Keeping Busy with the Six P's

August 2006

An internal audit director of a large hospital recently told me about the six P’s of hospital fraud. I thought it was a cute way to classify something that isn’t so cute—so I want to share it with you.

The six P’s of fraud in a hospital are

Patient Billing
Payroll
Accounts Payable
Purchasing
Plant (construction and improvements)
Parking

He said that he could stay busy for at least a year digging into these issues. These areas are almost guaranteed to find audit caviar—cost savings, fraud, or sheer stupidity.

What are your P’s—or your hot spots?

I was just working with contract monitors from a large Texas city—and they uncovered ridiculously huge overbilling for cell phone usage by city employees. The cell phone company was billing the city for services like email access and directory assistance that were not allowed under contract.

And not long ago, CFO Magazine had an article on how CFOs could easily uncover cost savings by examining long-distance charges. One CFO found that the phone company was billing him for phone lines that hadn’t been used in five years.

So maybe you want to add a P for phone.

Or maybe your hot spot doesn’t even start with a P. The first letter of the word doesn’t even matter. What matters is that you are aware of your risks—you are primed to grab the low–hanging fruit.

Don’t be ashamed to grab the low–hanging fruit

Aren’t there enough easy to quantify and prove juicy areas in your organization to keep you well fed? I call these areas “low–hanging fruit”. Low–hanging fruit is obvious, quantifiable, and easy to audit.

For example, another hospital client found out that the clerks were putting the cash receipts in their purse at the end of the day and getting on the bus and taking it to the bank. AHA! Low–hanging fruit.

You can easily quantify the bus–toting problem as follows, “$2500 per day is collected by hospital clerks and carried by bus to the bank.” It is very easy to audit—because all you have to do is watch a clerk put the cash in her purse and then follow her to the bank.

And would you be doing your organization a big favor by keeping it from happening in the future. Obviously.

Shimmy up to the buffet and have at it!

Don’t be ashamed to walk right up to the buffet and have at it. Don’t be shy. The low–hanging fruit is a blessing. TAKE IT. And then come back for seconds.

Make a list of the items on your buffet—maybe they all start with P—but they probably don’t—and then dig in! Tackle each menu item with relish and pride—knowing that there is plenty more where that came from.

A big thanks to Bob Rubel at UT Southwestern for sharing the six P’s and his insight!