Blog Post:

Hospital Theft – Millions in Lost Revenue – What’s the solution?

Mar 16, 2020

Theft of Hospital Supplies – Is a Fox Guarding YOUR Henhouse?

Every day, unauthorized removal of supplies and equipment is taking place in every hospital in the country.  As a result of hospital theft millions of dollars of stolen hospital supplies are discovered and reported yearly.  However, what is being reported may just be the tip of the iceberg.  The problem is much bigger and adds a significant cost to a hospitals operating budget. Theft of critical supplies and equipment can also have dire consequences for patient health and safety. Often the hospital theft is only discovered when the missing items are urgently needed.  All too often, the missing items go unreported and the thieves get away with the crime.

https://www.hcsbureau.com/articles-details.html?id=103 Health Care Solutions Bureau article “Preventing Theft a Lost Cause”.

Hospitals are Vulnerable!

The notorious bank robber Wille Sutton was once asked by a reporter why he robbed banks. His famous reply was “Because that’s where the money is!”  Today, many thieves look at hospitals as easy targets for high demand merchandise that can easily be converted to cash by selling on the internet.

Hospitals are open facilities with many access points.  They are unable to employ many of the safeguards and theft deterrence strategies employed by banks and retailers.  HIPPA regulations restrict many areas where patient confidentiality could be compromised from camera surveillance.  Anti-theft tags similar to what retailers use would not work in hospitals due to sterilization issues and other practical needs.  Hospitals are also reluctant to screen people leaving their facility for fear of creating a negative impression.

Hospital Theft - Who is Stealing Your Supplies?

Patients and their Visitors – Most of these thefts can be classified as opportunistic.  Exam rooms, patient rooms and many other areas of a hospital do not have video surveillance.  Even in areas that do have surveillance, the chances are very small that a theft would be viewed on camera in real time.  In most cases, the discovery is made long after the loss has occurred, then triggering a search of video archives in the hope of identifying the thief.  Most of these crimes go unsolved.  While these crimes may happen frequently, the dollar amount per theft is usually small but add up in time and volume.  Limiting access to many areas of the hospital for safety and sterilization concerns helps to minimize theft opportunities from patients and visitors.

Hospital Theft - by Vendors & Doctors

Vendors and manufacturer representatives – These people are essential to the efficient operations of a hospital. They bring in critical supplies and provide extensive knowledge for the optimal utilization of these supplies and tools.  However, they are also given wide latitude of movement within a hospital, and have unrestricted access to OR’s, core areas and many secure stock rooms.  This has led to several cases of vendor theft by opportunity such as this: http://www.fairfaxtimes.com/articles/man-charged-with-stealing-worth-of-hospital-supplies-and-selling/article_4e902b20-48c6-11e8-bc25-2ff00a6814d1.html where $231,000 of other vendors product was stolen and sold on the internet.

“A person with a briefcase can steal more money than a person with a gun”

The opportunities for hospital theft by vendors are many and can be hard to detect.  Vendors may pad orders, intentionally ordering more than a hospital needs so that the excess can be diverted without raising suspicion.  Transfer paperwork can be forged with the intent of product diversion.  Creating false paper trails can mask many cases of outright theft.  There is very little oversight as to the actions and responsibilities of vendor conduct in a hospital.  While the majority of vendors are honest and their actions above reproach, you only need one taking advantage of that trust to cost you big money.

One of the most common risks associated with vendor theft is the practice of relying on vendors to conduct their own inventory.  These results are usually submitted and accepted as factual without any verification by the hospital, resulting in ample opportunity for vendors to cover up their malfeasance. This is a prime example of the “Fox guarding the Henhouse”.  Most vendor contracts stipulate that the vendor must conduct periodic inventories along with a hospital representative and that both parties are to sign off on the inventory report.  Hospitals rarely perform this oversight and often never see the report. In many instances, signatures were gathered after the fact with no knowledge of the actual inventory count.  Any vendor with bad intentions will wait until a pattern such as this has been established before starting a campaign of organized theft.  In order to minimize this risk, you need to:

  • Adhere to the terms of the contract and audit the actual count in real time.
  • Spot check quantities on that inventory and compare them to purchase and use documentation.
  • Consider using a third party verification process to audit compliance and conduct an independent count for comparison purposes.
  • When a vendor requests an increase above established PAR values, request the supporting paperwork that his request is based on.

Employees – Who is better suited to hospital theft by stealing supplies and equipment that the very people responsible for ordering, receiving and distributing them?  While most hospitals maintain exemplary screening practices and try to hire only those with clean records, it is impossible to know what is unknown.  In some instances, a person with no previous criminal history will find themselves taking advantage of the trust placed in them to relieve an immediate need for money with no intent to repeat the act. However, after getting away with it once, the temptation becomes greater to repeat.

Hospital Theft - by Dr's and Employee's

A recent case in a Kentucky hospital illustrates how once someone starts on that path the lengths they can take it to.  In this situation, the Materials Manager, the very person responsible for ordering, maintaining and safeguarding the supplies of this hospital diverted over the course of six years (2014-2019) enough office and medical supplies and sold them on the internet to buyers in China and elsewhere at discount prices, depositing  over $780,000 into her bank account. Many of these items were shipped from the hospital mail room with shipping paid by the hospital.  The actual value of these items is estimated at 2 or 3 times the value received. See- https://www.wsaz.com/content/news/Louisa-woman-arrested-for-allegedly-stealing-supplies-from-medical-center-566276591.html

In another recent example, a surgical technician in a los Angeles area hospital was recently (2018) arrested and initially charged with the theft of $2.9 million in surgical staple reloads over a 3-year period.  The plot was only discovered when an inventory was conducted, and a comparison was made to purchase and use documentation.  When a search of the hospital was unable to find the missing reloads, a 6-month investigation was launched leading to the arrest of the former employee. See-https://www.nbclosangeles.com/news/local/former-hospital-worker-charged-with-stealing-high-priced-surgical-gear/2791/ and https://ktla.com/news/local-news/ex-surgical-assistant-sentenced-to-prison-ordered-to-pay-5-million-for-stealing-supplies-from-riverside-hospital/

Solutions:  How to minimize the opportunities for hospital theft.

  1. Limit Opportunity For Theft
    • Limit opportunity for theft. Safeguard supplies and equipment in secure spaces. Only grant access to authorized individuals. If possible, use badge or fingerprint access technology.
  2. Establish Internal Controls
    • Separate responsibilities for your employees and vendors. Establish internal controls so that no one person controls a process from beginning to end. For example, don’t allow the person that orders supplies to be the one that receives and checks in those supplies. Don’t allow vendors complete autonomy over their product. Create oversight checkpoints for complete transparency.
  3. Third Party Audits
    • Conduct third party audits, including periodic physical inventories to determine if there are hospital theft issues going on. The most reliable way to uncover a theft problem is when the financial number expectations don’t match the physical on-hand reality. A thorough professional inventory containing data down to the item level will reveal where the problems are and offer a path to solving the issue.
  4. Look For “Blips”
  5. Employee Participation
    • Make employees aware of the costs associated with product theft. Explain the benefits of reducing losses in terms that impact them, such as job security, patient safety and sense of pride. Reward and recognize departments that have low levels of theft. Encourage employee participation in a confidential whistle blower initiative or promote a “See Something-Say Something” campaign.
  6. Institute Identification Process
    • Consider instituting an identification process for all people entering the hospital. While most hospitals require employees and vendors to display approved ID, and patients are provided with wristbands, most visitors and delivery people are not checked in and rarely challenged. Some hospitals are now requiring everyone that enters the hospital to produce legal identification that is scanned in and produces a time sensitive pass that must be displayed for movement from the lobby to designated floors only. Reducing anonymity reduces temptation. Instruct employees on procedures to confront anyone not wearing proper identification. http://www.bristolpress.com/BP-Bristol+News/335634/pass-system-instituted-for-visitors-to-bristol-hospital

You don’t know what you’ve got until it’s gone

This is more than a line from Joni Mitchell’s song “Big Yellow Taxi”.  It is the reason that inventory controls and loss prevention practices are so vital to every hospitals well-being.  If you don’t know what you are supposed to have, how will you know what is missing?

There have been attempts by many hospitals to eliminate the cost of conducting inventories.  Proponents of eliminating inventory counts believe that the theft problem is overblown, and the money spent could be better used elsewhere.  This total lack of accountability only encourages hospital theft by thieves and delays the likelihood of discovery.  This “head in the sand” approach will lead to huge losses and compromise a hospitals financial wellbeing.

Attempting to save money by conducting inventory counts “in-house” is also very short sighted.  Your staff is ill prepared for the task that they see as burdensome.  Not only is the process outside of their normal skill set, it takes them away from their primary duties of patient care.  Standards are different from department to department, making the quality of the data gathered suspect.  At best, an in-house count provides a number for accounting to post on the balance sheet.

A professional inventory provides so much more:

  • Accurate counts that can be audited and verified in real time.
  • Standardized quality data across all departments.
  • Multi-faceted reporting customized to your needs for data mining and statistical analysis.
  • Third party impartiality. No bias, guessing or assumptions. We question everything!
  • Fast turn around on reporting, allowing you to act on fresh data.

Contact us today at [email protected]
so that we can design a process customized to your specific needs.

About Us

Inventory management, no matter what your business, is imperative to success. For hospitals, medical inventory management in the clinical care areas is an elusive and serious concern. Hospitals and Surgical Centers are now, more than ever, trying to get a handle on cost of inventory in all areas including ORs, Cath Labs, PACU, ASU, Anesthesia, IR Labs, Labor & Delivery, SPD, Pharmacies and all other clinical supply areas.

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Data Capture

Physical Data Capture of your Medical Inventory

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Perpetual System Inventory Updating

DSC will perform a real time inventory count of perpetual supply areas while transactions are frozen. Once the counts are audited and verified, they are posted in the system.

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Cycle Count Program

Cycle Counts may be performed on any number of product types such as consignment, perpetual, implants.

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Pharmacy Inventory Services

Custom designed to your specific accounting requirements.

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Laboratory Data Capture & Inventory

We will conduct a physical count of your laboratory supplies using proper Units of Measure based on item master criteria.

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Comparative Analysis

Detailed report showing changes over time so that you can evaluate progress.

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Consigned to Owned Confirmation™ Program

We will schedule meetings with the manufacturer representatives and vendors of the consignment products to collect, review, and update contracts. When completed, DSC will conduct the initial consignment inventory.

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Surgical Tray Audits

Surgical trays are normally included in a standard physical inventory, however, this can be offered as a stand-alone service.

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Pre-Inventory Training

DSC can train your department heads so that all departments are conducting inventory operations consistently and in compliance with corporate directives.

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Special Projects

DSC can provide fully credentialed on-site resources for support of special and/or short-term needs.

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Standardization

Based on observation during an inventory and/or assessment, DSC can help identify which items are counted or not counted at specific locations.

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