Embezzlement Monitoring: Part 1

Dental Practice Fraud: How It Happens & How to Discourage It

According to an American Dental Association survey, one in three dental practices will experience some form of employee fraud or embezzlement during their lifetime. Dental office fraud occurs more often than it should, and is often the product of poor or non-existent internal office checks and balances, too much autonomy and authority given to one specific employee, lack of oversight by the practice owner, and failure to prescreen employees adequately.

Common Types of Employee Embezzlement:

Skimming Cash

Petty cash or the occasional payment from a patient is often the first asset that a fraudulent employee targets to see if they can steal money without being detected. Fraudulent employees rationalize their misdeeds; i.e., “I am underpaid” or “the doctor makes more than enough money.” $10 turns into $100, and that turns into thousands. It is not uncommon for a fraudster to increase the magnitude of their theft as time goes on. They get braver, bolder, and feel invincible.

Deleting or Altering Transactions

Once a fraudulent employee perfects their scheme to steal money from the practice, they need to cover their tracks in the patient management system (PMS). In other words, they need to show that a payment has been made in order to clear the accounts receivable. This can be done by adjusting or deleting activity in the PMS.

Modifying Patient Checks

Patients typically pay their portion of fees on the day of service, either by credit card or by check. One fraud scheme involves a fraudulent employee telling the patient to leave the “pay to the order of” section of a check blank because they have a stamp. The stamp would be made out to the fraudsters’ own bank account using a “business-like name” that wouldn’t raise any suspicions from the patient. Without internal checks and balances that reconcile the PMS activity to actual bank deposits, this scheme goes undetected.

Refunding Patient Credits

Offices typically estimate and collect the patient’s portion of fees on the day of service and when the EOB clears; it is not uncommon for patients to have nominal credits in their account. This fraud scheme involves a fraudulent employee processing these nominal patient credits as refunds to their own credit card. Patients may not be aware that they have a nominal credit and never inquire about it. Without oversight, no one is the wiser and the fraudulent employee has successfully stolen money from the practice.

Unauthorized Expenditures

Offices commonly give a key employee (office manager) a business credit card to pay practice expenses as they arise (dental supplies, lab bills, utilities, etc.). Some offices even give that employee signature authority on the business checking account. Without oversight or protocols that are designed to monitor the practice’s financial affairs, a fraudulent employee can pay personal expenses and simply post those transactions like any other legitimate business expense.

We provide all of our prospective client’s with our Fraud Monitoring Checklist. Contact our office to learn more! info@dentalaccountingpros.com 

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