Embezzlement in dental practices is more common than you think
Employee embezzlement is a risk that many dentists underestimate.
Despite the trust and close-knit nature of dental teams, a surprising number of dentists will experience embezzlement at least once during their careers.
In fact, some statistics suggest that as many as three out of five dentists will be affected.
The impact is significant
Financial loss: The median annual loss can be around $450,000 for medical practices, and dentists can lose roughly 3-7% of their monthly revenue to embezzlement.
Emotional distress: the emotional impact can be devastating. The practice owner may feel a deep sense of hurt and betrayal, especially if the embezzler was a trusted employee.
Loss of time and resources: Dealing with embezzlement requires a significant investment of time and resources. The practice owner must spend time on discovery and recovery, which involves investigating the extent of the theft, reviewing financial records, and working with legal and accounting professionals.
Loss of trust: Embezzlement can lead to a loss of trust within the practice, among owners, associates, employees, and patients.
What are the most common embezzlement tactics?
Common embezzlement tactics include:
- Skimming cash: Theft of cash receipts is a frequent method, often involving the manipulation of patient payments. For example, a receptionist may pocket cash payments and delete the procedure from the system so that the payment is not recorded [2, 3].
- Creating fake vendors or companies: Embezzlers may create fake vendors and issue payments to themselves [4].
- Manipulating payroll: Employees may give themselves raises or bonuses, overstate hours worked, or pay other employees for hours they did not work [4].
- Misusing credit cards: This includes using business credit cards for personal expenses or stealing credit card rewards [4, 5].
- Issuing fraudulent refunds: Refunds may be issued to the employee's personal account rather than the patient [4].
- Altering or creating fake documents: Fraudsters may create or alter physical or electronic documents to hide their activities [6].
- Forging checks: Employees with check-writing authority may write checks to themselves or family members [4]. They may also use a rubber stamp with the practice's name to endorse checks, and then write their own name on the "pay to" line [3, 7].
- Creating false insurance claims or write-offs: Embezzlers may create fictitious patient claims, and pocket the money, or write off charges as professional courtesies [4, 8].
- Directing insurance claims to an employee’s bank account is another method of stealing funds [4].
- Stealing from petty cash is a simple way to take small amounts of money directly from the cash drawer [4, 8].
- Purchasing supplies for home use is a way to take practice funds for personal gain [4].
- Stealing drugs or medical supplies such as Botox is another form of theft [4].
- Upcoding CPT codes is a way to generate additional revenue that the employee may be able to steal [4].
Embezzlers often start with small thefts, gradually escalating their activities over time [4, 9]. They can be long-term, trusted employees, and may exhibit certain behaviors such as being overly territorial about their responsibilities, refusing to delegate or cross-train, working long hours, and rarely taking time off [10-12]. They may also resist outside consultants [10].
How Practice Observer Can Help
Practice Observer provides a comprehensive service designed to safeguard your practice from the threat of embezzlement. We understand that dentists are busy focusing on patient care and may not have the time or expertise to monitor their practice's finances closely. Our service acts as an additional set of eyes, using sophisticated software to identify red flags and potential fraud.
Here's how we can help:
- Proactive Monitoring: We analyze your bank statements and practice management systems regularly to detect unusual patterns or discrepancies [13]. We look for deleted events, and unusual transactions, that may indicate embezzlement or fraud [14].
- Red Flag Detection: Our software is designed to identify common embezzlement tactics [5, 15], including those listed above.
- Integration with your systems: We integrate with your practice management software, online banking, and credit card accounts to provide a complete view of your financial activities [5].
- Actionable Insights: We provide you with clear reports, highlighting suspicious activities and recommending steps to resolve those red flags [5].
- Risk Assessment: We assess your current internal controls and identify vulnerabilities.
- Best Practice Implementation: We recommend changes to your processes and workflows to reduce the risk of fraud [16].
- Transparency and Oversight: We help you create systems that promote transparency and accountability within your practice [17-19].
- Expert Support: Our team of experts is available to answer questions and provide guidance.
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