Which of these fraud scenarios is worse?
If you had to choose one of these, which would it be?
#1: A patient pays $100. Your employee steals the $100 and covers the theft by recording a write-off of $100 on the patient’s ledger.
#2: Your fee is $500. Your employee tells the patient your fee is $400. The employee collects $400 from the patient and applies a $100 write-off on the patient’s ledger.
Your loss in both cases is $100.
So how are theses two scenarios different?
They differ in who receives benefit from the employee’s financial misconduct.
In scenario #1, the employee’s actions benefited the employee by $100.
Let’s call this scheme “Ma Barker”
In scenario #2, the employee’s actions benefited the patient by $100.
Let’s call this scheme “Robin Hood”
To illustrate this difference further, let’s imagine a scenario where there are two dental practices.
One practice employs Ma Barker and the other practice employs Robin Hood.
Now imagine that after a few years of employment, each practice discovers their employee’s financial misconduct. When the loss is calculated, each practice has incurred a loss of $100,000, and for the sake of argument, lets say that each practice owner has $100,000 in employee dishonesty insurance coverage.
Employee dishonesty recovery in a Ma Barker case is straightforward.
In the Ma Barker case, the employee stole money to line her own pockets.
When the fraud examination report documenting the losses has been completed, the practice owner can submit a claim of $100,000 against their employment dishonesty insurance for reimbursement.
Employee dishonesty recovery in a Robin Hood case is not straightforward.
Unlike the Ma Barker case, where the employee stole for their own benefit, the Robin Hood case involves an employee who stole to give a benefit to the patient. This is more common than you may think.
Why do some employees act like Robin Hood? What is in it for them?
Every employee that perpetrates a Robin Hood scheme receives some type of non-financial benefit.
Most will say:
- it made their job easier: they “hated collecting co-payments” or “calling patients for money”, and instead it was easier to write off account balances and reduce fees.
- it feels good: patients often love Robin Hood employees, and Robin Hood employees enjoy both favor and compliments from patients. Yea, it does feels good.
The patients are often unaware that the Robin Hood employee is ‘stealing’. All they know is that the Robin Hood employee is nice to them, and never charges them much.
Robin Hood employees will often tell patients: “don’t worry if your insurance does not cover the full amount, I’ll make it work” or “I’ll reduce your payment by $100 so you will not have to pay more out of pocket”
These words are music to the patients’ ears, and that’s a big problem. Robin Hood employees tend to foster and cultivate a culture of false insurance entitlement among the patient base.
Patients of a Robin Hood practice can have a history of never paying out of pocket, so when the Robin Hood employee is finally fired or has left the practice, and the replacement employee starts asking patients for payment; there’s a problem. The implications from this most often result in a negative impact on practice goodwill.
If you “catch” a Robin Hood employee, terminating their employment often requires special handling.
When a Robin Hood employee is fired, they often will vigorously defend their actions, claiming that the practice owner ‘told them to do it’.
Most Robin Hood employees believe they are not doing anything wrong. Some disgruntled Robin Hood employees have sued the practice for severance and wrongful dismissal and have won their case. (yes, this does happen)
Now that the Robin Hood employee has been fired or has left the practice, the practice owner decides to make a claim of $100,000 against the employment dishonesty coverage.
Bad news: only certain employee dishonesty policies will cover losses incurred by a Robin Hood employee. So you may not get your money back.
More bad news: the Robin Hood employee has left behind a culture of false entitlement amongst patients who were accustomed to not having paying out of pocket.
When the practice resumes proper billing for services, patients often begin to complain. In some cases, many patients may leave and go elsewhere for treatment.
Patients of a Robin Hood practice will often say things like:
“Why do I have to pay now? I never had to pay anything before!”
“Can’t you make my insurance pay for it. Jenny* always did that? ” (*Jenny being the name of the Robin Hood employee)
Lastly, unlike Ma Barker cases legal recovery and prosecution remedies are more difficult in Robin Hood cases. It can be an uphill climb to sue a Robin Hood employee, and most district attorneys will not have an appetite for criminal prosecution.
Because the financial loss in both Ma Barker and Robin Hood cases have the impact, if had to choose, I’d rather have a Ma Barker in my practice than a Robin Hood.