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926: Part 1: Why Separation of Duties Is So Important With Money in Your Dental Practice – David Harris

About 70% of dentists will be embezzled at some point in their career. About 80% of them can be prevented just by having the right systems. In this episode, Kirk Behrendt brings back David Harris, embezzlement expert and CEO of Prosperident, to share three rules that will deter future thieves and reduce your risk of embezzlement. If someone is going to steal from you, make it extremely difficult! To learn how to drastically reduce your risk of embezzlement, listen to Episode 926 of The Best Practices Show!

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Main Takeaways:

  • Break up the duties of the revenue cycle. No one does more than two of the six tasks.
  • Only clinicians who were in the operatory should enter treatment into the software.
  • Anyone is capable of a dishonest act given the wrong set of circumstances.
  • Get a PO Box. Dentists should be the only ones with access to the mail.
  • Don't try to monitor everything yourself. Delegate more to your team.
  • Use cross-training as a way to transition into dividing up systems.
  • Have multiple sets of eyes on tasks to catch discrepancies.
  • Embezzlement does more than just financial damage.

Quotes:

“A friend of mine is a dentist who found out that she was embezzled. The amount that she lost was about $280,000. This happened over five or six years, and it was her trusted office manager doing it. I was in her town a week ago, and we had dinner together. She said to me, ‘I'm about to sell to a DSO.’ I asked her, ‘Is what you've been through over the past year,’ the investigation and the court proceeding that followed that she's been going through, ‘a big factor in your decision?’ She said, ‘Absolutely, it was. This whole thing has taken away some of the joy that I used to get out of dentistry. At this point in my life, I'm not ready financially or emotionally to hang up my handpiece. But I don't want to be a practice owner anymore.’ So, you are right on the money. This is a financial issue, but it's a lot deeper than that. And frankly, I would never wish being embezzled on any dentist.” (2:44—3:53) -David

“The thing about division of duties is that if it's done properly, what it does is force one of your team — if they wake up one morning and decide they want to steal from you — to have to approach a coworker. So, I go to you and say, ‘Kirk, I want to steal from our boss, but I really need your help.’ As soon as you make it so that the only way somebody can steal is to have that conversation with somebody who they work with but may not know all that well, that will stop about 80% of wannabe thieves from even trying. So, this is a really great way to lower your risk without excessive disruption. There is no out-of-pocket cost to dividing up duties. It's a relatively easy, cheap, one-and-done way to drop your risk.” (4:55—5:48) -David

“The first rule is really simple. The only people who should be entering treatment into software are clinicians who were in the room when the treatment was done. So, if we're talking in the dental operatory, typically, it's the assistant who should be entering treatment. If we're looking at the hygiene operatory, it's normally the hygienist. This sounds so basic, but we find a surprising number of offices where treatment is entered by the front desk. In other words, if you go back to the days before every operatory had a terminal with practice management software — in the old pegboard system that was the antecedent of practice management software, or when software first came into practices and you had a terminal at the front desk and nowhere else — then typically, treatment was written on a paper chart or maybe a routing slip, and that paperwork went to the front desk, and then the front desk entered the treatment. That was the classic way that things were done in 1990. Now, with every operatory having a terminal, first of all, the alternative approach creates paper when you're trying to go paperless. Secondly, it makes it much easier for a thief.” (7:46—9:10) -David

“When treatment is entered in the clinical area — let's say I'm a patient in a practice and I'm having a crown done today, and when the crown is placed, the assistant enters the CDT code into your practice management software. By the time I get to the front desk, I already owe the practice whatever a crown costs in your office, let's say $1,800. If the person at the front desk is going to steal my money, one of the things they have to deal with is the fact that I already owe $1,800. On the other hand, if I carry out my chart with me with a routing slip and give that to the person at the front desk, that gives them the luxury of deciding what they're going to enter into the practice management software, which might not end up being an $1,800 crown. So, what we do by entering treatment in the clinical area is that we put the front desk person who wants to steal in a bit of a dilemma. Because again, if they're going to steal, they have to deal somehow with my $1,800 balance, and whatever they do there is going to be visible. So, that's rule number one: treatment is entered by clinicians. Front desk should never be entering treatment.” (9:12—10:35) -David

“Some software will handle [setting preferences for who enters treatment], although I don't think you need to. All you really have to do is decide that treatment is going to be entered in the clinical area. If your clinical staff aren't familiar with how to do it, you teach them how. Then, you've usurped the prerogative of the front desk to do it. I mean, if the treatment is already there, there's not much they can do about that. So, I'm not sure you really need software gateways to do this. This requires an affirmative step by your clinicians, and you simply have to make sure that they have the knowledge and the understanding that it's their job to do this.” (11:03—11:45) -David

“It takes virtually no time to enter treatment. It’s all done on CDT code, so there’s like a five-digit code to enter to convey a certain treatment — and you’re already putting clinical notes in the computer anyway. Basically, what I’m suggesting you do is add five more digits to your routine. There’s really no big imposition here. The only issue is sometimes the clinicians don’t know CDT codes very well. That’s correctable. . . There are about 9,000 CDT codes in total. But in most operatories, you might use 1% of those regularly. So, I don’t think it’s a big deal. If you don't want to do it, fine. But understand that you've opened a door. If I'm a thief and I perceive that door to be open, I'm sure as heck going to take advantage of it.” (12:08—13:07) -David

“We talked about entering treatment. Now, we have billing patients, receiving payments, recording those payments, doing the end-of-day balancing, and making a bank deposit. I'm going to give you two rules for those. The first rule is that nobody in your practice should do more than two of those five things. The second rule is that the two they do should not be sequential. So, whoever is the person who is recording payments all day should not be the person doing balancing at the end of the day, and whoever does the balancing can't make the bank deposit. Let's go back to our objective, which is that we want to make it so that if somebody is going to steal, they have to involve a coworker. That basic breakup of alternating duties really puts thieves in that position.” (13:17—14:14) -David

“One thing that I'm a big advocate of is the doctor getting the mail. And I don't mean that the United States Postal Service puts it on the front desk, and then they put it on the doctor's desk. What I mean is that the mail comes into a post office box that the doctor has the key to, and as part of their routine on the way to work, they stop at the post office box and get the mail. As a side benefit, that might help you claim car expenses with the IRS. But that's a whole other story. By getting the mail and being the first person to look at it, you can check that box off of, you're the person who received the payments.” (14:45—15:29) -David

“One of the truisms of stealing is the money has to come from somewhere. So, if I'm stealing from you, one of two things happen. Either you get paid less than you otherwise would, or some suppliers don't get paid. We commonly see a whole bunch of unpaid suppliers in situations where stealing is going on because it's one of the ways that a thief can keep the doctor's bank account at the level that they think the doctor will be happy with while still stealing. So, that's one reason to get the mail. But the other reason is then you get to see the checks coming in. You can at least keep a reasonable headcount in your head of how much has been received today or this month and compare that to what's going into your bank account. It's one more step that makes it a little bit harder for people to steal.” (17:00—17:56) -David

“To refresh, the first rule is that treatment is entered in the clinical area by clinicians. Number two is, of the five remaining tasks, nobody does more than two. The third rule is the two can't be consecutive. So, we were talking about the adaptations of a small practice and how if we only have one front desk team member, how we can still do this. The other answer is, it might be a situation where you end up involving some of the clinicians in a step somewhere. For example, maybe it's your assistant's job to do the day-end balancing at the end of the day. The way that you lower your risk is by having different sets of eyes on what's going on in your computer. So, when somebody's job at the end of the day is to balance, they're going to look at the amount collected, and they're going to compare that to the amount that's going into the bank. If there's a discrepancy, they're going to come back to you and say, ‘Wait a minute. We collected $300 more than we are depositing today, and I don't know where it went.’  At that point, you start to realize that you have an issue, and you look into it. We get a lot of calls that start that way.” (18:00—19:15) -David

“[How you approach this with your team] is going to depend a lot on personalities, how you interact with your team, and stuff like that. I might use it as a discussion and introduction into cross-training. For example, ‘Nancy, we love you and we hope you stay here forever. But we also understand that people, at some point in their life, want to move on and want to retire. It's important to me that some of the other team members understand a little bit about what you do so that if Monday morning you call in sick, we don't grind to a screeching halt. So, I'd like my assistant to learn a little bit more about doing the day-end balancing, and I want her to do it for a while. She has ambitions to move into the front desk, eventually, when you're not there anymore. So, let's give her an introduction.’” (20:05—21:02) -David

“Unfortunately, I think sometimes doctors would rather either do things themselves and not delegate or just have them not get done at all as a way of avoiding delegation. So, it's a chance to convey trust in your whole team as opposed to individuals in your team. And what I'm going to tell you, Doctor, is that the people who work for you are probably smarter and more capable than you think. So, let's give them a chance.” (21:16—21:48) -David

“The other thing we run into is the doctor who says, ‘Well, Sally at my front desk would never steal from me. I mean, she goes to church every Sunday. I was at her daughter's wedding. There was no way that she would steal from me.’ We know from having seen this many, many, many times that everybody has the capability of being a thief inside — it just requires the right set of circumstances to bring it out. I'll give you an example. We're recording this in July, right after there have been horrific floods in Texas. I don't know this for sure, but I'm guessing that for a fair size swath of Texas right now, the infrastructure has been crushed. There's no electricity, there's probably not a lot of ability for food to get to certain places, and there are probably hungry people right now. If those people get hungry enough, will they steal food? Absolutely. In fact, I hope they will because it's much better than starving to death. So, we have to accept that at some level of pressure, everybody's ethics become pliable. The difference between people who are thieves and people who are fundamentally honest is that for the fundamentally honest people, that threshold that forces that is really high. There are other people who will steal because they want a designer purse and they don't have the money. So, everybody has got their own dishonesty threshold. But we have to recognize that every person in the right set of circumstances — or I guess the wrong set of circumstances — is capable of doing a dishonest act if they really need to. So, what I'm saying is, do not confuse outward manifestations of honesty, like somebody who appears to be really religious, with being safe. Safety comes from systems, not from individuals.” (21:49—24:03) -David

“You can either monitor a lot of things yourself, or you can set up systems that lower your risk and reduce the number of things that you really have to personally dig into. I like door number two a whole lot better than the first one.” (24:53—25:11) -David

Snippets:

0:00 Introduction.

1:11 David’s background.

2:05 Embezzlement affects more than just finances.

4:14 Why division of duties is important.

5:51 The revenue cycle and the six tasks, explained.

7:46 Rule 1) Treatment should not be entered by the front desk staff.

11:46 Why rule number one is important.

13:10 Rule 2) Nobody does more than two of the six tasks.

14:45 Why dentists should be the ones taking care of the mail.

17:57 Rule 3) Have different sets of eyes on tasks.

19:24 How to transition into separating duties.

21:05 Don't try to do this on your own.

24:06 Final thoughts.

25:14 About Prosperident.

David Harris Bio:

Under David’s leadership, Prosperident has expanded over the past three decades to become a team of more than 20 highly specialized fraud investigators, forensic accountants, IT specialists, and support staff. David’s vast investigative experience, coupled with his youth-filled misadventures and his past military service, have given him a unique insight into embezzlers’ mindsets and actions. He is passionate about sharing his wealth of knowledge with dentists and dental specialists.

David is a much sought-after speaker and an accomplished author on the topic of dental embezzlement. Dental Embezzlement: The Art of Theft and the Science of Control is his most recently published book.

David’s professional qualifications include Certified Fraud Examiner, Certified in Financial Forensics, Forensic CPA, Chartered Professional Accountant, Certified Management Accountant, and Licensed Private Investigator.
ACT Dental Team

ACT Dental Team

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