Scary But True...

Credible studies show an alarming percentage of North American dentists are victims of fraud and embezzlement with the average loss per fraud case is approx $100,000. The ADA 2005 study reported a 52% fraud rate with US dentists prior to the recession, this figure is expected to rise as employee’s deal with challenging personal financial problems due to the economy. Dumolin and Associates survey found that 60% of surveyed dentists had been a victim of fraud. Dr. Gord Christensen states in his lectures that 90% of all dentists will be embezzled at some point in their career.

Dental fraud falls into two basic categories: One is “theft” from the dentist directly. Receiving of cash payments and pocketing the money, a staff member manipulating payroll or “family account” dumping. The second category is “theft” from an insurance company in the name of the dentist. Insurance fraud occurs via up-coding of procedures, down-coding accounts, unlogged insurance claims and overpayment of primary and secondary insurance companies.

I am asked regularly, why Dentistry? Generally speaking, to their own admission, dentists are “poorly trained business owners”. This admission coupled with the overwhelming demand of the dentist to be the key revenue producer carrying a full schedule of patients often leaves little time or energy to pay attention to the financial metrics and accounting controls. Delegation happens and can occur in 2 ways that cause openness to embezzlement. One mode of delegation is a “do it all myself” mentality and causes “Under- delegation”. They feel they must do everything alone while they juggle a team, daily operations, patient standard of care, facility, equipment, new materials, techniques and technology production, collections, payables, payroll. There are over 20 financial systems that drive the practice and it is impossible for the dentist/owner to fit it all in by themselves without the administrative team supporting them.

Conversely, an overwhelmed dentist may commit “Over-delegation”. This is the when they transfer ALL accounting controls, patient and insurance information access, and bank control into the hands of one person without monitoring and reporting. This creates the environment of over control and power for the employee who may become tempted, desperate or dishonest and their knowledge can be a means to build a gateway to embezzle or de fraud.

So…. What do you do? The answer to overcoming fraud can be simply stated in three areas. Firstly, be aware of behavior trends of an embezzler, Secondly, prepare with proper multi step hiring process’s. Thirdly, prevention via daily attention, controlled authority and systematic access.

The awareness of patterns of behaviors of a fraudulent employees are a challenge to detect as they mimic a dedicated, hard working ideal employee. They tend to spend time alone in the practice with arriving early in the morning, working lunch hours alone and staying late. They rarely, if ever take vacation as they are afraid things will come up while they are away that may cause a red flag. They tend to be extremely territorial about their role in the finances of the practice offering to take on as many aspects as allowed. They are unreasonably resistant to change with it comes to updating or replacing the practice management software, involvement of an outside consultant, other when their role may change to allow other team members to deal with the finances.

The proper preparation lies within the time and attention to the interviewing and hiring process, it involves many steps to avoid hiring a desperate or dishonest person. Steps include doing a background check on anyone who will be handling money, banking or collections. Calling the their previous employer as a reference and asking about their success with money management and character traits. Learn as much as possible about the candidates personal finances while honoring the laws of interviewing practices to understand their financial support systems if any.

The prevention of fraud involves the following steps:

• Understand how to run reports from the dental software
• Make use of the authority levels within the dental software.
• Write offs are posted and tracked individually as opposed to one large amount. i.e. senior courtesy, family discount, PPO reduction etc..
• Have each clinical person sign off on their own daily posting of codes and procedures
• Review the practice daily record of transactions each day.
• Secure the point of sales terminals for debit and credit.
• Insist on record of daily bank deposits
• Review the accounts receivable list and note credits or write off’s of owed amounts.
• Print a monthly transactional report that shows all changes made to your data with additions and deletions
• Make sure if a office manager is managing money, dual signatures are required for outgoing payables and checks drawn on the bank account.

If a dentist suspects fraud and isn’t sure what to do, they need to obtain professional help. There is a dental fraud company who advises dentists named prosperident and they can be contacted at WWW.prosperident.com to obtain a first responder checklist.

They begin with the first they will conduct a silent probe that is completed remotely without any employee knowledge. If the fraud is found they will help the dentist with lockdown and recovery. If there is NOT fraud , the staff won’t know their integrity was questioned and all move forward in the practice operations with prevention systems.