How to Detect Embezzlement in Your Dental Practice

Ali Oromchian, JD, LLM
0 Shares

In our current landscape, dentists can be all too trusting when it comes to their team members and just about anyone they come into contact with. However, dentists should be warned that they too can be victimized by what they consider a “trusted team member.”

Dentists rarely have the chance to learn the business side of dentistry. So when they become first-time practice owners, they have to trust their instincts and learn the management side of the business on their own.

As a dental attorney at Dental and Medical Counsel PC, I invited dental embezzlement expert and Prosperident chief executive officer David Harris into the conversation to give us his insights into the mind of the embezzler and what dentists can do to prevent fraud from occurring in their practice.

Q: How did you become involved with this industry?

A: I got into the investigation of embezzlement committed against dentists totally by accident. In 1989, I got a call from a friend from high school who was now a dentist. He called to say that he was suspicious about his receptionist and asked if I could take a look at the practice’s books. I had recently quit my job and was a bit bored, so I readily agreed. I quickly found the embezzlement she was doing. I helped the doctor fire this staff member and then pretty much forgot about it. I certainly didn’t see a business opportunity for myself.

Then two weeks later, lightning struck. I was going to see my own dentist for a scheduled appointment. I had my hand on the outside door of his practice when I looked inside. Imagine the jolt I got when I saw that the person sitting ay my dentist’s front desk was the same woman who I had helped fire at the other office two weeks earlier.

I called my dentist (identifying myself by using the name of a local orthodontist), and when I got my doctor on the phone I filled him in on the employment history of his receptionist. He hired me to take a look at his practice, and by the time I finished that, the phone had rung a couple of times with other dentists seeking to have me look at their practices.

As I look back at the events from 30 years ago that brought me into this profession, I realize how much has changed. The investigations of manual “pegboard” accounting systems have evolved into looking at practice management software. The ability to move data electronically has allowed us to work remotely instead of having to be on site. Prosperident’s team now consists of more than 20 highly trained people, which is a good thing because the embezzlement schemes we see today are far more sophisticated than what I saw back then.

Q: What should doctors look out for when they’re hiring a team member?

A: As a group, dentists tend to believe what job applicants tell them. This isn’t always warranted. Sixty million Americans have criminal records (this is one in four adults), and studies suggest that more than 50% of resumes have some amount of embellishment or falsehood. Applicants with tainted pasts will go to great lengths to hide their “baggage,” including providing forged reference letters and providing incorrect phone numbers so that a friend or relative can impersonate a former employer.

Q: Do you have any advice for doctors just starting out?

A: Definitely. Understand the difference between delegation and abdication. It is necessary to delegate certain tasks to others in order for a dentist to function. Doctors all understand that clinical delegation does not absolve them from ultimate responsibility and the need to supervise delegated performance.

However, in the area of practice administration, many want to delegate without comparable accountability. Certain front-desk functions need to be monitored by the doctor, a spouse, or an outside party like an accountant or bookkeeper. Ignoring this step has proven perilous for many dentists.

Q: What are some steps doctors can take to prevent embezzlement?

A: There is a lot I can say here, but let me hit on a few key concepts. First, I do not believe that the concept of “preventing” really applies to embezzlement. When someone who works for you decides that stealing from you is appropriate, it will happen. The controllable is for how long it goes undetected. So the things I outline here are really designed to increase the probability of detection.

First, many dentists have a startling lack of familiarity with their practice management software. That software is as important to your practice’s financial well-being as your handpiece or imaging equipment. Some basic knowledge goes a long way to protecting you. At a minimum, you should be able to enter fees or a payment for a patient and print reports (and know which reports are available and relevant to you).

Armed with that knowledge, one of the best protective steps you can do is to print the reports you review yourself. If you allow a staff member to do this, you open the door to “selective reporting” where you are unwittingly looking at an incomplete picture of your practice’s activities.

Second, have anyone who sends you paper statements send them to your home instead of the practice. For electronic statements, have them sent to a private email address of your own instead of to your office manager. This ensures that you see this information before staff members do and creates some uncertainty about what you do with this information.

Every month, you need to reconcile your practice management software against:

  • Your bank account
  • Your “merchant account”
  • Any patient financing service that you use

These reconciliations need to be done by you, your spouse, or an outside party like a bookkeeper. They should not be done by a staff member.

One more item: assuming that your practice has an alarm system, ask the monitoring company to email you the log from the system on a monthly basis. Many embezzlers like some “alone time” to do their dirty work, and a quick review of the alarm log will reveal if a staff member is visiting at odd times.

Q: What should a doctor do if he or she suspects a team member of embezzling?

A: The biggest thing not to do is to let the person you suspect know that he or she is under suspicion. If someone has been stealing and thinks they are about to get caught, they may do something really desperate. See an example of what this can mean here: prosperident.com/assistants-life-sentence-reduced-to-40-years-in-killing-of-glen-burnie-dentist/.

There are two other things that dentists think should be done immediately: call the police, and notify your insurance company. Both of these steps will be taken later, but doing them on discovery is premature.

Embezzlement is a highly technical crime and beyond the ability of police to properly investigate. They need someone with dental knowledge and the ability to look inside practice management software to determine what happened before they can charge someone with a crime. In the case of your insurance company, there is no point in opening a claim until you have full knowledge of what happened.

If a doctor suspects embezzlement, they need expert assistance quickly. They should also avoid the temptation to treat someone who knows slightly more than the doctor as an “expert.” Your attorney, your CPA, and the trainer for your practice management software may all have a role to play, but it is unlikely that, for this purpose, they are experts.

Q: How often are dentists targeted for embezzlement?

A: The credible studies suggest that the lifetime probability is between 60% and 70%. The true probability is higher. We just don’t know by how much. This is because some embezzlement never gets detected, and a further amount is found out by the doctor but never reported. We simply have no way to quantify the impact of these phenomena on probability.

Q: What motivates the embezzlers?

A: Some embezzlers are pushed by financial necessity. Something in their lives is draining household finances. They could be going through a divorce or have an addiction or gambling issue. This cohort is stealing because they are in danger of not being able to provide necessities for their families.

The second group steal for a totally different reason. They feel like the value of their contribution to the financial success of their practice is much higher than what they receive in salary. These people believe that they are “entitled” to higher compensation and steal what they believe they deserve.

This group tends to spend stolen money on luxury items that they could not afford using their salary alone.

Q: How might specialists be affected differently than GPs?

A: In certain specialties, different business models mean that different methodologies are employed by embezzlers. For example, orthodontic offices have theft patterns that are unlike those used in general practices. Also, there are pattern differences between “continuing care” practices like general dental and pediatric practices, and practices where patients receive treatment for a limited time like oral surgery or endodontic practices.

Having said that, the probabilities and behavioral characteristics of embezzlers are very similar across all branches of dentistry. Prosperident does have specialized departments to deal with certain specialties.

Q: Are dentists more prevalent to fraud and embezzlement than other similar professions?

A: We confine ourselves to investigating embezzlement in dentistry, so I have no first-hand experience in other professions. The Association of Certified Fraud Examiners states that healthcare practices are the third most victimized economic activity, behind government and charities.

Q: Is it possible to recoup the funds that were stolen?

A: Almost everyone gets some money back, and a minority make full recovery. Most practices have some amount of insurance coverage for embezzlement, which is the first source of recovery. Beyond that, recovery depends on whether the embezzler has assets that can be attached (many do not) or whether there is a third party like a bank that may have some responsibility.

Q: Do thieves normally use multiple means to steal, or just one?

A: Almost all embezzlers use multiple methodologies. The norm is three different methods. Also, methodologies often evolve over time as the embezzler gets better at their “craft” or in adaptation to changes in the pattern of the practice owner.

Q: What are the red flags that someone is embezzling?

A: I mentioned previously that working alone in the practice is a symptom. Territoriality (about job duties or even their workspace or computer) is common among embezzlers, as is resistance to change. They certainly do not welcome involvement from outside advisors like a consultant or software trainer. They may have financial issues or appear to be living beyond what their income would suggest.

Q: Do embezzlers ever work together?

A: It isn’t common, but we do see “collusive fraud.” When collusion does take place, it is normally between people who have a connection with each other that extends beyond the workplace. Usually they are relatives of each other or close friends.

Conclusion

Thank you, David, for sharing your insights and for informing us on the perils to being victimized. In the end, it is encouraged to safeguard your practice by understanding your software and putting the right processes in place. There is too much to lose, so it is best to safe rather than sorry.

Mr. Harris is the chief executive officer of Prosperident, the world’s largest firm investigating financial crimes committed against dentists. He is a licensed private investigator and a CPA. He also is dual certified in fraud investigation. He is an international lecturer as well. He can be reached at david@dentalembezzlement.com or (888) 398-2327.

Mr. Oromchian, JD, LLM, is one of the nation’s leading dental lawyers on topics relevant to dentists. He is the founder of Dental and Medical Counsel PC, which is regarded as one of the preeminent dental law firms devoted to dental entrepreneurs. He is also recognized as an exceptional speaker and educator. Additionally, he is the author of The Strategic Dentist, which serves as a guide to dentists looking to purchase or start their own practice. He can be reached at ao@dmcounsel.com.

Related Articles

How Lawsuits Can Damage Your Dental Practice

How to Handle Contractural Disputes in Your Dental Office

What to Do If You’re Facing a Wrongful Termination Lawsuit