20/20 MONEY by Adam Cmejla

November 11, 2024 Embezzlement in optometry practices: how it happens, who's likely to do it, and ways in which you can prevent it from happening w/ Dr. Bethany Fishbein, OD

Welcome to this episode of 20/20 Money! My guest on today’s show is Dr. Bethany Fishbein, OD, consultant and executive coach with Leaders of Vision. Bethany has been on the show many times in the past and today she joins us to talk about a topic that is admittedly harder and more distressing to talk about: embezzlement in optometry practices. In Bethany’s experience as a consultant having worked with many practices over the years, she’s unfortunately been privy to instances where embezzlement was happening. We talk about who’s likely to do it, what they’re likely to do, and small ways you can cross check the systems in your practice to ensure that you’re running a tight business.

As a reminder, you can get all the information discussed in today’s conversation by visiting our website at integratedpwm.com and clicking on the Learning Center. While there, be sure to subscribe to our monthly “planning life on purpose” newsletter that’s filled with tips and ideas to help you plan your best life, on purpose. You can also set up a Triage conversation to learn a little bit more about how we serve in the capacity of a personal and professional CFO: helping OD practice owners around the country reduce their tax bill, proactively manage cash flow, and make prudent investment decisions both in and out of their practice to ultimately help them live their best life on purpose. Lastly, if you’re interested in learning more about the 20/20 Money Membership, a platform that we created to help ODs become “brilliant at the financial basics,” please check out the link in the show notes of this episode to learn more.

And with that introduction, I hope you enjoy my conversation with Dr. Bethany Fishbein, OD.

Resources:

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ChatGPT Prompt/Answer

Embezzlement in an optometry practice (or any healthcare setting) can occur in several ways due to the complex nature of transactions, including patient billing, insurance claims, and cash handling. Below are some realistic examples of how an employee might embezzle funds in an optometry practice:

### 1. **Billing Fraud:**

- **Overcharging Insurance:** An employee could submit inflated insurance claims by increasing the cost of services or adding services that were never provided. They would then pocket the difference between the amount paid by the insurance company and the actual cost.

- **Phantom Patients:** Creating fake patient records and submitting claims for services or products (like glasses or contacts) that were never provided, then diverting the insurance reimbursement to themselves.

### 2. **Skimming Cash Payments:**

- **Cash Payments Not Recorded:** If a patient pays in cash, an employee might record the visit as "invoiced" or "to be billed later" rather than marking it as paid. The employee then takes the cash and destroys or alters any record of the payment.

- **Under-reporting Receipts:** An employee could under-report the total cash collected at the end of the day, skimming small amounts regularly to avoid detection.

### 3. **Inventory Theft:**

- **Selling Optical Inventory:** Employees could steal optical products (like glasses, contacts, frames, etc.) and resell them privately. Since optical products are high-margin items, this could go unnoticed if inventory management is lax.

- **Ordering Extra Supplies:** Over-ordering contact lenses, frames, or other supplies and then selling the excess or returning items to vendors for cash or personal store credits.

### 4. **Falsifying Refunds or Discounts:**

- **Fake Refunds:** An employee could process fake refunds for products or services and divert the refunded amount to their personal account or as cash.

- **Unauthorized Discounts:** An employee might give unauthorized discounts to friends or family and accept a bribe or kickback in return.

### 5. **Manipulating Payroll or Expenses:**

- **Payroll Padding:** The employee could inflate their working hours or add fake employees to payroll, then collect their salaries or wages.

- **Expense Reimbursement Fraud:** An employee might submit inflated or completely fake expense reimbursement claims, such as fake mileage for business travel or falsified invoices for office supplies or services.

### 6. **Misappropriating Patient Deposits:**

- **Misusing Prepayments:** In cases where patients prepay for services or products (e.g., contact lenses ordered in advance), an employee could misappropriate these funds, not recording the prepayment in the system.

### 7. **Altering Financial Records:**

- **Adjusting Daily Ledgers:** An employee responsible for managing the daily financial ledger could adjust entries to match up with the cash they skimmed or misappropriated, making it appear as though the totals balance.

- **Reconciling Bank Deposits:** Employees responsible for reconciling bank deposits might under-report the actual cash received, depositing a portion into their own account or taking some before it is deposited.

### 8. **Vendor Fraud:**

- **Fake Vendor Invoices:** An employee could create a fake vendor, submit invoices for non-existent goods or services, and then approve payments to the fake vendor (which is actually the employee’s personal account).

- **Colluding with Suppliers:** An employee could collude with a real supplier to submit inflated invoices for services or products, splitting the overpayment with the vendor.

### Safeguards to Prevent Embezzlement:

While this experiment is theoretical, it’s crucial to implement safeguards to minimize the risk of embezzlement. These may include:

- **Segregation of Duties:** Ensuring that no single employee has control over multiple aspects of financial transactions (e.g., someone handling cash should not be responsible for reconciling the ledger).

- **Regular Audits:** Conducting surprise audits and thorough annual reviews to catch discrepancies early.

- **Inventory Management:** Using automated systems to track inventory and spot unusual fluctuations in stock levels.

- **Bank Reconciliation:** Assigning bank reconciliation duties to someone outside of the person handling deposits.

- **Transparent Payroll:** Having a separate, trusted party regularly review payroll and expense reports.

Testing your practice’s internal controls without actually attempting fraud can help you spot weaknesses before they become a real problem. Would you like to explore specific ways to strengthen the financial controls in your practice?

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