Red Flags & Healthcare Employee Fraud

healthcare employee fraudBy: Valery Bond

According to a recent Association of Certified Fraud Examiners (ACFE) report, 92% of employee fraud cases had a least one red flag and 64% exhibited more than two behavioral red flags! The number one red flag that spawned the fraud was reported to be the employee living beyond their means, with the second red flag attributed to financial difficulties.  But how does an employer or Human Resources manager of detect the healthcare employee fraud issues that can leave them open to this type of liability and fraud? 

  1. The first line of defense is simple – open eyes and ears. Poor performance evaluations, job loss anxiety due to a reduction in force (RIF), extreme absenteeism, and intimidation or bullying behavior are all issues that may trigger fraud. These red flags should be easily and readily recognizable as a potential for liability by Human Resources folks.
  2. Accountability in management may reduce the threat of a liability in the organization. Upper level managers, directors and supervisors must convey the emphasis and get employee buyin for a sustainable compliance program.  Beefing up internal controls with appropriate management oversight, adherence to policies and procedures that includes the inability of overriding protocols can certainly be of assistance in detecting a potential for fraud.
  3. Obviously, preventing fraud is the best and most cost-effective way to limit loss due to fraud committed by employees. Questions to consider as a business include: do we provide effective training and education regarding anti-fraud?  Does the organization have an anonymous reporting tool in place?  Is the tone of the office one of honesty and integrity? Does the company have an effective Code of Conduct and Compliance Program?  Has a Risk Assessment been completed; and if so, acted upon?  Is there a policy and procedure for disciplinary actions; and if so, have mitigated actions been reported and recorded with the Board of Directors?  All these questions can lead to answers for a ‘worry’ that has not yet occurred.
  4. It was found that 42% of cases involving fraud were discovered through a tip, and 49% of the tip generators were employees. An anonymous hotline and open line of communication is not only essential for patient privacy and HIPAA compliance, it is an avenue for staff members to report suspected fraud and abuse.
  5. Because senior management, the CEOs, CFOs and COOs have a fiduciary responsibility to the organization, the Board of Directors must always be kept apprised of both the good and the bad occurrences in the workplace. Periodic Board of Director meetings (at least quarterly) should be held and include retaining agendas, attendance sheets, and most importantly the Minutes from the meetings to protect the organization if, and when, a fraudulent act happens.


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