Devious Diversions

Medical Providers Illegally Take Control over Controlled Substances

By By Michael S. Klueh, FHFMA, CPA, CMA, CIA, CFM, CFSA;;Sandra Mehling, RN; and Craig R. Ehlen, DBA, CFE, CPA


“You have the right to remain silent. You have the right to an attorney…” are words commonly heard during drug busts on the streets. The unfortunate reality is that with growing frequency these scenarios are playing out in the healthcare arena when unscrupulous medical providers divert narcotics from hospital inventories, so they can resell them for profit or personally abuse them.

Drug diversion fraud potentially involves three distinct parties: the fraudster, the hospital, and the patient. The theft may occur from numerous points in the production stream, including pharmacy stockrooms, nursing stations, or surgical areas (the operating suites, recovery rooms, and anesthesia areas).

The basic cornerstone of our healthcare system is trust – the patient’s and the hospital’s trust that the hired medical provider will always act in a prudent manner that is in the best interest of the patient. What makes drug diversions so heinous is the immediate and potentially life-threatening impact of a drug diverted from the intended patient. If the drug diversion worsens the patient’s condition, irreparable injuries or death may occur. Problems also can arise if the healthcare provider consumes the drug while charged with the direct or indirect care of patients. The theft is often more than just an asset misappropriation.

The fraudster faces possible loss of both employment and medical license in addition to potential civil and criminal penalties. Drug diversions also endanger the hospital by placing its credentialing at risk. It creates the possibility of fraudulent billings to Medicare for drugs never administered. Such fraudulent billings could expose the hospital to severe sanctions, such as being barred from participating in governmental programs either indefinitely or for a period of time. In addition, Medicare may hold hospital management personally liable for the fraudulent billings.

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