michael Spencer, president of M.R. Spencer Financial Services, a Flint, Michigan-based financial advisory firm, physicians as a group are popular targets.
“They are at the forefront of every sales training presentation,” Spencer says. “We’re taught to go after the physician. As a result, one of my physician clients told me, ‘Everyone has their hand out. They all want something.’”
But that doesn’t mean physicians have to give it to them.
Mark Dreher, CPA, is managing partner of Wallace, Plese & Dreher, a Phoenix, Arizona-based accounting firm. He says that physicians are frequent victims of fraud. “There are only two kinds of doctors in the world,” he says. “Those that have had fraud committed against them, and those that will.”
Spencer points out that physician practices, in general, have a significant amount of money flowing through the business. Right off the bat, that makes them more susceptible to fraud, because the financial community—from stock brokers and insurance agents to financial advisors—knows there’s money coming in the front door. The challenge for physicians is to retain it and invest it properly. “Protect the core, protect the core,” urges Spencer. “That has to be the battle cry, because that’s what will sustain them for the rest of their lives. Then, if they want, they can look at some speculative investments.”
Dreher says that it’s important for physicians to understand what causes fraud to happen, noting that internal fraud—the kind perpetrated by employees and patients—occurs more often than external fraud. The three basic elements, he says, are pressure—a reason why somebody perceives that they need something—opportunity, and rationalization. And most people who perpetrate fraud are first-time perpetrators. “The idea in a practice is to create an environment where the opportunity does not appear to be easy. Then, if they don’t have the opportunity, they can’t move forward and rationalize their behavior.”
According to Dreher, the average fraud in a small company, such as a physician practice, is larger than the average fraud in a large company. The reason is the smaller company tends not to have the proper controls in place. He suggests that physicians, particularly during these difficult economic times, need to be aware of what’s going on in the lives of their employees. For example, if an employee’s spouse recently lost a job, give some extra thought to the responsibilities, and opportunities, that employee has.
Spencer says that because physicians put a lot of time and energy into the practice of medicine, they often lose control of their own finances. Frequently, that occurs because they place people in charge of finances who aren’t necessarily competent. “You have to trust someone,” he says, “but many times that employee got their position because they were with the physician when the practice got off the ground, and they were elevated up in the ranks over time. That doesn’t mean their skills are there. As time goes on, make sure the people you have in positions are trustworthy and competent in what they’re doing.”
That’s where internal audits can help. Many accounting firms have CPAs who specialize in internal controls and in implementing policies and procedures. Along those lines, Dreher says the best thing a practice should focus on to minimize fraud is to establish business standards within the office; create an environment that removes some of the opportunities where employees feel they can take a chance. “You don’t want people to feel like they’re not trusted, but prevention is a lot easier than detection. That’s why people check other people’s work. That’s why computers have unique logins and passwords, and you don’t share them with anyone. If somebody perceives an opportunity, it is often very difficult to find out what they’ve done.”
Dreher points out that because physicians tend to surround themselves with fairly trusted advisors, including CPAs and attorneys, they’re not usually as susceptible to external fraud. But, he cautions, that doesn’t mean it can’t happen. He explains that physicians often rely on stock tips or investment advice they receive from a colleague or another physician during the course of surgery. Running the “advice” by a well established and well trusted circle of advisors is a good safeguard against the types of investment fraud that are perpetrated.
“One of the things I tell doctors is that if something is being marketed only to doctors and dentists, that concerns me,” Dreher says. “If it’s such a great investment, why is it being restricted to doctors and dentists?”
Ed Rabinowitz is a veteran healthcare writer and reporter. He welcomes comments at email@example.com.