How Dental Embezzlement Happens (and the 3 Rules That Stop It)

Close the Gaps: What a Fraud Investigator and a Dental CPA Want Every Practice Owner to Know

If you own a dental practice, the odds aren’t great. In a 2019 American Dental Association survey of 17,000 dentists, 47% said they had been stolen from. David Harris, CEO of Prosperident, puts the lifetime risk closer to 70%. In his firm’s case files, the average loss is about $109,000.

In our recent webinar, DentalHQ‘s Eric Dawe sat down with Harris and Bill Ladd, partner and co-founder of the dental CPA firm Duckett Ladd. They covered how theft actually happens, why your accountant probably won’t catch it, and the simple controls that make it much harder. Here’s what practice owners should take away.

Why dental practices are such easy targets

“What makes it possible is really the word DMD or DDS on the front door,” Harris said. Dentists train to treat patients, not run a business. So many owners hand the books to someone they trust and stop looking.

Harris calls this the difference between delegation and abdication. Delegation means you hand off a job and still understand it well enough to hold someone accountable. Abdication means “I don’t ever want to hear about this again.” Thieves count on the second one.

Most theft is skimming, and your CPA usually can’t see it

The most common theft isn’t an employee writing themselves a check. It’s skimming revenue: diverting patient payments or insurance checks before they reach the bank.

That matters because of what your accountant can see. “What happens in your practice management software is not normally visible to your accountant,” Harris said, “and that’s where most of the bodies are buried.” Ladd agreed. A bookkeeper’s job is to record what hits the bank correctly. Money that never hits the bank won’t show up for them.

The 30-minute monthly check every owner should do

Both experts named the same top control: compare what your practice management software says you collected with what was actually deposited in the bank.

“If you don’t do that comparison, the dumbest, laziest front desk person you could ever possibly imagine can steal from you,” Harris said. For a well-organized doctor, it takes 30 to 45 minutes a month. Ladd’s advice is to look for trends, not only single mismatches. The numbers should rise and fall together and even out over time.

If a payment never touches your ledger, it’s easier to take. This is one reason DentalHQ posts membership plan payments straight to the patient ledger and chart in your practice management software. Cash patients are an easy target, so every payment should leave a record.

The 3 rules for dividing duties

Harris’s goal is simple. Set things up so that anyone who wants to steal would have to recruit a coworker. Research suggests that alone stops more than 80% of would-be thieves.

He describes six steps in the revenue cycle: treatment is entered, patients and insurers are billed, they pay, the payments are posted, staff balance at end of day, and the deposit goes to the bank. Then he applies three rules:

1. Treatment is entered in the operatory by the clinician who was in the room. If the front desk enters treatment, Harris explains, the patient at checkout has a zero balance. That gives a thief lots of options. Entered in the operatory, the patient already owes money, so whatever happens next shows up in the software.
2. No one does more than two of the remaining five jobs.
3. No one’s two jobs can be back-to-back. For example, the person who balances at the end of the day doesn’t make the bank deposit, so the depositor double-checks the balancer.

Small practices with one front desk person need to get creative. The owner might be the only one with the P.O. box key, or the assistant might take over end-of-day balancing. “In that small practice, that owner is going to have to have a heavier hand,” Ladd said.

Be consistent, not erratic

Staff doesn’t get upset about controls. They get upset when trust seems to change overnight: sudden questions, surprise printouts, closed-door calls. Harris recommends explaining that these controls are standard business practice and applying them every time. Ladd added that knowing someone is watching discourages theft before it starts.

If you suspect theft

Harris’s first rule: don’t tip anyone off. About 20% of owners who are sure they’re being robbed turn out to be wrong. Accusing an innocent employee can wreck morale. If the suspect is guilty, you risk retaliation. Instead:

• Investigate quietly, without staff knowing.
• Bring in a fraud specialist, not your practice management software trainer or your bookkeeper.
• Hold off on calling the police until you know how much is missing, when it started, and who did it.

Trust systems, not people

Harris told the story of a new owner who hired Prosperident just to set up good systems. He had no reason to suspect anything. The team found about $150,000 missing, plus roughly half a million more that went back to the previous owner. His lesson: “I learned to trust systems, not people.”

Watch the full webinar

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