Nancy is the receptionist and office manager at a local doctor’s office where you are working as a doctor’s assistant. The doctor leaves Nancy to handle all office duties including collecting cash receipts, billing patients, depositing checks, and the monthly bank reconciliation. The doctor doesn’t have any training in accounting or collecting insurance payments and wants to be able to focus on treating his patients. Since the work in the office doesn’t require an additional employee, Nancy has been given all office managing responsibility. The receptionist could share the office managing duties, but she is too busy greeting patients, pulling charts, and answering phone calls. Nancy is also a single mother of four. She likes to give her children the best possible care and enjoys having the finer things of life to the extent that she can afford them. Nancy also works a second job because her job as office manager “just never seems to pay the bills.”
Most patients visiting the doctor have insurance and are only required to pay a co-payment for the services that they receive. As you are filling out some patient information during a routine visit, you overhear the patient say to her husband. “Honey, do you have any cash with you today? This office prefers the copayment to be paid in cash and I have forgotten to stop by the ATM this morning.” You thought that this was an interesting comment since you had never heard of the office having a cash co-payment preference.
In addition, you haven’t seen a written sign or ever heard that the doctor prefers cash co-payments. You are aware that in addition to a co-payment, Nancy bills the entire remaining cost of service. The remaining amount is then billed directly to the patient. As you have been filing patient records, you have often heard Nancy complain that “full payment cannot be collected from yet another patient.” You are aware that several accounts are written off each month due to the high amount of uncollectible accounts. A high percentage of bad debts seems to be a common and expected occurrence in the physician/patient business. You are currently taking a fraud class and realize that several opportunities for fraud exist.
1. Consider the fraud triangle. What opportunities and motivation exist for Nancy to commit fraud?
2. What should be done to improve internal controls and reduce the risk of fraud as it relates to the segregation of duties?