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Friday
Jun082012

Embezzlement & Employee Theft Can, And Probably Will, Happen To You.

Medical Spa Employee Embezzlement & TheftEmployee embezzlement and thefts are the most common crimes in any cosmetic practice... in fact, it's pervasive.

Believe me it can and it did happen to us. It’s still hard to believe that I saw the evidence and ignored it because I just could not believe what my eyes were seeing. Instead of going with my gut instinct I listened to a mountain full of lies from my Physician Assistant so the first lesson learned is trust what your eyes are seeing and rely less on distracting noise.

When all was said and done, our P.A. had stolen over the course of just 14 months, more than $200,000 in Botox, Fillers and Laser Treatments. 

How was she able to accomplish this?  The theft occurred in three primary ways.

  1. With Botox/Dysport she would mix the proper dilution of 2.5 and then draw out a full syringe of properly diluted Botox and re-inject another syringe of saline. She would then take the syringe of Botox and put into her mini-cooler posing as a lunch box which she brought every day to keep it cold and then treat patients out of her house. The evidence of this was apparent with patients complaining of poor results. She would cover herself with some inventive lies such as; Botox out too long and I did not want to waste it, the refrigerator was not cooling to proper levels, she put the Botox in the freezer and the solution crystalized and weekend the Botox, I may have accidently put in too much saline and I used Dysport and it does not work as well as Botox.  Looking back I can clearly see the evidence but listened to her lies and excuses.
  2. On fillers her number one excuse was that the product “leaked” while injecting and she was forced to use another syringe. Other excuses were the patient had a bad result so to keep them happy she offered a free syringe, a reaction that forced her to remove and re-inject later and I threw in some free syringes because she bought a package of Fractional Laser Treatments.  Most of the time, she was simply pocketing the syringes to again inject patients of our practice at her house.
  3. Watch you consults and close ratios. We have been in a bad economy so this was hard to gage.  She would “feel” out the patient during the consultation and those who she believed would be players she would offer discounts for Fractional Laser, IPL’s, Matrix etc. if they paid her directly in the room in cash. I was tipped off by this from a competitor who called me and told her one of their patients told them about this. After firing my P.A. within weeks we had identified 36 patients who paid cash in the room.  She told those patients she was the co-owner so it was ok to pay in the room… To add insult to injury we had to complete their treatments as well.

Submit your own story about medical clinic embezzlement or theft here

After having gone through this we put in some practices that I wish we had done all along.  We now perform a Botox and filler audit every Friday. Every unit of Botox is logged onto a log sheet by patient and same for fillers. If we are off by more than 5% I will meet with my NP to go over the discrepancy.  On lasers shot counts are logged for every patient. As an example if Mary comes in for a Fractional Laser Treatment and the beginning shot count was 45,000 and ending shot count was 45,400 then the next patient for the same treatment should begin at 45.401. We also now provide to each patient our policy of ONLY paying for services at the front desk during check out.

I was also amazed to find out that every staff member suspected what was going on but was afraid to say anything because they did not want to cause any problems if they were wrong. Lastly review your insurance policy for theft coverage. I was mortified to find that ours only covered $10,000 which left us loses of about $200,000.00. We were able to absorb the losses but many others might have been forced to lay off staff or worse go out of business. As a non-physician owner I trusted far too much that a professional medical practitioner would not steel. I now understand all too well that the white coat which commands respect could also have hidden prison stripes and to use my eyes and cover my ears…

Reader Comments (12)

Unfortunately this is an all too familiar story. Of the physicians that I now the majority have had at least one instance of some form of employee theft that involved firing an employee and a few involved the police. One physician running a medical spa was telling me that he had had three theft with different in the last 12 years (that he was aware of). In the first case he lost about $40k. In the second he had an employee stealing products and then selling them from her home so he only lost $4-5k. In the last he had an employee who was taking cash for discounted treatments as you described above.

If this hasn't happened to you yet, it will. It's not very hard for a staff member to justify themselves in doing this and most clinics don't have any policies that help prevent this.

Recent studies indicate that employee embezzlement has become so rampant that it accounts for the majority of ordinary business losses suffered by employers. Some estimates indicate that more than $400 billion is stolen annually by employees in the United States.

Just yesterday I fired a staff member who we found was taking cash in the treatment room to perform laser hair removal on extra areas.. Her clients would pay for one area and she would take pocket cash to perform discounted treatments on other areas.

This is a problem in many clinics but cosmetic clinics are especially susceptible to this since: they are fee for service and have cash floating around, they have product that can be sold outside of the practice, they have services that can be sold inside the practice. If you have been practicing for more than five years, you've had at least two or three staff members who have stolen from you as a best guess. If you don't think that's the case, you're probably a worse business person than you should be. (BTW: Thank you for bringing up this subject since it's an epidemic.)

I'm somewhat surprised that this seems to be so common. I have yet to face this kind of issue - to my knowledge - and I hope that it will not affect me. I am hopeful that in future articles you may detail how this can be avoided in more depth. - Yours, Dr. Hiroshi Kinjo

Psych exams, drug testing and credit reports before hiring someone! It's hard to find someone whom we can fully trust. We shouldn't rely on referrals and recommendations only.

06.11 | Unregistered Commenterp.luna

If I had not have lived through this, I like many of you would not have thought theft on this level would be possible. This is in fact a big reason of why it does occur and yes, it is widespread.

Meet with your staff and go over what constitutes theft on every level, not just Botox, fillers, lasers and cash. As an example all your products, syringes, Lipo B12, misc. medical supplies etc.

If you have not yet done so, establish a formal employee discount plan for all services and products. Let everyone know in an office meeting that theft is a widespread problem in this industry and is cause for immediate dismissal and notification of governing bodies which will likely cause anyone with a license to loose it. Let them know that "prevention" is everyone's responsibility and that anyone's silence is acceptance and is equally bad.

In short, be proactive and assume theft is already happening. Thieves grow more brazen when they are left unchecked...

Oh yes, I know all about. It was happening in a Med Spa that I worked in. and the two sales people knew injectors from a former job, and man did they steal. Guess what~~~~ I was the fall guy, the lamb so to speak since I was in charge!

I had to control/dev. all inventory sheets(their were none when I was hired). I was asked several times to go into petty cash two boxes, and I would bring to my manager and tell her pls, I've got so much to do already. She would say, no problem. But the gal at the front desk every time I came up to get client, she was ALWAYS were they were kept. and the keys she had a copy. So glad to be out of there. so glad. They took so much Obagi, IS clinical, and more....

06.13 | Unregistered CommenterLeigh

Yes, I know of these situations as well. To answer one of the comments above, to be proactive/or to solve a suspected problem, INVENTORY, INVENTORY, INVENTORY control. With each shipment of Botox and Filler, each bottle/syringe was numbered with a magic marker. We kept a 3 ring binder in the locked storage of filler and each time a syringe of filler was taken, it was logged in the binder with the date, client name, and the number it had been assigned with the magic marker. Our Botox binder was kept on top of the locked refridgerator and in addition to the above mentioned being logged, we also logged the number of units per that particular client. YES! It took extra time, and even was a pain in the neck to do it. As far as our products, they too were logged in a binder every time a new shipment arrived and when a product was taken from the locked display cabinet, client information was written in the log for each sale. Each WEEK, yes, every single week. we double checked our logs by doing inventory. All of this work and effort was all worth our time when we had to defend ourselves. Our accountant found thousands of dollar discrepancies (missing money), and those of us who were doing the treatments and selling the products, who had keys to the cabinets and refridgerator, we were found CLEAN of theft. It turned out, the theft was at the reception desk. The employee taking cash from our clients for their purchase or their treatment, was doctoring credit card totals, taking cash from the drawer, and taking cash from our cash paying clients. As I said, it was a HUGE relief that I was able to prove where every single unit of botox went and every syringe of filler was accounted for. All of the staff, including myself, were all guilty until proven innocent, we were all under investigation. My documentation of where every single unit/syringe/product went saved my job. Yup, it's still a pain and time consuming, but I wouldn't change a thing.

06.13 | Unregistered Commenternlf

This is so true it is very hard to trust employees
We just found out our receptionist called our business banking accounts
And changed all business banking alerts to her personal email account
And has been receiving this information for two months
Her intention was to embezzle monies from the company through quickbooks
And identity theft

And we wonder why the unemployment rate is high?
Employers do not need these employees

08.22 | Unregistered CommenterAesthetics

Keep the honest, well...honest! My husband and I own a med spa. We had a bad experience with a previous business partnership. We were able to catch things quickly with monitoring.

As a former banker, I have always advised small businesses to take measures to create a system with checks and balances.

Operate under "dual control". That means it takes 2 to get the job done. If your book keeper does the books then have some one else verify and make the depsoits. That should not be the same person accepting the payments at the front desk. You can also use Tamper Proof Night Drop Depsoit Bags to secure all deposits before they are sent to the bank. Have your accountant review your books for discrepencies. Ours looks for changes and deletions in the history logs. Sounds like a pain but it works.

Most banks offer On-Line Banking. As a business owner you should look at it regularly to see if anything looks suspicious. Provide your book keeper/office manager a sign-on that allows them to view the transactions but can not make transfers or wire transfers. Occassionally audit large checks that are written by pulling a copy up on line to see if it matches what is in your books. I saw book keepers/office managers put a name on the check within QuickBooks but put their own name on the actual check and cash it.

Know your Return on Investment Ratio - if I spend $1 to make a $2 sale normally and all of a sudden I'm spending $1 to make a $1.50 sale, this is a red flag.

Managing your inventory with control logs, as identified above, should be an option it should be a requirement.

These types of checks and balances help keep the honest, well...honest! As a business owner you should also do your part to prosecute offenders appropriately. I don't wish to hire the employee that stole from you. But at the bank I would see business owners refuse to prosecute a former employee because they felt bad for them. Pleeeaase! They didn't care about you or your business and the average person who embezzles will do it again.

09.5 | Unregistered CommenterGrace

As an employee at a medical spa, this article makes it seem like employers should always think that employees are trying to steal from them every chance they get. The doctor/owner who I worked for had a bad experience with his first few employees and that experience has made it sour for him. He's literally said that he couldn't trust anyone and sometimes that can backfire because it creates a negative working environment. Who wants to work for someone where there is no trust. Because of this, the doctor had a high turnover rate. He would make us count inventory every week and if something was off, I would literally have a mental meltdown as the office manager and try to backtrack to find the discrepency. If I couldn't find it, in the back of my head I would think, "What if he thinks I'm a theif, that I stole it even though I didn't..." Thankfully, discrepencies were far and few inbetween our inventory counts but I hated that icky feeling of thinking that someone doesn't trust me even though I've done nothing to make them lose trust in me. Since I've worked there, we've never had any issues with theft. The doctor had more finanical lost from losing an employee, losing their clients, and the finanical time spent on training and employee a new technician. The technicians had a harder time dealing with the "no trust" issue. We had one employee who confided in me that she wanted to quit, one month into her employement. As the office manager, I sat down with her and discussed what was going on, wanted her to take time to think about it since she was doing so well. She was literally afraid of the doctor and hated the negative vibe. She didn't like it that the doctor was controlling. She didn't want to also have that icky feeling when something is misplaced, because the first thing that pops in her head is, "will he think I stole it?". She couldn't work in that kind of environment. Six months later, she quit. I've worked for the doctor now for eight years (the only employee who's been with him that long) and he has mellow since then. He has come to trust me and try to trust his technicians and be less of a control freak. I've also implemented certain measures to account for petty cash, botox, fillers, retail supply usage so that he could concentrate more on what's important, his patients. I think what really needs to be said in response to this article is that measures need to be put in place to account for services, petty cash, inventory, supplies, etc. Also, the employer should spend more time in the interview process to make sure that the potential employee is someone they feel they can trust.

09.6 | Unregistered CommenterM.Palmer

I understand and appreciate your comments. For me I still trust my staff but as you said, I've implemented controls to prevent, as much as possible, any further attempts of theft. Background checks in most instances don't work. In this business, very few centers report the person who is stealing. I found out that the center my PA had worked at before had the same issue but they did not report it nor did they inform me when we checked references.

Knowing that this article and the white paper Jeff recently put out will help others avoid these scams almost makes it all worthwhile. This business is tough enough without having someone rip you off...

09.7 | Unregistered CommenterBrian

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