How employees steal from a dental practice.

This post discusses the schemes used by employees to steal from a dental practice. The schemes are not specific to dentistry and are used to steal from every profession and business.

I have uncovered these schemes many time since 2004. From that, I can say that most dental embezzlement is perpetrated using a handful of common schemes.

These schemes are not embezzlement “trade secrets” either.

All of them can found online and in the news. Visit this link to read hundreds of news articles about dental embezzlers and the schemes they used -> Busted! (Arrests, Warrants and Felons)

You don’t need advanced match skills to steal from a dental practice.
You just need to be dishonest.

Busting Myths about Dental Embezzlement

One of the most common myths held by practice owners is that employees can only steal cash.

This myth is supported by a false belief in that checks, credit cards, and other forms of payment are “safe”.

This is false. When a dishonest employee has decided to steal from the practice, anything of “value” can be targeted.

The most common thefts include:

  • insurance payments (checks, virtual cards)
  • patient payments (cash, checks, credit cards)
  • supplier rebates
  • submitting fraudulent claims
  • refunds to patients and insurance
  • payroll padding
  • credit card abuse
  • check fraud

Add these to this list of stolen items:

  • dental supplies (steal and sell)
  • office supplies
  • prescriptions / medications (anxiolytics, opiates)
  • Yes – even Amazon orders – Click here to see why.
  • Visa or other gift cards – the office manager ordered $30K in gift cards in one year. She kept $25K of the gift cards for herself and gave $5K to patients.

..and some dishonest employees keep on stealing long after they are gone .

  • This dental embezzler had swindled her way to have the practice pay for her health plan a year before it was caught.
  • An embezzler stole from the practice twice. The second time was 6 months later. She set up a series of automated withdrawals from the dentist’s bank account. It took several months before the practice owner noticed multiple ‘odd’ ACH withdrawals that were starting to add up. The bank initially refused to reimburse the dentist, and it took many calls and demand letters before the bank settled.
  • An ortho manager stole postdated checks for monthly ortho payments and covered it up before she suddenly quit. Three months later, she starts cashing the checks. The orthodontist was tipped off when a patient complained that the office cashed 3 monthly payment checks at once.

How to steal from Patients and Insurance Companies.

In the blink of an eye, your money becomes their money.

When a dishonest employee steals a payment, they will choose one or more of these methods to conceal the theft .

Deleting Transactions

I’ll use cash in this example. Cash is easy to steal and easy to conceal. Virtually every dishonest employee will take cash from the practice at some point.

Here is an illustration the events:

  • the patient has finished treatment and it at the front desk.
  • the patient makes a payment
  • the employee records the payment in the dental software
  • the employee prints a receipt and hands it for the patient
  • the patient leaves

After the patient has left, the employee deletes the payment record from the software and keeps the cash.

To conceal the theft and make it look like the the patient’s account in balance, the employee will do one of these things:

  • (i) deleting the treatment charge, or
  • (ii) applying an unauthorized adjustment to offset the treatment charge, or
  • (iii) back-dating the payment record to remove it from the day end deposit report.

How to look for the concealment transactions

Conduct regular spot checks for deleted treatment fees and payments

Your practice software management software has an audit log and you’ll need to learn how to use it; even at a novice level.

The audit log can help to show who did what and when in the dental software.

Look for deleted payments, deleted treatments, and backdated records. Look for a reasonable explanation.

If you need help, most dental software companies have online videos and manuals to get you started.

If you get stuck, you can retain my services on an hourly basis.

Perform routine spot checks of ledger adjustments

When an employee steals a payment, they often will make an offsetting adjustment in the patient ledger top create the illusion of balance.

Many employees who steal payments by applying fraudulent account adjustments will often use one of the most frequently used adjustment types.

For example, in an practice that accepts insurance reimbursement, it may be common to write off the unpaid balance after the insurance payment has been applied. (e.g.: a “Insurance Adjustment”)

Because the Insurance Adjustment code is frequently used, it is less likely that the fraudulent Insurance Adjustments will be noticed amongst hundreds of other legitimate adjustments.

Account write-offs and accounts sent to collections

Fraud experts agree, the more authority a person has, the more damage they can do.

Employees should not be permitted to write-off an account. If a long overdue account is paid, the embezzlers can keep the payment and report the account as being “written-off” or “sent to collections” .

Instead of writing off accounts, some employees will post credit entries on accounts to reduce the balance owing.

Typical credit adjustments are called names like “professional courtesy” or “seniors discount” in the software and embezzlers tend to use them with less frequency since if overused, it may draw unwanted attention from the owner.

Back-dating is one of the oldest schemes still used today.

Here’s how backdating works:

The patient’s ledger shows that the patient was charged on on March 1 and paid in full on on March 20. Looks good.

But that is not what really happened.

What really happened is that patient was billed on March 1 but paid six days later on March 26.

The dishonest employee had recorded and back-dated the payment to make it appear as though it was paid six days earlier on March 20.

The employee stole the payment and because of backdating, it did not show up on the normal day end reports.

Cash payments are generally stolen on the same day.

Patients that pay in cash most often do it at the end of their visit.

Cash payments recorded at odd times when the patient is not in the practice is a sign “cash holding”.

This happens when an employee sequesters cash payments for a short period of time before deciding which payments they can steal without getting caught.

Stealing from insurance companies.

Dishonest employees will can also steal from insurance companies to line their own pockets (but not all are like that)

In this scheme, the employee creates a fake a dental claim and submits it to the insurance company for reimbursement.

When the insurance check arrives in the mail, the employee converts the check to cash by one of two methods.

They deposit the check into the dentist’s account and at some time, remove an equal amount of cash or the check is deposited into the employee’s account (or an account that is controlled by the employee.)

If the check is made payable to the dentist, the employee can convert the check to cash by depositing the check directly into their own bank account through an ATM.

Sometimes, an employee will collude with a patient (most likely a friend or family member) to steal from the insurance company. The employee sends a fraudulent claim and has the insurance check mailed to the patient. The patient cashes the check and shares the proceeds with the employee.

“Employee healthcare fraud is requires the employee to abuse the dentist’s credentials. One of my very first cases involved collusion between an employee and a patient. The employee submitted fake claims for the patient and the patient’s family. Blue Cross paid $43,000 to the patient for work that was never done.”
William Hiltz BSc MBA CET

Stealing cash from the Deposit

In every dental office, someone must physically take the cash and checks to the bank. This person will have an opportunity to take a portion of the money before it is deposited into the dentist’s account.

Separation of function will reduce the risk of deposit tampering. In this example, someone is assigned to prepare the bank deposit slip for the bank and a different employee is assigned to make the physical deposit. The employee who made the deposit keeps a copy of the slip which is matched to a receipted deposit slip issued by the bank when the deposit is made.

Separation of function is designed to prevent deposit tampering but thefts still occur because the process is not adhered to.

In many dental offices, a single person oversees preparing the deposit slips, making the deposit, and reconciling the bank statement. That person can steal money and conceal it by falsifying the deposit slips.

To illustrate, if a dentist was paid $1,000, and the employee filled out a deposit slip for $500 and stole the other $500. The employee also made corresponding bogus entries to understate the day’s receipts.

Again, the embezzler’s goal is to create a false sense that everything is in balance.

The best way to deter this kind of fraud is to separate the functions of preparing the deposit and making the deposit.

Stealing from the dentist’s deposit will be difficult to conceal for a long time if separation of function exists.

Deposit tampering can be successful for a long time when a practice owner has no interest in the business side of the practice and trusts one employee to look after all things.