Parts 1 and 2 of our embezzlement series discussed who embezzles and why. It also revealed the embezzled owner’s core problem: a lack of appropriate oversight. In this third and final part, we will provide essential tips on developing embezzle-resistant offices through effective revenue cycle management.

Can You Prevent Embezzlement?

In Healers versus Stealers: How to Outsmart the Thief in Your Dental Practice (2023), David Harris, CEO of Prosperident, a dental embezzlement investigation company, says embezzlement is a premeditated crime, not a crime of opportunity. That is, embezzlers don’t decide to steal impulsively; they look for ways to commit the fraud they have determined to commit. Thinking about embezzlement as deliberate frees owners from spending extraneous time on prevention strategies and more time on functional oversight of their companies.

Embezzlement-Resistant Offices: Hiring Practices Overhaul

Designing an embezzlement-resistant office starts with clearly understanding that some embezzlers have planned to steal from you even before you hire them. Harris calls this subset “zero-resistance employees.” These employees look for oversight breaches to green-light their intended theft. The best way to avoid these embezzlers is to pre-screen applicants through a rigorous hiring process (Harris, 2023). To evaluate your current employees, Harris suggests that owners look for ethical lapses on the job or for high-risk behaviors off the job. Gambling, alcohol or drug use, unstable personal lives, or frequent moving can signal problems that may make embezzlement attractive to some (Harris, 2023).

Suppose you have previously exercised little (or no) oversight in hiring. In that case, Harris (2023) suggests that, in addition to considering whether the potential hire is competent and fits in with the office’s culture, you consider a fundamental question: Is everything the applicant is telling me really the truth? Dentists often hate hiring and are lax in following a thorough hiring process. Repeat embezzlers take advantage of this laxity as an invitation to present themselves as just what the frazzled dentist needs. Harris (2023) suggests the following tips:

• Think of hiring as a part of owning a business: Remember you are a dentist and a business owner. Hiring is part of business, and the new employee will influence the course of the practice. Take the time to hire carefully.
• Enter the hiring process with an investigator mindset: Savvy owners try to uncover what the applicant doesn’t want to divulge. A recent survey reported by CNBC.com (2022) found that over 55% of respondents admitted to lying on their resume at least once. Common resume lies include falsehoods about skills, previous work experience, degrees, personal details, salary, and employee references.
• Don’t trust your perceptions: 1 in 4 adults have a criminal record. You probably think you don’t even know someone with a criminal record or that you are a good judge of character. Harris (2023) admits that not all criminal records are instant barriers to hiring. Still, owners should take the time to uncover an applicant’s record and determine if the offense has unwanted implications for the safety of the other employees, patients, and office assets. Trusting your impression of an applicant is a sure-fire way to get deceived.
• Become a proactive employer: Don’t toss the unsolicited resumes in the trash if you are not actively hiring. Take time to evaluate the resumes and file the ones that seem a good fit for your office. You may need to add to your current employee pool and will have the opportunity to reach out to someone who may be willing to come and work with your team.
• Look for hires with good people skills: Most dentists want a quick learning curve for the new hire, so experience in a dental setting gives a candidate the edge. Harris (2023) suggests that offices hiring for public-facing roles may find excellent candidates in other industries. Computer software skills are probably trainable compared to trying to teach someone to be customer service-minded.
• Do proper employment checks: A background check for all potential employees is a must, says Harris (2023); however, how that is accomplished varies by state. To avoid HR violations, check with an employment attorney or an HR specialist to determine the appropriate guidelines for your state. A credit check is advised if the employee will work with any portion of the revenue cycle. Consult an HR advisor or employment attorney to learn more about how credit checking is handled in your state. Low credit ratings should not necessarily disqualify an employee if the circumstances are understandable; however, owners can arm themselves with information and use discernment to determine if they will proceed with hiring.
• Scrutinize and call references: The study reported by CNBC.com (2022) identified 21% of people falsifying references. This may take the form of providing phone numbers of friends or relatives who give glowing recommendations or pretending the former employer cannot provide references because they are not in business or deceased, says Harris (2023). Instead of using the provided numbers to speak with former employers, Harris (2023) suggests looking up the number for the business and calling. This strategy will end-run any deception for checking references.
• Verify credentials. The study reported by CNBC.com (2022) found that 41% of applicants lied about their college degrees or equivalent. It may be cumbersome, but owners should verify the applicant’s degrees, licenses, and permits. It is important to remember that, should the employee perform procedures outside their scope of licensure, it could cause problems for the owner.
• Look for inaccuracies: Attention to detail is the crown jewel in most offices. The resume is an applicant’s first point of contact, so most people want to make a good impression. Resumes with jarring grammar or misspelled words signal the applicant is not attentive to details even when trying to put their best foot forward.
• Scan social networking sites: Social sites are great for identifying a candidate’s interests, lifestyle, and behavior outside of the interview.

 

 Oversight

 

Daily Oversight

Once hiring processes are in order, owners can reconfigure their office oversight procedures. We recommend starting your oversight makeover by dictating the treatment to the assistant for entry into the practice management software while still in the operatory. Hygienists can also employ the same data entry method for their treatment. This is the most accurate way to ensure the patient’s file records the correct treatment for that visit. At the end of the day, Harris (2023) recommends that providers print their own day sheets to verify the treatment entry. Once providers approve the data, the owner should review the day sheet report, initial it, and store it securely. This first step prevents an embezzler from only reporting a “clean” subset of transactions.

 

Next, scan the day sheet to ensure each patient has a fee charged for the visit unless it is for no-charge visits, such as surgery follow-ups. Be sure to review any fee adjustments. Harris (2023) warns that substituting an adjustment code for a payment code is a common theft-concealment tactic. Harris (2023, p. 138, Kindle edition) says, “Whatever the cause of the adjustment, it represents money out of your pocket, and for that reason, it requires scrutiny comparable to if you were writing a check for the same amount.”

 

Monthly Oversight

At the end of the month, dentists should print a monthly summary report from their practice management software and compare it to the sum of the day sheets. Whalen can provide a simple spreadsheet for owners should they need extra help. The sum of the individual day sheets should exactly match the month-end report. After verifying the month’s totals, owners should compare these to the bank statements. Whalen has developed standard operating procedures for dental practices to help you complete your monthly oversight duties. If you’d like to learn more about implementation and how oversight can help you, click here for your free copy.

 

If You Think You Have Been Embezzled

If you believe you are a victim of embezzlement, it is crucial to remain calm. Harris (2023) offers these suggestions for appropriate action:

Summary

Embezzlement in dental offices is rampant. Besides the monetary toll on the practice, owners and staff members must deal with feelings of betrayal and grapple with extending trust to new team members. While owners cannot prevent embezzlement from happening, developing and utilizing oversight strategies can speed up the detection of the crime and help the office move forward successfully.

 

 Resources

Harris, D. (2023). Healers versus stealers: How to outsmart the thief in your dental practice. Tellwell Talent. Kindle Edition.

Schiff, M. & Martin, M. (2022, December 20). Over 55% of people admit to lying on their resume at least once-here are the 8 most common lies. CNBC.com. Over half of Americans admit to lying on their resume (cnbc.com)

In the first part of our embezzlement series, we discussed the who, what, and why of embezzlement. This second part will focus on lowering your chances of becoming an embezzlement victim.

The Perfect Target

David Harris, CEO of Prosperident, a company of experts investigating dental embezzlement, believes that no one can prevent the crime but that dentists are often easy targets because of their single-minded focus on producing dentistry, with little concern over the practice’s revenue cycle (D. Harris, personal communication, May 23, 2024). Harris says that the embezzler enters the practice looking for the strength of the owner’s oversight. Specific owner characteristics embolden the embezzler to act:

• Is the owner comfortable with viewing pre-printed day sheets?
• Who enters treatment?
• Does the doctor track the top-line revenue?
• Does the accountant receive pre-printed day sheets and other reports?
• Does the doctor have account access to third-party payers, vendors, etc?
• Does the office staff have too much control?
• Does the doctor allow office staff uninterrupted access to all parts or consecutive parts of the revenue cycle?
• Are doctors tracking month-end revenue numbers?

Owners who exhibit a lackadaisical attitude about the business of dentistry are prime targets for embezzlers because they fit the embezzler’s profile for a successful scam.

How do they do it?

According to Harris, embezzlement is a crime of adjustment, not cash theft, in our technologically dependent environment. Doctors seldom do more than glance at a manager-printed day sheet. Inattention to the account adjustments leaves owners vulnerable to continuously losing revenue. Since the average embezzlement is detected after two years of theft, doctors can lose a significant chunk of their assets before discovering the scheme. Additionally, Harris cites that accountants often only receive documents produced and delivered by the office staff, which allows the falsification to go undetected.

Delegation vs. Abdication

Fraud prevention plans start with a commitment by practice owners to manage their practices. Too often, owners divest control to the office manager so they do not have to wade into tiresome financial details. Preferring to practice clinical skills, many dentists unwittingly open the door to embezzlement because they abdicate their responsibilities under the guise of delegation (Prosperident, 2020). Dentists are unprepared in their business, management, and oversight training. They often rejoice when a competent office manager arrives and condones the hands-off management style. However, few office managers have formal training either. This creates a “perfect storm” scenario for would-be embezzlers. A dentist with no desire to exercise accountability and who extends trust to them allows embezzlers to thrive. Harris (2023) has this to say about practice ownership:

“If you want to own a dental practice and enjoy the numerous financial and lifestyle advantages of practice ownership, you must concurrently accept the responsibilities of being an owner. And one of the biggest responsibilities is oversight (p.134).”

Prosperident (2020) offers these helpful insights on owner accountability:

• Accountability is not abstract but actionable: Owners should design office operations around a culture infused with trust and verification.
• Accountability requires knowledge and time investment: Prosperident (2020) quips, “Administration is not a cruel joke that the world has played on the dental profession; it is a vital link in the chain between the treatment of patients and your financial well-being.”
• Accountability means operational decisions rest with you: In some cases, office managers begin to feel ownership of the office, often acting as a surrogate who knows what the owner wants. Lack of oversight allows those managers greedy for illicit gain to foil any initiatives owners pursue. Dental offices thrive in the team mentality, but remember who owns the team!
• Accountability thrives in an oversight environment: Owners must set up policies and stick to them. Set up job expectations and make sure they are performed as prescribed. Cross-train other team members so that no one holds the keys to all information and access. Allow only legitimate and infrequent unsupervised work opportunities. Ask managers to print reports while you stand by for them instead of letting the employees do it within their own timeframe. Print reports yourself and study them carefully for any discrepancies.

Dentists who have never required accountability may fear that employees will feel discredited. When introducing accountability measures, owners must ensure that employees understand the intent of the new oversight policies and procedures. Assure the staff that these positive changes will facilitate best business practices and assist operations when employees transition out of the office. Let the team know that you better understand your owner’s duties, including proper oversight, and that you will intentionally protect the office’s future, which helps preserve their jobs. Listen to their concerns but remain firm that the new operational tactics will be enforced.

In our next blog post, we will look at some tips on making operational changes to your office protocols to assist you in exercising appropriate accountability planning and oversight.

 

References

Harris, D. (2023). Healers versus stealers: How to outsmart the thief in your dental practice. Tellwell Talent. Kindle Edition.

Prosperident. (2020, July 20). Delegation versus abdication. Delegation versus Abdication – Prosperident

Imagine this: Dr. Thompson had built a thriving dental practice over twenty years ago. He’d weathered staffing changes and insurance headaches. But nothing could have prepared him for the devastating discovery—a trusted employee had been embezzling for years. Unfortunately, this story isn’t unique. While staffing shortages and low reimbursements dominate headlines, a more insidious threat lurks within dental practices: embezzlement.

Most are unaware of its occurrence, and many deny it could happen to them. William Hiltz (2023) says dentistry is one of the most embezzled professions, citing that 60% of dentists have been embezzled sometime during their careers. Other experts offer sobering statistics, as well. A 2019 ADA Council on Dental Practice survey found that about 49% of respondents had been embezzled, a staggering 22% more than in years past. In Healers versus Stealers: How to Outsmart the Thief in Your Dental Practice, David Harris (2023), CEO of Prosperident, a team of dental embezzlement experts, states that 70% of dentists will eventually experience this crime of relationship.

The incidence of embezzlement is increasing over time. In our exclusive interview, Mr. Harris (D. Harris, personal communication, May 23, 2024) cited a 2007 ADA survey, which found that 35% of dentists had already experienced embezzlement. He noted that by 2019, that number had risen to 47%. Further, the COVID pandemic brought a sharp uptick in the number of calls Prosperident received from concerned doctors. Harris attributes this increase in call volume to the shutdowns forcing doctors to learn their practice management software to post payments or enter emergency treatment without the usual support staff.

What Embezzlement Is

Embezzlement is a subset of fraud. Harris explains that it is a scheme of stealing and concealing the theft. It is an intentional and repetitive theft often perpetrated by diverting incoming funds called “skimming.” However, some bad actors steal time and resources or tamper with payroll. Harris remarked that the front office staff target revenue; however, the back office embezzles gold from crowns, endo files, handpieces, and supplies, which they resale. Embezzlers commonly use more than one scheme at a time, and some are serial fraudsters who move from office to office to avoid detection. From his experience, Harris (2023) finds that embezzlers make off with 2%-4% of the practice’s collections through a series of ongoing small thefts. Before they are discovered, the average thief will swipe $109,000!

Why Embezzle?

In our interview, Harris revealed that, in his experience, embezzlement is a crime of greed or need. He notes that the proportion of those who steal for greed versus need is a function of the current economic conditions. Harris believes that in our post-COVID environment and current economic downturn, the ratio is shifting toward need as people experience growing financial insecurity.

 Who Embezzles?

Citing the ADA Council of Dental Practice survey, Harris (2023) notes that embezzlers are more likely to occupy administrative roles (71%) than clinical roles (29%). Administrative staff who embezzle often occupy supervisory positions (36%) or are administrative assistants, treatment coordinators, or financial coordinators (32%). Some embezzlers are doctors who steal from their partners (10%). The commonality among the embezzlers is that they enjoy and often adamantly pursue trusting relationships with their victims.

Harris (2023) says embezzlers use one or more rationalizations to acquit themselves of their consciences. From idealizing themselves as the engine in the practice’s success to believing themselves entitled to more, equivocating that other people embezzle, or insisting they did not take very much, embezzlers deny responsibility or injury to the owner and normalize their misdeeds.

It is common for the embezzler to position themselves in the practice as the owner’s go-to for keeping the practice running smoothly. Often, these employees are seemingly dedicated to the office, staff, and patients. They may be hard workers willing to go the extra mile or work after hours. They may shun vacations and reject the help of others to perform tasks. They are often well-liked by other employees and patients and are known to be givers. In most cases, these behaviors are performed by conscientious employees who are what they seem. Unfortunately, embezzlers sometimes model these characteristics to keep their true intentions from being revealed.

Myths and Red Flags

Many dentists mistakenly believe they will never be embezzled. They cite several reasons, which include the following (Harris, 2023):

• I live in a suburban area or a small town.
• I pay my staff well, so their compensation keeps them loyal to me.
• My staff members are good people, and we are all on the same team with the same goals.
• I check day sheets regularly so I know if there are discrepancies.
• We don’t have many cash transactions, so there is little to steal.
• My practice management software prevents embezzlement from happening.
• I would notice the revenue decreasing if I were being embezzled.
• My accountant would notice any fraudulent activity.
• I call references when employees are hired.
• I know what is going on in my office.

Sadly, these ideas mistakenly keep dentists from noticing red flags that signal they are paying someone to victimize them. Some red flags that dentists may see include the following (Hiltz, 2023):

• Bringing the Bling: Embezzlers might exemplify standards of living that are disproportionate to their income. Buying luxury cars and expensive jewelry, enjoying elaborate vacations, or splurging on concert tickets for multiple friends is unlikely on a dental office salary. Some embezzlers even use the stolen funds to generously pay for others’ debts or give excessive gifts.
• Debt, Divorce, or Down on Their Luck: Financial hardships are intense pressures. Employees getting frequent collection calls or complaining about their money woes or debt load can be tempted to help themselves to your money.
• Corner Cutters: Sometimes embezzlers use situational ethics when handling patient and insurance charges. Beware of employees who cut ethical corners and feel entitled to do so. Be sure you don’t cut corners, like taking cash without reporting it or falsifying personal expenses as office expenses.
• Job Control: Employees who frequently ask to come in early or stay late to catch up may have legitimate reasons for the requests; however, embezzlers need privacy to work their scams. Fraudsters often resist changes in office policies or practices, especially changing practice management software, accountants, bookkeeping software, insurance posting, and patient billing. They frequently balk at getting additional help, stating the helper may interfere with their system. They may be slow to respond to requests for documents relating to the financial side of the practice.

While it is difficult to embrace, you cannot fully protect yourself from becoming a fraud victim. However, there are operational controls that, when implemented, may alert would-be embezzlers that their schemes are not likely to go unnoticed. If you are curious about embezzlement statistics, click here.

 

References

American Dental Association. (2019). 2018 CDP survey on employee theft in the dental practice. Center for Dental Practice.

Harris, D. (2023). Healers versus stealers: How to outsmart the thief in your dental practice. Tellwell Talent. Kindle Edition.

Hiltz, W. (2023). It’s a fact. Dentistry is one of the most embezzled professions. The Profitable Dentist. It’s a FACT. Dentistry Is One of the Most Embezzled Professions – The Profitable Dentist