A couple of my consulting assignments have involved setting up processes for increased upfront collections. Although physicians offices have been doing this for years, it’s still surprising just how many hospitals have yet to truly broach this subject within their own facilities.

Money Count
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A major part of upfront collections, and direct collections in general, is setting up the auditing process for making sure that all the monies being collected are actually going to the entity, whether it’s a physician or a hospital. In this regard, physician’s offices have taken their eye off the ball as much as hospitals have. It’s actually harder in hospitals because at least they have finance departments that are doing a lot of bank book balancing on the back end, and yet it’s not foolproof unless auditing processes have been put into place.

Don’t believe me? I was talking to another consultant who deals almost exclusively with physician’s groups. He was telling me how easy it is for office managers to fudge the figures and pad their own accounts because many physicians won’t ask them for bank statements, and don’t know how to balance a checkbook to even begin the process. Also, physicians are reluctant to bring in auditors to check their books because they don’t feel the expense justifies it. Of course this is more prevalent in smaller offices than large offices, but even large offices can feel the sting of theft within their ranks.

Another thing about physicians offices is that they usually develop some type of rapport with the office manager, so that, many times, even if they figure out that person has been stealing from them, they allow it to continue because they don’t want to go through the process of having to try to hire someone new.

As it pertains to hospitals, it’s relatively easy for someone who collects cash at a cashier’s window to have a second set of receipts, write a receipt for the patient, pocket the cash, and put through an adjustment in the computer. If they’re not overly greedy, with cash, it may never get caught because there are few hospitals that would know how to find it.

It doesn’t have to only be cashiers. There was a news story about a business office director who came up with a novel way of obtaining funds from the hospital. What she did was set up accounts on her own at multiple banks and credit unions, then have her staff write refund checks to those names and transfer the money out of those accounts later on. In two years, before she was caught, she had transferred almost $750,000 (yes, you read that correctly) into these accounts. That it took that long at a medium sized hospital to figure out that something was wrong shows that even with a full financial staff, it can be easily done with the right creative mind.

Have I scared you enough? Well then, let’s be a bit more proactive and positive. Here are general hints for both hospitals and physicians offices to take; one might or might not fit your situation. Below are five ways that you can set up auditing processes to help make your cash collections more secure:

January 26th, 2010
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1. Set up a process where cash payments over a certain dollar amount have to be verified live by a second person. The second person can be anyone, and what you’d do is have the second person initial the receipt that’s going back to the patient. Sure, smaller payments might slip by, but if your cashier knows that someone is regularly coming to the desk during the day, not only at a planned time like being covered for lunch, they’re less likely to attempt to defraud your office during the day.

2. Do spot audits, even if you’re not really auditing. My consulting friend recommended that if you’re working in a physician’s office, go out and ask for the bank statements every once in a while, then observe the person’s reaction to your request. If that person can’t, or won’t, immediately give them to you, they may be suspect. If, once you have them, you can be in a spot where you can observe them for a while to see how they might be reacting, that might tell you something also. If you know how to balance the checkbook, do a comparison of your deposits against a few days of ledgers, since bank statements separate checks from cash deposits.

If you’re in a hospital, the same thing can be done at your cashier’s office, only ask for a copy of the all ledgers in the area, then go back to the office and verify that all payments recorded show as payments on the system.

3. Have a written policy on refunds, and make sure the chief financial officer, or an administrative level authority, approves it. My thought on the business office director who embezzled all that money is that there was no real procedure in place, and she was able to use that to her full advantage. It’s always harder to catch problems when a person in authority is the one cheating the system, but with proper procedures in place, I would bet that there wouldn’t have been a way she could have gotten close to $750,000 out of the hospital.

4. Set up checks and balances procedures based on your needs, and be overly cautious. It never hurts to be overly cautious with cash, especially if there’s the possibility of cash changing hands throughout the day, or only one person that’s usually responsible for almost all the cash holdings. Do what you have to do: close the cash drawer twice a day and balance each time the drawer has been closed; have locks on all cash bags, have only one of each color bag; make employees go through processes where they have to initial receipts or vouchers as the need arises. Whatever it is, make sure that every conceivable cash transaction has been addressed.

5. Make anyone who is a main point person for collecting cash, or even handling daily checks, take at least one two-week vacation a year, make sure that all records are being audited and the work area is being searched. Banks do this, and it’s probably the most important thing to do for your own piece of mind.

In my past, I didn’t have a problem with my cashier, but I had one employee who, while she was gone, we went through her desk and found a high number of checks that hadn’t been processed for payment, cash that the hospital needed. We weren’t sure if she’d taken other checks, or done anything with any other checks, and we didn’t care; we terminated her while she was on vacation and moved on, because she didn’t have a position where she should have had any checks in her possession to begin with.

Seeing that she had the checks made us tighten our cashier process, because all checks did come to the cashier, and therefore she had to either have been away from her desk when the checks came or left the checks in an unsecured area where someone else could easily take them. All it takes is one incident to bring home the importance of making sure your facilities cash is secure.

In today’s tough environment, having checks and balances in place can save a lot of grief on the back end because, unfortunately, the odds of ever recovering most of that money won’t be good.

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