Doctors who abuse substances are 50 to 100 times more likely to commit workplace fraud: UBC study

In the U.S., fraud costs companies and their investors an estimated $1 trillion a year, and new research from the UBC Sauder School of Business finds addiction could be part of the problem.

Anyone who follows the news knows workplace fraud takes many forms, from low-level thieves who tuck goods into their bags to high-rolling executives who bilk investors out of millions.

But a new study from UBC Sauder shows that substance abuse can exponentially increase the chance that employees will commit fraud.

For the study, titled Substance Abuse and Workplace Fraud: Evidence from Physicians, researchers examined data from state medical boards, including malpractice lawsuit settlements and violations of professional standards. Infractions included everything from narcotics and alcohol abuse to tax evasion and insurance fraud.

The study authors then examined whether employee substance abuse increased the likelihood that the physicians would commit fraud. What they found was staggering: the doctors who abused substances were 50 to 100 times more likely to commit workplace fraud.

“We think of doctors very highly, as we should, because they go through a lot of training, they have to be ethical, and they have to take a vow before they practice,” says study co-author and UBC Sauder Assistant Professor Dr. Xin Zheng. “But in a few instances, we even saw doctors who stole from their own patients when they were unconscious to support their expensive drug habits. It was shocking.”

In other instances, doctors were found to be stealing narcotics from the facilities where they worked and then either using them or reselling them; others were caught overbilling health insurance companies.

However, Dr. Zheng emphasizes that the rate of fraud among doctors is very low: less than one per cent.

There are several key reasons why substance users are more likely to commit fraud, explains Dr. Zheng: they need to steal to support their habit; they tend to have poor impulse control; and substance abuse leads to “delay discounting” — that is, people put a far higher value on an immediate reward, even if it means jeopardizing a future cash flow stream like a salary. (Earlier research shows that among heroin addicts, this discount rate is eight times higher than for non-addicts).

“Even though doctors make a lot of money, when they abuse drugs or alcohol, it becomes very expensive, so they have a lot of motivation. And when they are abusing drugs, they are discounting their actions, and they are more likely to do things impulsively,” says Dr. Zheng.

But it isn’t all bad news. The study found that after physicians overcame their substance abuse, the likelihood they would commit fraud dropped back down to the level of those with no history of addiction.

“When physicians had substance abuse issues two or three years before, but then had one or two clean years — either because they go to rehab or they quit on their own — they are no more likely to commit fraud then normal people,” says Dr. Zheng. “So, rehab or getting clean does help.”

The authors did find, however, that a history of malpractice lawsuits or unprofessional conduct was correlated with a higher likelihood of fraud.

Published in the Journal of Business Ethics, the study is among the first to show a direct link between substance abuse and the likelihood of fraud, which is estimated to cost companies and investors $1 trillion a year. Dr. Zheng says he wasn’t surprised to find that substance abuse would increase the chances of fraud, but he was shocked by the magnitude of the effect.

As a result of the findings, Dr. Zheng believes there should be more regulatory oversight of doctors to root out substance abuse and workplace fraud. At the same time, he believes employers should be open to hiring doctors who have a history of substance abuse, since the likelihood that they will commit fraud is on par with those who have no history of substance abuse.

He also thinks companies should introduce or improve employee assistance programs, so if employees have substance abuse problems they can get the help they need.

“Employers can bring in specific programs to help their employees overcome these hurdles, because they can be helped, and they can definitely improve their behaviour,” says Dr. Zheng. “And in the long run, it's less costly for businesses and for our society.”