Read the audio transcript below:
Dr. Luisa Schult (LS): Hi, everyone. Welcome back to Brush Up, presented by Oral Health Group. The dental podcast where we speak with industry experts to discuss a variety of topics such as technology, finance, and practice management. I’m your host Dr. Luisa Schuldt, a dual certified prosthodontist and periodontist based out of Fonthill, Ontario. Today we’re going to discuss fraud and embezzlement with David Harris. David Harris is Prosperident’s CEO and is the author of the book Dental Embezzlement: the Art of Theft and the Science of Control. Prosperident, based in Halifax, NS, is the world’s largest and longest established company investigating embezzlement committed against dentists. Welcome, David. Thank you for joining us today.
David Harris (DH): Great to be with you, Luisa.
LS: As we’re jumping into this topic, I’d love just to start with how often is this an issue? How often do dental practices experience fraud or embezzlement?
DH: It’s a great question. The short answer is the majority of dental practices will be embezzled at some point. When they do studies and they ask the question, and there are very few Canadian studies. We work in both Canada and the US and we really don’t see a whole lot of difference in prevalence between the two countries. The most recent study was done in 2019 in the US and about half the dentists who responded said that they’d already been embezzled. So when you roll that forward to what’s going to happen in the rest of their careers, it’s probably a pretty good bet that something around 70 or 75% of dentists will be touched sooner or later.
LS: Okay and I would assume that the extent to which the damages may extend is different, right? We can have different amounts, small, greater. What are we looking at?
DH: Absolutely. Some of it can be minor. You know, I think in the COVID ways, and if you remember one of the things that happened in COVID early on was a shortage of toilet paper and I’m guessing that you know some staff took toilet paper out of their practice. Technically, it’s embezzlement. You know, is that something that a dentist would typically run and call us to investigate? Probably not. On the other hand, we also see embezzlement. We have a part of our website called the “The Million Dollar Club” and that’s where we profile people who have stolen more than a million dollars and there are more than a handful of those.
LS: Okay, so we’re talking as much as pennies all the way up to significant amounts of money that can really have a negative effect on a practice.
DH: The biggest embezzlement I saw was about $2,000,000 and that was taken from a two doctor practice over six years.
LS: What should we be keeping our eyes open for? What are some of the most common signs that something is changed or is not going as it should?
DH: I divide the symptoms into two categories and one type of symptom are what I would broadly call financial indicators of investment. So that’s somebody who is stealing in a way that causes some kind of distortion in the financial accounts. And it could take a lot of forms. You know, one of the classics, of course, is that the amount collected according to practice management software does not line up with the amount deposited in the bank. That’s a relatively visible symptom, but it requires somebody who’s looking there. There could be other things, you know, it might be patients complaining about their bills. It might be that the accountant spots some kind of discrepancy. The other indicator is behavioral, and that’s where you have somebody who’s acting like they’re stealing. And behavioral indicators could include somebody who works a lot of hours alone. Somebody who refuses to take vacation, somebody who gets really territorial and possessive about their duties and even their workspace. So those are the kinds of things that you might see from somebody if they’re stealing.
LS: Well, so the concept of kind of hiding what they are doing.
DH: Yeah, every theft has two parts. There’s the stealing part where your property becomes my property and there’s the concealment part, and that’s what I do afterward to hide the fact that I did it. So the stealing part happens in basically the blink of an eye. You know, it’s quick. It happens at a time and a place that the embezzler chooses. It’s the concealment part that tends to be visible long after the act. When we investigate a lot of what we’re looking for is the concealment.
LS: You were mentioning a moment ago about money that is put on the accounts, but then doesn’t get deposited and patients complaining. Where exactly would be the weakest spots in a practice, the easiest places for this to happen?
DH: You know, that varies a lot from practice to practice. And one thing, Luisa, that people don’t always appreciate is how interactive a crime embezzlement is. In other words, if I work for you and I plan to steal from you, the first question I ask is: all right, so what does my doctor look at? And, more to the point, what doesn’t she? So let’s start by saying there are two kinds of dentists. There are those who sit there at the end of the day, they print a report from their practice management software that says what was collected and they compare that to the bank deposit. And then there’s the other 85%. if you are in that 85%, stealing is easy because I don’t really have to conceal. In other words, if you’re not sure how much money should be going into the bank today, if you don’t confirm that that amount was deposited, the dumbest, laziest thief on the planet can still steal from you. If you do confirm that, and confirming bank deposits is a lot more challenging than it once was, just because of the number of different ways that money can arrive in your account. But if that is something you pay attention to, then I can still steal, but now what I have to do is I have to make your practice management software lie to you about how much money came in. And I’m not going to get into the details here of how that happens, because I don’t want to empower thieves. But I will say that it is far less challenging than people probably believe to make your software underreport how much you collected today.
LS: Okay, so that software sounds like a pretty important thing to be keeping an eye on, as well as those bank deposits.
DH: Your software is as important to your profitability as your hand piece is. And every dentist I talk to knows their hand piece like it’s their third child. But as soon as we start talking about practice management software, their eyes kind of glaze over and to them this is some mysterious black box that the staff make use of. And their own understanding of it is pretty superficial. Luisa, one other thing I want to mention, just on the topic of how people steal. When I talk to dentists a lot of times about theft, the picture they have in their mind is $20 bills. In other words, cash theft and, you know, cash is everything’s first choice. If I could steal some other form of wealth or I could steal cash, I’ll take cash every time. But it’s not my only choice. It is not terribly hard to cash a check with somebody else’s name on it. And even stealing credit card payments or direct deposits into your bank account aren’t that challenging either. So one thing I’d really like the audience to hear is that we need to be a little more broad minded about this than simply thinking about cash theft.
LS: That’s really good information and I think I feel unfortunately aligned with a lot of those dentists and that we would not be suspicious of the right areas. What if we do become suspicious and we start to notice something is, you know, not quite right. Something might have gone awry. What should our first steps be to, you know, assess the situation more clearly or report it? Or, you know, take hands in the matter.
DH: I’m going to start this answer by talking about what not to do, and the big thing not to do at that point is alert the person you suspect to the fact that they’re under suspicion. If I’m stealing from you every morning when you come in, I’m looking at you and saying, does she know? Am I about to get caught? And if I think that I’m about to get caught, I will get highly defensive because, in my mind, what’s going to happen next is: okay, I’m going to get caught, I’m going to go to prison. And the list of things that I would do to prevent that chain of events from happening. It’s pretty small. We have seen cases where, for example, somebody would burn down the practice in an attempt to prevent them being caught and charged and convicted. It actually goes even a little bit further. And there’s no Canadian case that I’m aware of, but I know of at least three in the US where the dentist was murdered by the embezzler in the hope of preventing the inevitable. So if you’re a dentist and you wake up one morning with that sinking feeling in the pit of your stomach, like somebody stealing from you, the rule is very simple. This is not a do-it-yourself problem anymore. You need expert help, and you need it right now. You know some well-intentioned dentists say, well, I’ll just dig into this a little bit deeper. I’ll take a look at stuff in my software. I’ll, you know, I’ll close the door to my private office, and I’ll call my accountant. And if I’m a thief and I’m looking for signs that I’m about to get caught, you just gave them. The other thing a lot of dentists don’t realize is almost everything they do in the practice management software has logged in something called the audit track. So if you start making enquiries, if you start printing reports yourself that you haven’t before and I’m a thief, I’m watching that audit trail like a hawk. So it’s really a case where the next thing you should do is pick up the phone and call somebody. The other invocation I’ll make to your audience is that they should not confuse somebody who knows 20% more than they do with an expert. Your accountants, your practice management software trainer, your practice consultant, if you call any of those people the question you should ask them should really be okay, who do you know who specializes in forensic investigation for dentists? That should be the only question you ask. These people will sometimes offer to help you and their good intentions will unfortunately lead you in a wrong direction.
LS: And all of this not alerting the possible thief and that natural instinct to want to stop this immediately, is there some silver lining in that once you do get that expert opinion and somebody does review things in the correct way, this will most likely be traceable? Like the thief wouldn’t have hidden things so well that if discrete eyes are set upon the accounts and this expert is helping us out, they’ll find it. There’s no need to take a rapid, instant decision of “I want to stop this now.” You have that traceable pattern right there? The crumbs are still there.
DH: Well, let’s first of all acknowledge how dentists think. And you know when any of you see a carious tooth, what goes through your mind is, you know, do I have time to fix that right now? So, you know, you come from a place where your chair time is very precious and you want to use it to the maximum time. This is not urgent. You know, I was talking to somebody the other day, and they have a suspect. But there’s been no confirmation and they’re trying to decide, do I fire them today or not? And I said okay, so here’s the trade off. If you fire them today, you don’t have just cause to fire them. So you’re looking at paying them severance and, you know, whatever their entitlements are under labour laws. Our investigation will probably have a conclusion in four weeks or so. So what we have to weigh here is what they might steal over that four weeks which probably is a few thousand. Versus the certainty, that you’re going to have to pay them 60 or 80 thousand in severance. You know, if it were me, I would wait. But yeah, people want to react quickly. It really bothers them that money is leaking out of their practice and they want to stop it, but you have to look at the magnitude and the typical thief is taking probably between 2-4% of what you’re collecting. So over 4 weeks, it’s not a lot of money.
LS: So there’s a great advantage to, you know, just taking a breath, contacting the expert, letting them do their job without disturbing what’s been happening for the last X amount of time.
DH: A friend of mine says, you know, when you suspect embezzlement, stop, drop and think. And I think that’s pretty good advice.
LS: I think so too. You’ve already mentioned a couple really interesting bits of stories there. Is there any really particular case that has stuck out that you think we could all really learn from that has some good tips for, you know, prevention or what we should do in a given case?
DH: There are so many cases and so many interesting wrinkles from them that I’d love to talk to you all day about war stories. If somebody wants to read a little bit more, I’m just going to point them at our website, which is prosperident.com and there’s part of our website called the Hall of Shame. And we profile about 700 embezzlers there if you want that flavor. That’s one place. We also have done a lot of webinars and, again, they’re all accessible on our website where we’ll invite embezzlement victims to come on camera and tell their story. We’ve done three in the past few months that are noteworthy. An orthodontist was profiled in one and a couple of general dentists. And, you know, there’s great information there from each of them. What I’d say to your audience in terms of advice is, first of all, that comparison between collections and practice management software is really important. As I said before, if you don’t do that, you really open the door to fairly crude stealing methodologies. What I would say, Luisa, is that I think most dentists have been taught to do that the wrong way. In other words, the focus is that’s something I should be doing at the end of each day. And I think when you try to do it that way, you make it a lot more laborious than it needs to be. What I’d rather see you do is do that as a monthly activity. In other words, did all the collections from the month line up to deposits for the month. What bedevils that calculation is what are called timing differences. In other words, when amounts arrive in your bank account on a different day than when your practice management software captures them and if you think of a patient who pays by credit card, if I’m a patient of yours and I pay by credit card today, your software will capture that as a payment today. But it probably won’t hit your bank account for two or three days. So when you’re trying to do this at the end of each day, that kind of delay makes it very challenging because you don’t know for a couple of days whether that money actually arrived. On the other hand, when you look at a month as a whole now, anything that had that kind of timing difference but resolved within the month isn’t an issue for you anymore and all you’re really having to deal with is the stuff overhangs, the beginning of the month, and transactions that are still not fully settled on the last day of the month. And that’s a much smaller number relative to the total revenue for the month, so I’d suggest doing that as the best advice I can give you.
LS: You know, you mentioned earlier, the day-to-day part of it, but I think this month to month balance is really, really valuable. And you were saying that sometimes it’s 2-4% of the revenue that might be embezzled. And I think when you’re looking at it as a month, it’s easier to catch that amount should it be there.
DH: Yeah, it is. And a couple of other pieces of advice. I’m going to talk about articulation. And as soon as you hear that, what you’re thinking about is the relationship that the mandible and the maxilla have. That’s articulation in a clinical sense. In a financial sense, here’s what it means. If your office was opened 20 days this month and you have 20 day end reports from your software in your left hand and you have a month end total from your software in your right hand, if you add it up, the 20 day end reports, they should come out to exactly what the month end report does. For collections and adjustments and payments. If they don’t, somebody came in after hours and did something they didn’t want you to see. One of the things you should do at month end is that articulation calculation, and if audience members want a spreadsheet to make it easier for them, we have one that will make it pretty simple. So that’s one thing to look at. The second thing is you need to look at each day and I’ll go one step further. The best thing you can do is print the report yourself. When you allow somebody to print that report for you, you make it very easy for them to do selective reporting. If you print it yourself, you have total control over the parameters used to generate that report. And you know that it has integrity. If somebody hands you a report, you never know that. So, #1 print the report yourself, #2 do the articulation calculation at the end of the month, and #3 make sure that bank deposits and collections line up. If you do those three things, you’ve really gone a long, long way to protect yourself.
LS: Seem like very easy steps, I think.
DH: An hour and a half a month is plenty of time for you to oversee your practice financially. The people who are trying to do that daily balancing thing are already spending more time for less results.
LS: That sounds like very sound advice, David. Thank you. From what I understood throughout our conversation, this happens to practices of all sizes, specialty, general practices, everybody should really have their eyes open and should be looking for ways to prevent and ways to detect this in their practice.
DH: Everybody’s looking for that safe harbour. You know, I get asked, well, do orthodontists get embezzled more or less than general dentists, or does it happen to group practices more than individual practices? The probabilities are driven by one simple question, and that is the chance that somebody who works for you is going to wake up tomorrow morning and say, alright, today’s the day I’m going to start stealing. When they do that, Luisa, they give no thought at all to where they work, what kind of practice, is it urban or rural, is it big or small. They don’t think about any of that. They just think, I want to steal and I see a target there. A couple of things that surprise people. First of all, you know, DSOs gets stolen from as much as everybody else. We do a lot of DSO work, and we also work for solo practitioners, not a lot of difference in the probability that it happens in each place. You know urban, rural, specialist, general. They all get stolen from about the same. The one other thing that we didn’t mention that I want to get on air though is this one thing that dentists do a terrible job of is pre-employment screening. And when you’re looking for things you can do that will allow you to dodge a bullet, that’s a big one. So a really sobering statistic: about 3 million Canadians, which equates through one in ten adults, has a criminal record. And yet, in contrast to how the rest of the world hires, the norm in dentistry in general is the criminal record checks are not done. That’s part of pre-employment screening. There are other parts. It astounds me that dentists in general don’t do drug tests when they hire, that they’re really casual about talking to former employers. So another place where there’s huge potential for improvement is in how people are screened before they’re hired.
LS: That’s a tremendous piece of advice. I do have a the recollection of a practice owner who had been, you know, in trouble before for similar issues and not consulting with previous employers. Doing that criminal check could have prevented everything.
DH: I see that almost on a daily basis. You know, it is far easier not to hire these people in the first place than to go around with a broom and a dustpan and clean up what they do if you do hire.
LS: Well, this was a really enlightening conversation. Thank you so much, David. You really pinpointed some really easy steps we can take to be safer with our practices, take responsibility for the finances of them, and thank you so much for your time.
DH: No problem. Good to talk to you.
LS: It was great to talk to you as well. I’d like to thank our listeners. Thank you so much for joining us and listening in. Be sure to subscribe on Spotify and follow us on social media to be notified every time we post a new episode. Keep brushing up! Thank you.