Are staff stealing your supplies and selling them on the Internet?

Warning: Nurse nabbed $300,000 worth of surgical goods

Surgical blades, a surgical camera, and laparoscopes disappear over two years from a hospital. The culprit? A nurse who admitted to stealing more than $300,000 worth of medical equipment and supplies from the hospital and reselling them over the Internet.1

Angela DeVarso, 33, stole the equipment and supplies by using her access to operating room areas to take the items, place them in a large bag, and take them home, according to the United States attorney for the District of New Jersey.2 DeVarso admitted that she did so on several occasions and that the stolen equipment included large quantities of sterile sutures, staples, and vials. She faces a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross loss to the hospital.

"In this era, in these economic times, there are questionable motives on the part of people, and greater vigilance is essential," says Larry Trenk, president of the New Jersey Association of Ambulatory Surgery Centers in Oradell, NJ. However, "there are ways you can prevent this," says Trenk, who is the chief operating officer at Oradell-based Surgem, which develops, finances, and operates 10 multi-specialty surgery centers in New Jersey and Florida.

Outpatient surgery programs are "extremely vulnerable," he says. Not all such programs can afford security guards, expensive video systems, and other protective safeguards, he points out. "So as an organization, you have to have strict, concrete, internal controls: financial-, or procedural-, or documentation-wise," Trenk says. Consider these suggestions:

Segregate responsibilities among your staff and also with your vendors.

Smaller outpatient surgery providers might lack a system of checks and balances, says Mark Mayo, an ASC consultant and executive director of the Ambulatory Surgery Center Association of Illinois. For example, Mayo says, problems arise when the "same person who opens the mail can post -- or not post -- payments to accounts." Or, that person might post the amount as a credit instead of a payment and keep the cash, he warns. "This looks like it's all OK and in balance as the patient has zero balance, so no more bills, and the credit adjustment stops the need to look for payment or for a deposit," he says. "This same person may be the office manager, who also prepares the deposit and takes it to the bank, minus some for themselves."

In other cases, items are charged to the facility but diverted for personal use, he says. This "can happen more in a larger practice where an item is coded as an approved expense for one of the doc partners, so others do not question," Mayo says.

You must have internal controls within your organization, Trenk agrees. There must be segregation of responsibilities among your staff, he says. For example, "the person who orders an item isn't the person who receives it," Trenk says.

In other cases, when the facility managers get "too cozy" with supply representatives, they have allowed reps to count the inventory for the facility, or they haven't checked the consignment bill against the actual use records, Mayo says. "There have been cases where supply reps have charged for consignment items not actually used," he says.

You don't want a rep counting your inventory, Trenk agrees. "That is a matter of restricting access," he says. "It's a no-no. You're asking for trouble if you let sales reps do the inventory for you." They will disregard par levels and inventory controls, and they propose that you purchase items, he says. "I've heard horror stories," he says. "They say, `You need one more. There's nothing on the shelf.'"

Another system of checks and balances is needed for medications, Trenk advises. There should be multiple sign-offs before medication can be dispensed, even through an automated dispensing process, he says.

From a financial standpoint, monitor your costs for any blips or exaggerations in your supply cost expense on monthly basis, Trenk advises.

"One of the failsafes or internal controls you have: Ensure there aren't major discrepancies over a period of time," he advises. "Especially if you have the ability to identify and isolate your costs per case, you should be able to put up some kind of microscope as to what your costs are," Trenk says.

Identify and understand your inventory levels and any inequities in cost over time, he says. "Understand your cost structure," Trenk adds.

Monitor for missing equipment.

To avoid theft, look for sudden changes in your supply item usage, Mayo advises.

"If your supply usage is going up while your case volume is staying the same or is going down due to fewer cases, then you may want to watch out for unauthorized use or theft," he says. "You may also notice a change in use pattern for certain specialty areas like ortho supplies going up or other supply orders going up if your materials manager is in on the deal. They may order more, but the item not showing up in case use and still missing from inventory may equal theft."

Limit access to certain areas of inventory and equipment, Trenk advises.

Monitor your employees.

Consider installing security cameras, Trenk advises. "That's a strong deterrence for employees dealing with equipment and services," he says.

Watch these employees

Be alert for those employees who work odd hours on weekends or are consistently the last persons to leave at the end of the day, Trenk says.

Additionally, be alert to any major changes in employee's lifestyle, in terms of purchases, he says. While acknowledging that you don't know the income of an employee's spouse, be alert to situations such as someone who makes $50,000 a year driving a Hummer, Trenk says. "Those are things that don't agree with one another," he says. "Be mindful."

An internal controls program, with periodic audits, is essential, Trenk says. "Most likely, the audits should be done by independent, objective third party," he says.

References

  1. Ryan J. Nurse admits stealing $300K in supplies from Paterson hospital. The Star-Ledger. April 27, 2010. Accessed at www.nj.com/news/index.ssf/2010/04/nurse_admits_stealing_300000_i.html.
  2. United States Attorney, District of New Jersey. Nurse Pleads Guilty to Stealing Medical Equipment from Passaic County Hospital and Selling It on the Internet. April 27, 2010. Accessed at www.justice.gov/usao/nj/press/press/files/pdffiles/DeVarso,%20Angela%20Plea%20PR.pdf.

Large pill theft shows challenge of securing drugs

Drug theft is a vexing problem for any health care provider, but a health system in Texas is finding that the thefts can be on such a scale that federal investigators become interested and the community starts asking how the provider could have let the thefts continue for so long.

The Texas State Board of Pharmacy reacted forcefully to the theft of 370,000 pills from The Parkland Health and Hospital System of Texas, in Dallas, by what hospital officials and police say was a coordinated team of health system employees and criminals who sold the tranquilizers and painkillers on the street. In May, it levied $20,000 in penalties against Parkland for failing to prevent the massive narcotics theft, among the largest fine ever imposed for pharmacy wrongdoing in Texas, according to a statement released by the board of pharmacy.

The hospital system's troubles may not be over, however. Ron Anderson, MD, Parkland's president and chief executive, issued a statement saying the hospital system is cooperating with the federal Drug Enforcement Agency (DEA) and Justice Department prosecutors as they investigate the narcotics loss. Parkland discovered the problem in 2007 and it alerted regulators and fired some employees, including a supervising pharmacist who the health system says alerted subordinates to the Parkland investigation, the DEA reports.

The dismissed head pharmacist was identified by the health system and police records as Ronald Woody. A police affidavit indicates he told investigators "he had warned the pharmacy technicians of the ongoing theft investigation and that they needed to watch their backs, because they were all suspects," according to The Dallas Morning News.

Parkland self-reported the incident and asked the appropriate agencies to investigate, says Candace White, spokeswoman for the hospital. The hospital also sent a detailed letter to the State Board of Pharmacy explaining what hospital officials knew of the thefts and what actions had been taken in response. In the letter, the hospital says that "despite its commitment to improving the health and wellness of a culturally diverse community with a growing indigent population, Parkland was the victim of five employees, some of whom operated as a coordinated criminal ring, who abused their positions of trust within Parkland."

The hospital confirms that during 2007, five Parkland employees and two outsiders stole 500-count bottles of hydrocodone 10/650 mg, hydrocodone 5/500 mg, diazepam, alprazolam, and lorazepam. The drugs cost the hospital $13,247.59. Their street value was about $1 million, according to federal estimates.

Most troubling are reports that the drug thefts went on for nine months to a year before being discovered, says Julie Malida, SSA, MAAA, principal for health care fraud at The SAS Institute, a software company with a consulting group that addresses fraud and financial crimes, based in Cary, NC. "With the appropriate inventory tracking and the appropriate data analytics applied against that inventory management, there should never be a nine-month or 12-month period of loss before missing prescriptions are noticed," Malida says. "Inventory management should require multiple sign-offs before scripts can be dispensed, even if it is an automated dispensing process. Data analytics can examine prior patterns of dispensing and apply sophisticated modeling, rules, and linkages, to determine what spikes may constitute an outlier. This would enable the hospital and/or pharmacy to stop the bleeding before nine to 12 months of losses occur."

Such an extensive theft ring should not go unnoticed for months if the provider uses a tracking system that records drug inventory and all drug transactions, scanning on a regular basis for variances, Malida says. The data must be reconciled at the end of the day or the end of the week, and then analytics utilized to look for patterns of commonalities among any variances, she says.

"The advanced analytics will look for patterns and outliers that will reveal your problem much sooner than letting a year go by and realizing that 60% of your Valium and 10% of your hydrocodone is missing," she says. "You would never have to wait an entire year to discover those aberrations."

Data analytics also would help you spot collusion among employees, such as was reported at Parkland. Malida points out that data analytics software will flag details that might be overlooked by investigators, such as the same people being involved in some or all of the thefts, or a pattern such as every 10th pill being stolen, or the same person signing for all the missing prescriptions.

"The first line of defense is having appropriate tracking and reporting processes in place," she says. "The second step is that, whether you use advanced analytics or not, someone has to be looking at the data on a regular basis. You can have a great inventory control system and security measures in place, but if you don't look at the data regularly and often, and deeply enough, you won't know if those measures are working."

Sources

For more information on preventing drug theft in health care facilities, contact:

  • Julie Malida, SSA, MAAA, Principal for Health Care Fraud, The SAS Institute, Cary, NC. Phone: (312) 819-6800, Ext. 8809. E-mail: julie.malida@sas.com.
  • Candace White, Media Supervisor, Parkland Hospital, Dallas. Phone: (214) 590-8054. E-mail: candace.white@parknet.phm.org.

Hospital details drug thefts

The theft ring at Parkland Hospital in Dallas was discovered and self-reported to all appropriate agencies by Parkland's director of pharmacy services, Vivian Johnson, according to a letter the hospital sent to the State Board of Pharmacy.

In that letter obtained by AHC Media, publisher of Same-Day Surgery, the hospital explains that once Johnson discovered the thefts, Parkland conducted its own investigation and spent about $1.3 million in system upgrades, additional security measures, and an independent review by Ernst & Young.

The Parkland Police Department's investigation at the Parkland Prescription Center led to the arrest and indictment of Sharron Benson, a pharmacy technician, who confessed to the diversions at the prescription center, according to the hospital's letter. Benson has been indicted and is awaiting trial. The police investigation at the Parkland Community Oriented Primary Care Southeast Pharmacy led to the arrest and indictment of several Parkland pharmacy technicians, a drug dealer, and the husband of one of the technicians, according to the letter. "These individuals were involved in a conspiracy to steal controlled substances from Southeast [Pharmacy] and sell them on the street," the hospital's letter says.

The pharmacist in charge of the prescription centers was fired for alerting the pharmacy technicians that they were being investigated, the hospital reports. That pharmacist was one of the people arrested.

Parkland tells the State Board of Pharmacy that the losses were not the result of a failure to properly oversee the pharmacies. At the time of the loss, the sites of the theft had cameras, locked controlled substance cabinets, card access for cabinets and entrances, and comprehensive policies and procedures that conformed with federal and state law, the letter says. "Some criminally intentioned individuals simply decided to steal," the letter explains.

Parkland emphasizes in the letter that it had discovered the drug theft on its own, conducted an investigation, and terminated five employees. The hospital already has spent more than $1 million to prevent a recurrence of the drug theft, and it has implemented a significant loss prevention program that included the hiring of a drug diversion officer.