Beware these “Old-School” Medical Practice Embezzlement Schemes!

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2 Doctors and 2 CPAs Discuss Office Internal Controls

  • Perry D’Alessio CPA
  • Dr. Gary L. Bode MSA CPA LLC
  • Dr. David Edward Marcinko MBA CMP

Internal controls are simply those systems, processes, procedures, and mechanisms controlled by management that make it possible for a medical practice, clinic or any health entity to successfully achieve its goals and objectives.

Internal controls designed and implemented by the practice physician-owner, help prevent bad things from happening. Embezzlement protection is the classic example.

However, internal controls also help ensure good things happen, at least most of the time. A procedural manual that teaches employees how to deal effectively with common patient complaints is one example.  Operating efficiency, safeguarding assets, quality patient care, compliance with existing laws, and accuracy of financial transactions are common goals of internal controls.




Common Office Schemes

  • The physician-owner pocketing cash “off the books”. To the IRS, this is like embezzlement to intentionally defraud it out of tax money.
  • Employee’s pocketing cash from cash transactions. This is why you see cashiers following protocol that seems to take forever when you’re in the grocery check out line. This is also why you see signs offering a reward if he/she is not offered a receipt. This is partly why security cameras are installed.
  • Bookkeepers or your accountant writing checks to themselves. This is easiest to do in flexible software programs like QuickBooks, Peachtree Accounting and financial software []. It is one of the hardest schemes to detect. The bookkeeper self-writes and cashes the check to their own name; and then the name on the check is changed in the software program to a vendor’s name. So a real check exists which looks legitimate on checking statements unless a picture of it is available.
  • Accountants or bookkeepers paying bills of others and posting the disbursements as if they were for a practice obligation. Checks payable to the Internal Revenue Service for example can bill used to pay tax obligations of another and are described in the bookkeeping as practice taxes due.
  • Employees ordering personal items on practice credit cards.
  • Bookkeepers receiving insurance company checks or patient checks, demonstrating the receipt of such in the EMR software and not posting in the practice bookkeeping software. Instead checks are illegally depositing them in an unauthorized, pseudo practice checking account, set up by them-selves in a bank different from yours. They then withdraw funds at will. If this scheme uses only a few patients, who are billed outside of the practice’s accounting software, this is hard to detect. Executive-management must have a good knowledge of existing patients to catch the ones “missing” from practice records. Monitoring the bookkeeper’s lifestyle might raise suspicion, but this scheme is generally low profile, but protracted. Checking the accounting software “audit trail”, this shows the required original invoice deletions or credit memos in a less sophisticated version of this scheme.
  • Bookkeepers writing payroll checks to non-existent employees. This scheme works well in larger practices and medical clinics with high seasonal turnover of employees, and practices with multiple locations the physician-owner doesn’t visit often.
  • Bookkeepers writing inflated checks to existing employees, vendors or subcontractors. Physician-owners should beware if romantic relationships between the bookkeeper and other practice related parties.
  • Bookkeepers writing checks to false vendors. This is another low profile, protracted scheme that exploits the physician-owner’s indifference to accounts payable.


  1. Understanding the Healthcare Fraud and Abuse Control Program


Beware these “od-school” schemes that are making a comeback, today.


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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact:




  Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

[Dr. Cappiello PhD MBA] *** [Foreword Dr. Krieger MD MBA]



One Response

  1. So Wisely Retro

    What was old – is often new again to the next generation of physicians.



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