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Safeguard Your Dental Practice from Fraud


Dentists in North America are routinely defrauded. Our Forensics Services team is frequently approached by dentists to investigate suspicions of fraudulent behaviour in their clinics. More often than not, however, a fraud comes to light that leaves the clinic owners baffled and frightened because they did not even suspect it.

What is important for dental practitioners to realize is that not only are you defrauded more often than other small businesses; you are in fact, targeted for fraud. It seems unfair and it is. Some of the factors that makes dentists’ offices attractive targets, are as follows:

  • Dental practices generate what is perceived to be a great deal of money compared to other professionals and small businesses.
  • Dentists, albeit highly skilled healthcare professionals, tend to have less interest, time or skill for business operations or accounting matters.
  • Clinics tend to operate with a small number of administrative personnel, who are often assigned tasks that most businesses believe should be segregated and assigned to different people.
  • Healthcare professionals are often reluctant to report offenders to the police, or to sue them civilly, by virtue of the caring nature of their practices, their training, and relationships with employees.

Dentists should take steps to defend themselves against these crimes, particularly in today’s economic circumstances. We often see what we call “serial defrauders”. Frequently, these are office administrative personnel who move from dental practice to dental practice, defrauding each in turn.

To gauge the effectiveness of your fraud prevention systems, think about whether you can answer ‘yes’ to each of the following 10 statements:

  1. I have created an internal culture that is intolerant to fraud or financial abuse.
  2. I have policies and procedures designed to prevent and detect fraud, and all my employees are aware of them and I practice what I preach.
  3. I have appropriately segregated duties in my clinic to reduce the risk of fraud.
  4. Accounting reconciliations are prepared monthly and are reviewed by an individual independent of the reconciliation process.
  5. I know the history and circumstances of my employees and I require them to take regular vacations.
  6. Banking activities cannot be performed without my oversight.
  7. I manage and track inventories, particularly of items with a secondary resale market.
  8. I have software controls in place which leave an audit trail and track user access to financial data and online banking.
  9. I know what my financial results should look like and I monitor bank accounts and financial reports regularly.
  10. My patient management software system is monitored for unusual transactions: deletions, corrections, reversals, and fee overrides.

If you cannot answer ‘yes’ to at least 6 of the above 10 statements, you should consider integrating additional fraud risk management procedures in your practice to protect your bottom line.

Dentists need to implement stronger internal controls to prevent or detect fraud. Too many dentists do not do so. It is not because they do not see the value in it, but because the process itself is perceived as tedious or confusing or they simply want to spend their non-patient time on other matters.

To help protect dental practices from fraud, we utilize a program called (tongue in cheek) “the six-month checkup”. It is important to undertake a rigorous data analytics examination of the banking, patient management and accounting data on an alternating, revolving six-month rotation. Data analysis can be conducted efficiently and economically and can provide the clinic owner with important feedback on:

  1. Reversals, deletions, corrections, and write-offs of dental services in the dental clinic’s operational program data
  2. Reversals, deletions, corrections, and write-offs of dental services in the dental clinic’s operational accounting data
  3. Unusual recipients of funds
  4. Unexpected timing of dollar-value payments
  5. Unexpected general journal entries
  6. Unusual patterns of payments or deposits
  7. Automatic payments or transfers online or electronically
  8. Unexpected types of transactions, such as foreign currency or bank drafts
  9. Cash withdrawals
  10. Lack of cash deposits
  11. Unexpected funds transfer

In other words, Red Flags of Fraud for a dental practice.

In an ideal situation, practice management software will track patient visits and corresponding revenues, which will reconcile to accounting transactions recorded and bank transactions. Analysis of operations, banking and accounting data can help identify red flag transactions and areas where reconciliation is expected, but doesn’t occur or is forced to occur by a “plug” accounting entry.

Peripheral benefits to proactive data analytics include the following:

  1. Deterrence will be increased because the dental practice staff will know that the owner is managing financial risks every six months (surprise visits are recommended).
  2. Dentists don’t have to invest time in each analysis cycle, with the exception of assisting to interpret results and confirm unusual transactions identified.
  3. Insurance costs may be reduced because of this proactive activity. As well, accounting and other staff may increase efficiency and accuracy of recording transactions as a result.
  4. Year-end accounting and tax work are likely less onerous.
  5. Dentists with several clinics will find them easier to manage.

As the old saying goes, “the Devil’s in the details”. Data analytics can be a successful solution to reduce the risk of fraud in dental practices, especially when the dentists do not want to remain embroiled in the details themselves.