Expert: Fraud costs mount; managers most likely culprits

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Fraud and embezzlement scams are costing nursing operators, other healthcare providers and U.S. taxpayers billions of dollars annually, warned a prominent accounting expert at the annual meeting of the American Associaton of Homes and Services for the Aging.

"A dishonesty or fidelity coverage policy is definitely needed. Your base (insurance) coverage probably doesn't have it," noted Angela Morelock, a certified forensic accountant with national accounting firm BKD. Fraud happens at each organization, she said. Across all sectors, the tab is $652 billion annually, or 5% or revenues. Just 58% make any sort of recovery after fraud is discovered, highlighting the need for better fraud prevention activities, she added.

"Probably the worst transgressions in long-term care are patient trust funds being raided," Morelock told a packed session at the conference, which closes today in Orlando, FL. "This is the area where we see the most embezzling. They're such ugly incidents, and they do hit the media."

Morelock said operators should take a few key steps to avert trust fund abuse, incuding performing surprise checks of the funds. Also, multi-facility companies should make sure trust-fund bank statements are sent to someone at the main office for oversight -- not to the office or person who is controlling the fund.

For the first time ever, managers/supervisors (across all industries) have become the biggest threat to commit fraud or abuse, Morelock noted. That group committed 41.2% of the crimes discovered, compared to 39.5% for "employees" and 19.3% for "owner/exec," according to the 2006 "Report to the Nation on Occupational Fraud and Abuse" from the Association of Certified Fraud Examiners.