OM Ep. 161 Bracing for Impact: Dentistry's Battle Against Embezzlement

About this Podcast

In this Ortho Marketing Podcast, Dean Steinman is joined by David Harris, CEO of Prosperident. They discuss the overlooked challenges faced by dental practices in the realm of financial security. Explore the ins and outs of embezzlement within the dental industry, shedding light on the tactics employed by unscrupulous individuals and offering valuable insights to fortify your practice against potential threats.

Episode Transcript:

David Harris: Hi, I'm David Harris, the CEO of Prosperident and I'm really excited that I'm going to be doing a podcast with my friend, Dean, who is one of the guys you have to know in dentistry. Dean and I are going to have a pretty wide ranging conversation on embezzlement. We're going to talk about how common it is in dentistry and I'll let it slip now that it happens a lot.

And more important, we're going to give you a couple of strategies that you can use to protect yourself and your practice. So you do not want to miss this one.

Dean Steinman: Hello everybody out there in podcast land. This is Dean Steinman from Ortho Marketing. And guess what? We are back with another podcast for you! So it is now 2024 January and hope everybody had a great holiday season. Hopefully you had an okay year, last year I look forward to making 2024 a great year across the board.

It was a tough year for a lot of practices And one of the big issues across the board in practice we've found has been, financials and embezzlement and security and I have a very special guest with us today. David Harris has been with us before. David is the president of awesome company called Prosperident and welcome aboard. How are you?

David Harris: I'm good, Dean. Good to be with you. And great to be starting off the new year with a podcast.

Dean Steinman: I appreciate you joining, coming back up, man. Just what, if you can give us a little overview of Prosperident again, tell us who you are and what you do.

David Harris: Absolutely. Prosperident is a dental specific forensic accounting company.

So we do embezzlement investigations and we also help dentists put the safeguards in place to protect themselves. And we only work with dentists. So we have about 25 people. We've been in business for 34 years and a bit, and that's who we are.

Dean Steinman: So if you and I've had this question before, so if you can't just, let me get people from, back, if you're a dentist, how do you know that you have this problem?

How do you know that you get, cause you're focused on, you have somebody running your office. You don't look at your books. You don't look at this. You just want to make people smile. That's what we're in the smile business in the dental world. How does one even know that they're having a problem with being embezzled or that there's a security issue here?

David Harris: There are really two sets of possible indicators, Dean. First of all, there are financial indicators. And an example of a financial indicator might be you have practice management software in your practice that collects information on how much patients pay and how much has been billed and things like that.

So an example of a financial indicator would be that the collections according to your practice management software do not line up with your bank deposits. It could be however that they do line up and there's some other problem But we'll maybe get into that in a few minutes, but financial indicators.

I had somebody who I talked to yesterday and she said yeah last year my practice revenue increased by over a million dollars. Good for her. However, the cash collections went down by about 10, 000. So she's wondering what's going on there. The other type of indicator is behavioral.

And it's pretty well established that when thieves steal, they act in certain predictable ways. For example, a lot of thieves are reluctant to take vacation. Because if I'm stealing, I need to keep some kind of control over the way that information moves around the practice. And when I'm gone, I give up on that.

I tell a story sometimes. A big embezzlement that I worked on early in my career was a two dentist perinatal practice. One Monday morning, for the first time anybody could remember, the office manager was not in the practice. Why? Because on the weekend she had broken her leg skiing. So suddenly she wasn't there and that's when the wheels came off the wagon for embezzlement.

And around 11 o'clock in the morning, one of the receptionists came into the senior doctor's operatory, took him out, which was a big no in their culture, and said, there's something weird going on here because I've gotten three of these very strange phone calls from patients this morning. And it was all about a problem with their bills and it was all the same problem from three different patients.

And that's when she smelled a rat and. Went to talk to the doctor, had the office manager been there like she was, every other Monday, those calls would've gone to her and not the receptionist, and she would've just deflected them.

Dean Steinman: Mentioning before about, looking at, the collectibles and this and that, if, so if an office manager, we'll just say that they're the main per culprit, just as example, If they're the ones giving the doctors the numbers, why would the doctor not believe 'em, 'cause doctors. You have so much stuff on your plate to have to look at your report from your software and then report from your bank and then line them up. That's by being over their pay grade. So do they have to reach out? Do they have to put this as part of their daily, weekly, monthly, job type, problem and make this part of what they have to do every month?

Because obviously the deaf people do this for him. So now it's something like as a business owner, I'm like, Oh, I got to ask what else on my list to do, but it's important. So how do you have, what do you suggest from that perspective?

David Harris: You hit on something key there. Everybody who has access to your money needs oversight.

If we think of the kind of the typical pyramidal office structure where you have receptionists and an office manager and an owner dentist, one of the jobs of the office manager is to make sure that the receptionist don't have sticky fingers, but somebody also needs to oversee the office manager.

Could be the dentist. It could be the dentist spouse if you are privileged enough to have a spouse who has the time and the inclination and the aptitude to do that. But the calculations that we're talking about, and I'm going to mention too, are relatively mechanical, and what that means is that it could be done by somebody else who does not have DDS or DMD after their name, it just can't be the office manager.

Writing hurt on themselves, because that would never work.

Dean Steinman: You suggest that bring in the accountant to do it, bring in an outside company to do

it, like what boarders?

David Harris: Accountant, outside bookkeeper, maybe there's a consultant who wants to do it. Maybe you've got a kid in college who wants to earn some beer money.

Any of those things are a possibility. The point is though that you can't have an office manager who is unsupervised because sooner or later that story is going to end badly.

When I talk to dentists about embezzlement, the mental picture that they always start with is the theft of 20 bills. And the first thing they'll say to me is I don't take in much cash. And I say, all right, I'm going to give you two pieces of news.

The first one is, you have no idea how much cash actually comes in. What you know is how much is turned over to you, which could be a radically different number. And if I'm a, if I'm a receptionist or an office manager and I want patients to pay more cash, I can make that happen. All I have to start telling them, Dean, is Dr.

So and so gives a 10 percent discount if you pay cash. So it's totally up to you, but there's an ATM right around the corner and you might want to go make a withdrawal and pay me so I can give you the discount. Stealing 90 percent is basically almost as good as stealing a hundred percent. So if I have to discount some people to influence their behavior, I could do that.

So that's point number one. Point number two is most dentists don't realize. How easy it is for somebody else to cash a check with their name on it. They almost all assume that's impossible. And probably 30 or 40 years ago, it was difficult. In 2024, it's really easy. And that's unfortunately something we see almost on a weekly basis.

I'm not going to get into the details of how it happens here. Just in case the wrong person is listening. But I can tell you that stealing. checks is very easy. A thief who's a little bit enterprising can probably find a way to steal credit card payments. And another thing that we're seeing increasingly is electronic funds transfers getting diverged.

So you have some insurance company that's sending money, they think to the practice, and the doctor thinks it's going to the practice and it's going to some of their bank account.

Dean Steinman: Give us an overall bird's eye view of the whole entire industry. What percentage of practices. you think are actually being embezzled?

David Harris: I guess I have my own opinions, but I'm going to instead go to a study that was done about five years ago by the American Dental Association. And what the ADA did was they asked, I think the number was 19, 000 dentists if they'd been stolen from. And let's start with the good news. 53 percent of them said no.

As far as I know, I haven't been. And, this doesn't lend itself to absolute answers. I think everybody who answered any question here finished with, to the best of my knowledge. So 53 percent said, I don't think I've been stolen from, and of course the other 47%. Yes, I have. The ADA asked that, that cohort another question, how many times.

And now it gets a little interesting. So 26 percent of the respondents, in other words, about half the people who said, yes, I've been stolen from said once, as far as I know, 11 percent said they'd been stolen from twice, 2 percent were the triple dippers three times. And the one that really makes me scratch my head is that 8 percent of respondents.

Had been stolen from at least four times. Let's do a little frequency exercise here. We take 26 percent times 1, and 11 percent times 2, and 2 percent times 3, and 8 percent times, let's assume only 4. And what you end up with, Dean, is 92 embezzlements have already happened in a cohort of 100 dentists.

Dean Steinman: Interesting. And this could be going on for years, obviously.

David Harris: Sometimes it has.

Dean Steinman: 20 bucks here, 30 bucks there, just adds up a lot.

David Harris: And there, there are some unknowns there. For example, we don't know how many people have been stolen from and didn't realize it, how many of that 53 percent who said, no, I haven't been actually had an either, either didn't know it, or I guess conceivably knew about it and just chose not to share that with the ADA.

We also don't know how many of that group and for that matter, how many of the other 47 percent who had been stolen from will get hit either the first time or again, and the rest of their groups. And so this is a really mainstream issue.

Dean Steinman: So with so many practices now being digitized and being, technology oriented how has, the increase of using technology?


risks associated with embezzlement.

David Harris: Technology makes it way easier to steal. I started doing this kind of work back in the days before computers. So when dentists used the old pegboard system that was the manual ancestor of practice management software. And when you were working in a pegboard office.

There, was, what you were seeing as a dentist at the end of the day was raw data. In other words, you saw individual patient appointments, you saw whose handwriting made entries things like that. And even the least adept dentist in practice management software. Pegboard in those days could could see what was going on.

When practices computerized, the distance between the dentist and the information got bigger. And now what you were relying on were reports, and reports are essentially an abstraction of transactions instead of seeing the raw information. And also, a lot of dentists decided that, that knowledge of practice management software was somebody else's job.

And they consciously stepped away from it. And what I'll say to the audience is, that software is probably more important to your financial well being than your handpiece is. And yet, you all know the handpiece like it's your child. And when it comes to practice management software, so many dentists are just scared they will break something if they touch it.

And so the knowledge gap between receptionists and office managers and doctors has grown. And that, that creates an exploitable weakness that plenty of embezzlers are happy to step into.

Dean Steinman: It's funny, when I talk a lot of practice, I always find out what type of software they're on and it's still amazing that a huge majority are still computer based versus cloud based.

Okay. And then mind blowing that they're doing that at the compute, that's where ransomware could pop up and problems like this across the board. What's one bit of advice you could give a practice who's listening this today just from a technology standpoint of something they could do to potentially you know mitigate the embezzlement Opportunities that are out


David Harris: The first thing is to accept the fact that practice management software is not going away Okay, if you're a dentist, it's gonna be with you for the rest of your career and you may as well embrace it You know, I run into a whole lot of dentists who do not know even how to print a report in their software.

And the second piece of advice I'll give you is print your own damn reports. As soon as you allow somebody to print your report and hand it to you, that report was printed without you having any control over the parameters used to generate. And selective reporting is a real thing. Again, I'm not gonna map it out here for how people can do it, but we see a whole lot of selective reporting where the doctor thinks they're looking at all the information in the practice management software and they're not,

Dean Steinman: You bring somebody aboard and especially if you don't practice doesn't have an office managers there for 10, 15, 20, 30 years, you trust these people. They're your lifeline. And, so we deal with what that said. Sensitive topic, Embezzlement. So how do you approach flight education and communication to create awareness without causing alarm?

Or is that, or is if this spoke, this fire,

David Harris: I think we need to cause a bit of an alarm here. This is a mainstream disease that affects dentists. And most of the dentists I've met are great people and they didn't get into dentistry because they thought it would make them.

Insanely rich. They went into dentistry because they wanted to help people and they were fortunate to have the manual skills and the intellectual skills to do it. Through dentistry but I see way too many dentists who abdicate from the finances of the practice and they simply leave this in everybody else's hands and hope for the best and that's exactly the recipe that an embezzler is looking for and yes, they take advantage.

I will quote a former president of the United States known as the Great Communicator. And he said very simple statement, trust then verify, and that should be the principle that every dentist lives by.

Dean Steinman: Every

business owner should do that. Yeah. You can't get by without trusting and without delegating otherwise you'll never get out of the mud.

But at the same time. You trust and delegate then, verify and the ideal way to do that is to bring in the third party because they might because they said they haven't even had a turn on their computer or they don't have a printer report. Ideally it's just to bring in she'd be able to talk to you first, if you want to suggest somebody just here's two things to do today to verify.

How would you suggest to do that?

David Harris: There are systems and there are there are guardrails that can be put in place that will stop a fair number of problems. And we love to work proactively with a practice owner to put those things in place because that lowers the risk dramatically.

The second thing that lowers the risk dramatically is practice owner involvement and it doesn't have to take a lot of time. I think the time commitment to be effectively overseeing your practice is probably 10 minutes a day in an hour to an hour and a half once a month. That should be the time commitment.

If you're a practice owner and you don't want to make that time commitment, then my general suggestion to you is you've made a bad career choice. And it's time to reconsider and, think about affiliating with a DSO or maybe an FQHC. If you're of the right age and physical fitness level join the military, but with the privileges of practice ownership comes some responsibilities, and this is one of them.

Dean Steinman: They have to realize, more important, are they a dentist or a business owner? Plain and simple. You don't have to choose one or the other.

David Harris: If you want to be a pure clinical dentist, there are plenty of options available to you, but practice ownership should not be one of them.

Dean Steinman: So now let's put your supervision crystal ball on. Let's look at the future. What do you envision the key challenges, opportunities out there in the dental office, in the protection industry and investment, program that you're positioning yourself to address in the future?

David Harris: Sorry, could you repeat that?

That seemed like an awfully complicated question in the way I heard it.

Dean Steinman: So basically

we're going to look, we're going to look in the future. All right. So what would you see? down the road at the biggest challenges and opportunities, okay, that are out there for somebody for embezzlement. And how are you, what are you doing to position yourself to address those that potentially is coming down the road?

David Harris: The challenge right now, as we sit here in, in the first part of 2024 is the way the economy's moved in. Inflation has eroded people's purchasing power over the last couple of years. We're now in a high interest rate environment and what that means is that you have staff who bought a house when money was cheap And you know the mortgages are just starting to cycle through and people are renewing it Sometimes four or five percentage points higher than their last mortgage So the first thing for a dentist in the current climate is to understand that a lot of their staff are Probably experiencing money problems Does that mean automatically that they will steal?

Absolutely not. But some percentage of them, who have maxed out their credit cards and they've borrowed all the money they can from family and they're in their eyes at the end of the line financially, some of those people will steal. So we need to have probably a better understanding than most dentists do about where their staff are in the world.

It's interesting, Dean, when I watch what happens at lunch hour in a lot of practices, Dennis goes into their private operatory and they close the door and they check the stock market or surfboard or do whatever they do. And the staff all go into the break room and have a conversation.

One of the suggestions I'd make to Dennis is, maybe once or twice a week, eat with your staff. If you haven't done this before, they're going to find it creepy at first. And you might have to bribe them with a little bit of food to get them to accept that you're going to be around a bit.

But the break room is the place where the hierarchy kind of gets left at the door. And people tend to relate to each other as people. And that's where you'll learn, who's put an offer on a house, but they're not really sure if they, if their financing is going to go through. And, who who's got an expensive repair bill on their car that they weren't expecting?

That's where you find that stuff out. And again I'll reinforce that not everybody with money problems steals. And people steal for lots of reasons other than financial pressure. But get to know your staff as people and you'll be in a lot better place to spot when somebody is likely to go off the rails.

Dean Steinman: All right. So closing it, should a practice do today, what's one thing somebody should do today that just let them. Breathe easily tight six. I'm like being or oh, I might be one tip today

David Harris: Actually, I'm gonna give you two answers to that I'm gonna give you I'm gonna give your audience two financial strategies that they can follow that are both pretty easy but The basic challenge with practice management software is to make sure that first of all, it records accurately what happened.

And second, that it corresponds to what's happening in your bank account. So the first thing is a comparison between collections and deposits. The conventional wisdom was you did that at the end of each day. And there are two problems with that. It's a lot more work than what I'm going to propose. And there are things called timing differences that make The real time calculation at the end of the day is very difficult.

So there are, there's a lot of money that comes into a practice where it's recorded on one day in your software and a different day at your bank. When a patient comes in and pays by credit card. Software captures that today but it might take two or three days before that money lands in your account.

And that, that really complicates the end of day reconciliation. As soon as you move to doing that once a month instead of at the end of each day, A, it takes a lot less time and B, Most of those timing differences are self resolved. So that should be part of a doctor's monthly routine. The second thing I'm going to do is introduce something called articulation.

And when your audience hear about articulation, what they're all thinking about is that relationship between the mandible and the maxilla. And in a clinical sense, that's articulation. What I'm using that word very deliberately for what I'm suggesting a dentist do. Let's say your office was open 16 days this month and in your left hand, You have 16 day end reports that you printed at the end of each day and you stuck aside.

And in your right hand, you have a month end report that's a summary of the whole month. Would it be fair to say, Dean, that if you total the collections and the adjustments and the payments for the 16 day end reports, they should exactly equal what the month end report says? Should. What if they don't? If they don't, what it means is somebody came in after hours and they did stuff you didn't, they didn't want you to see.

Dean Steinman: Okay. Oh, How hard is it to see that?

David Harris: It's easy. You just add up the 16 reports and I built a little spreadsheet that, that, makes the math easy. So if anybody in the audience wants that spreadsheet, let me know and I'll send it to you. But when you total up the 16, they should equal exactly what the month end. Somebody says, or there was extracurricular activity, simple, and that's how you find it. What that ensures is that you have seen everything that happened in the practice this Month.

Dean Steinman: Okay. So it's just another thing to add to your list to do, but this is important.

And I think you're running a business and making sure that it adds up. Is,

is a priority

David Harris: You can't delegate this. You can't ask the office manager to do this calculation because that's like asking the fox if he'd mind holding the keys to the henno for you for an hour while you went to the gym.

But, it, your spouse your kid, your accountant, your bookkeeper, there's somebody who can do this for you if you say, that, that isn't really what I signed up for. What you did sign up for though is to understand that it has to be done and why it has to be done.

Dean Steinman: This is so important to, I appreciate the, the insight and giving this out there.

So in closing two questions. One. Nine. Ten. 11. If somebody wants to get in touch with you, get more information, potentially thinking they might be, this might be an issue for them. What's the best way for them to do

David Harris: they can call us on our toll free number, which is 888 398 2327. So 888 398 2327.

Or they can go on our website, which is prosperident. com. And there's a contact us form right there. Just fill it in and somebody will get back to you. Usually within a couple of hours.

Dean Steinman: Awesome. Great. As you really have to take a look at this and as David said, delegate it. Use something that, if you don't feel comfortable with numbers or this or that, just outsource it.

And you should be able to, every month, get a basic report. Shouldn't take much time or cost much money to do it, but it's something that's real important to do, especially with how prevalent this is without even realizing it. David, thanks so much. And we've got one final, question for you.

What are you binge

watching now? I chose to watch.

So what do you


David Harris: Yeah. The series I'm watching when I work out which came on last season is called fire country. And it's a it's a story about prison firefighters in California.

Dean Steinman: Okay. What's it on Netflix? Regular TV.

What's it


David Harris: I'm seeing it on I think Amazon TV, but it's a network show. It's, it was on CBS last year and it should be back live with us in a couple of weeks.

Dean Steinman: Oh, good. All

So guys, if anybody's looking for a new show to watch, check it out. David suggested there. So David, thanks so much again for joining.

I appreciate it. Everybody out there podcast land. Thank you so much for listening. Thanks for all of the feedback and something, just make sure that your numbers add up. And if not, please reach out to David. These guys are great. They're Best in the industry as far as what I know and I highly recommend them to do so So thanks so much again for joining.

I appreciate it everybody in podcast land. Thank you so much for listening And be happy keep smiling and may 2024 be a best year ever. Thanks everybody

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