What the World's Leading Expert in Fraud Has to Say About the Dental Industry

Connect with David Harris and his team: https://www.prosperident.com/

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Transcript

Jonathan VanHorn:

Welcome to the Tooth and Coin podcast, where we talk about your adventure of being a dental practice owner. In these episodes, we're going to be talking about problems that you will likely face as a practice owner, as well as give an idea about actionable solutions that you can take so that you can get past this problem in your practice. Some of these concepts are really big ones. Some of them are very specific, but we hope that these episodes help you along with your journey. Now, a very important piece for you to understand is that this is not paid financial advice. This is not paid tax or legal advice. We are not your financial advisors. We are not your CPA's. This is two CPA's talking about informational and educational content to help you along with your journey. A very important piece for you to understand.

Jonathan VanHorn:

Another thing that you need to know is if you enjoy today's content, join us on the Facebook group. So we've got a Facebook group that is active with dentists that is going to have content talking about what we're talking about today, to continue the discussion. Agree with us, don't agree with us, have a story to tell, have something to share? Join us in the Facebook group. If you go to Facebook and you search for Tooth and Coin podcast, click on it to join it and be able to join us there. Finally, if you need some more help, we're developing a list of resources that are going to be centering it around our topics of discussion, to be able to help you a little bit more than what the content is doing. So if you'd like access to that whenever it becomes ready, all you have to do is text the word tooth and coin, T-O-O-T-H-A-N-D-C-O-I-N to 33444.

Jonathan VanHorn:

Again, that's toothandcoin, all one word, no spaces to 33444. Reply with your email address and we'll email you instructions on how to get into the Facebook group, as well as our digital list, to be able to send you those resources when they're available. And if they're available, we'll go ahead and send them to you as well. So onto today's episode, hope you enjoy it.

Jonathan VanHorn:

Hello, ambitious dentists today on the Tooth and Coin podcast we have with us, an old friend of mine. It's one of the few people in dentistry I've actually physically met. And that is Mr. David Harris. He is with Prosperident. Basically, if you want to talk about dental fraud, he is the world's leading expert. If someone came up to me randomly on the street and said, "Hey, we're going to have a fight over dental fraud. You've got to pick your horse." David would be my horse. There wouldn't be any doubt about it.

Jonathan VanHorn:

And David, being a friend of the podcast, listen to our episode, I think it was episode number four. And he was like, "Hey, if you guys ever want to talk to someone who actually does fraud every day, multiple times a day and lives in this world, I'd be happy to have a conversation with you." Joseph and I said, "Of course." You're the best at it. We're going to talk to you about it. We're going to ask you questions. We're happy to have you on. So again, David Harris with Prosperident, dentalembezzlement.com. They are dentistry's embezzlement experts and we're really lucky to have him on the episode. So David, thanks so much for coming on.

David Harris:

Oh, great to be with you, Jonathan and great to see you again. I will make one clarification. You said I do fraud every day, that's not true. I investigate fraud everyday.

Jonathan VanHorn:

Okay.

David Harris:

Other people do it. I just keep score.

Jonathan VanHorn:

Well you're more involved in that world than we are. I'll say that much. So a big problem we're talking about today on the grand scale is fraud. We hope that we're going to be able to talk a little bit about the how, the why, and the what is being done in the fraud world right now, so that David can really give us in the trenches information about how to combat this and like why people steal money. For a lot of us out there, you don't really think about that being... I'm personally a very trusting person. I want to trust people as much as I can. And so that concept of someone else is willing to just take stuff from me is completely foreign, it's something that I almost just block out in my head because I want to trust people. So David, why don't we start with that? Like, why do people steal from dentist?

David Harris:

Well, you said a Jonathan, everybody wants to trust people. And just for this conversation, I'd like to be a little more precise in our terminology. You mentioned fraud a couple of times. What I really want to talk about is embezzlement. And embezzlement means somebody who's in a position of trust, like an office manager, or maybe a bookkeeper, possibly another dentist in the practice, stealing from the practice owner. So embezzlement is really the conversation. Your question was, why do people steal? And they steal for two reasons, which I'm going to call need and greed. So needy people have their backs against the wall financially. There's something going on in their life that has meant that there's more money going out of their household each month than coming in. And unless you're a government somewhere, you can't sustain that for very long.

David Harris:

And at some point they've borrowed all the money they can from friends and they're two months behind in their mortgage payment and the bank is about to kick them out and they steal. And they feel bad about it, but they just don't think they have any choice. And there could be a lot of causes. It might be somebody who's going through a divorce. It might be a situation where you have one spouse working in the dental practice and the other spouse has lost their job. Maybe there's an addiction, but there's something happening that's kind of upset the family finances and they're stealing to keep themselves afloat. And then you have the greedy people and they're a little bit different. They're really stealing to address an ego deficit more than a financial one. So they think basically that they're worth far more than what society thinks they're worth and they're stealing to make up what they perceive as that difference.

David Harris:

So this is the person who looks at their dentist as basically a high functioning moron with good hands and in their mind the only reason the dentist is successful is because this person keeps their chair full and then when their patients leave, collects the money. And some of them, Jonathan will even construct a partnership in their own heads between themselves and the dentist that doesn't exist anywhere else, but in their mind. And then they're not in their mind stealing, they're just taking what they think they should have in the first place.

Jonathan VanHorn:

You wouldn't have this money if I wasn't collecting it so I should obviously get 5% of it. Right.

David Harris:

Yeah. And when you talk about the fraud triangle, which I know you guys have covered previously, I mean the third leg of the triangle is rationalization. And rationalization is when you say to yourself, "I know that in general stealing is wrong. However, it's okay in this case, because..." And then whatever comes after that, because is the rationalization. And one of the rationalizations that we see is called the metaphor of the ledger. And what that says is my value to the practice is much higher than what the doctor's paying me so I'm entitled to the balance. And early in our careers, no, we've learned at age three that stealing is wrong. And rationalization is where you suspend reality for a minute when you say, but it's okay here, because.

Jonathan VanHorn:

So in terms of like you dealing with the people that have the need or the greed, I mean, is there a defining factor in these people that you guys catch?

David Harris:

Well, yes. It is the most trusted person in the office because people who you don't trust have a far more difficult time embezzling from you than somebody who you do trust. So Jonathan, if I'm working for you and my plan is to embezzle, I worm my way in your family. I'll be the staff member who will babysit your kids for you, or we'll run your personal errands on my lunch hour because what I want you to think is, "Gosh, I would be so screwed if Sally ever left." And you mentioned trust early on, let's circle back to trust for a minute because the way that humans handle trust is interesting. When you first meet somebody, you do this assessment process of can I trust them? And if the answer is yes, then you lock this away in a closet. You never revisit it.

Jonathan VanHorn:

It's true.

David Harris:

And in the world, in which I live trust needs to be a little more fluid concept. And we need to kind of pull that out of the closet periodically and say, okay, I know that I could trust this person two years ago, but are they still deserving of my trust? And it just isn't human nature to do that. And that's when people get into trouble. Dentists' are people of science and healers and altruists, and they really like you want to trust everybody. And unfortunately, I see the consequences of extending trust and never re-examining it.

Jonathan VanHorn:

How many people do you trust David? That's what I really want to know is how many that you trust.

David Harris:

Well, I used to trust my mother and my father, but my mother passed away so I'm down to one.

Jonathan VanHorn:

Hmm. That's funny. And I noticed you didn't mention marriage or anything like that [inaudible 00:09:03].

David Harris:

Well, I had this argument with somebody once and what I said to him was "Your mother will always be your mother, your spouse may not always be your spouse."

Jonathan VanHorn:

Do you ever find spouses stealing from dentists?

David Harris:

We do actually a lot more than you would expect. And usually of course, it's an antecedent to divorce. So I'm married to a dentist and I'm about to divorce them. And I go see one of those horrible creatures called a divorce attorney and the divorce attorney says, "Okay, David, where does your money come from?" And I say, "Well, I worked for my wife, the dentist, and she pays me a salary." And the attorney says to me, "Okay, so when you tell your wife that you're trading her in on a newer model, what do you think her response is going to be?"

David Harris:

And I say, "Well, I'll be careful to do it somewhere where there are no sharp objects around, but I guess after that she's probably going to take me off the payroll." And the attorney says, "Okay, David, so I'm not going to tell you how to do this, but I'm going to tell you what you have to do. You're going to need to find a new place to live. You're going to have to buy groceries and not least importantly, you're going to have to pay me your blood-sucking divorce attorney. So you need some money under the mattress." And you know how this story is going to end Jonathon.

Jonathan VanHorn:

Yeah. Well, here's a business bank account that's got $200,000 maybe I should move half of the money into account that's in my name or something like that because I know where the buttons are on the bank website.

David Harris:

We have broken the news to a number of dentists that your marriage is probably in trouble and here's how I know that. We've caught somebody with their hand in your cookie jar and you're married to them.

Jonathan VanHorn:

Yeah. Yeah. So we've talked a little bit about why people steal. Let's talk a bit more about real world we're coming in and you're a dentist and your a new practice ownerish, or you've been practicing for a little bit, or you're about to become a practice owner or whatever it may be. What are the risks associated with this? What happens in the real world whenever practices are embezzled from?

David Harris:

It's a little tough to give you precise numbers and here's why. There's a lot of under-reporting that happens. So there's some embezzlement that never gets detected and we can't quantify that. There's also some embezzlement that gets found by the doctor and it gets for whatever reason swept under the nearest carpet, it doesn't make its way into the statistics either. And again, we can't quantify that. When we look at what we do know the best numbers I can give you came from a study The American Dental Association did in 2018, and the results were published in 2019.

David Harris:

So what the ADA did was they asked 17,000 dentists, have you been embezzled? And of course this isn't a question that lends itself to absolutes. The good news is 53% of the respondents said, "I don't think so." So 47% had been embezzled. And then the next thing the ADA did was they went back and asked the 47%, "Okay. How many times?" And 27% of all the respondents, in other words about half the people who said yes, said "As far as I know, once." And the remainder were somewhere between two and more than four times. And if you did a interesting little exercise, I took 27% the number of who said yes, once that I know off times one and 11% had said two times that I know of so I multiplied 11 by two, and I think it was around 2% that said three times and so on. So I multiplied the percentage times the frequency and what you got was if you sat a hundred dentists in a room that group had already had 93 embezzlements.

David Harris:

The other unknown here is how many of the 53% who said, "No. As far as I know, I've never been embezzled", will get hit in the rest of their careers and you there's a pretty good chance that they will. Here's what your clients should take away from this. There's probably realistically an 80% chance that your client will at some point in their 30 odd year career gets stolen from them. The other question is how much money gets stolen? And the answers there come from our case files and the average amount in our case files is about $109,000.

Jonathan VanHorn:

So is that 109 or a 190?

David Harris:

One zero nine. One more thing before we leave that question. So I mentioned this study had its results released in 2019. In 2007, so 12 years earlier, the ADA did a very similar study. And in that survey, 35% of dentists reported being embezzled. So from 2007 to 2019, the number of dentists reporting embezzlement went up from 35% to 47%. In other words, it increased by about a third in a 12 year period.

Jonathan VanHorn:

What do you think led to the increase? Do you think it was-

David Harris:

More people stealing.

Jonathan VanHorn:

Okay, well that... People don't all of a sudden wake up and there's like a third more thieves than there was before. I do think it was like the financial crisis of 2008, the economic downturn. Do you see that more often in years where like... We're in boom economies right now, technically. Do you see fraud more prevalent in downturns versus... I mean you've been doing it long enough. Do you see a rhyme or reason to that? Or you just see it all the time, one way or the other?

David Harris:

There are probably a lot of reasons. First of all, I think that we've done a fair job of shouting from the rooftops and increasing awareness. So I think a higher percentage of the thieves are being caught now. And probably that unquantifiable group who I mentioned who steal and don't caught is getting a little bit smaller. And then yeah, you can point to a lot of events that prompt people to steal. And the other thing Jonathan, I think is that the financial operations of a dental practice are getting more complicated than they once were. Dentists if we're going to be really blunt about it, the control systems in most practices haven't changed fundamentally since the 1960's, which was before computerization, before practices took credit cards, before there was such a thing as an electronic funds transfer, and when probably most dental practices were managed by the doctor's spouse, as opposed to an arm's length employee. Okay. So all those changes that have happened since, I don't know, 1965 and yet the control systems fundamentally haven't changed.

Jonathan VanHorn:

Do you feel like the technology getting more... I don't know if automated is the right word, but being more efficient has helped or hurt dentists chances of being embezzled against?

David Harris:

Every technological change creates opportunities for thieves. One of the most successful thieves of the 20th century was a guy named Frank Abigail. And if you've seen or heard about the movie, Catch Me If You Can. That's his story. And Frank was predominantly a guy who passed worthless checks and monetized them. And he said a couple of years ago, if I were doing this today instead of in the sixties and seventies, the amount of money I could have stolen would have been much, much, much higher.

Jonathan VanHorn:

Yeah.

David Harris:

And I don't think he's commenting on the effect of inflation on dollars over time. He's simply saying I could do a lot more of this today. And the same comment applies to dentistry. Every innovation and one innovation I'll point to that opened some doors for thieves is a thing called a Square. And a Square is a little white plastic gizmo that plugs into the bottom of a smartphone and allows somebody to pay by credit card. I'm not going to map out the opportunities it creates, but I'll just point to that device and say if I were a thief, I would have a Square.

Jonathan VanHorn:

So I just gave an example that was too specific for David that happened in a real world situation. So we're not going to share that in case anyone who's listening and looking for opportunities. So we talked about the financial impact and the risk associated with doing this right or that dentists just implicitly take on by being a business owner today's environment in the dental world. A question that I've gotten in the past and whenever I get questions like this I always say in my experience... But I don't have much experience in this world so I'm just going to tell you as friendly information, just as anecdotal information, does fraud or embezzlement typically happen in smaller offices like three to seven employees, or does it typically happen in larger offices of like 20 to 30 plus employees? Again, another question of, do you have any data on this or just thoughts?

David Harris:

All kinds. What drives the probability of fraud or in this case embezzlement is really the probability of you hiring a dishonest person. And that has no relationship whatsoever to office size or whether you're a periodontist versus a prosthodontist or anything like that at all. The real probability we're dealing with is it somebody you hire maybe 20 years ago woke up this morning and said, "Yeah, today's the day I'm going to steal from my doctor." Statistically, Jonathan, this is a complete random walk. It doesn't depend on any factors relating to the doctor. I mean, another one that I will hear a lot from doctors is "Well, I pay my staff really well and therefore I'm purchasing their honesty and lessening the chance that they will steal from me." Okay. Well, let's go back to those ego-driven thieves.

David Harris:

The greedy ones that I talked about. These people are like bottomless pits. They overestimate their value by a multiple. In other words, they think you should be paying them three or five times what you are. That extra $2 that you pay your staff above kind of the local going rate, doesn't come close to scratching that edge. So no, there are no offices that are more or less vulnerable. People say my staff have been with me forever and therefore I'm not vulnerable, or I pay people really well or I live in a small town where all of the people I hire used to be my patients. And we see embezzlement that fits all of those profiles.

Joseph Rugger:

Let me ask you this, David. So when we talk about money in and money out, this is something that you referred to as the revenue side on the expense side. So whenever you're looking at all of the different embezzlements, what typically do you see? Is it majority revenue side stuff or is it majority expense side? And if you could maybe just kind of expand upon that, just for folks that aren't super savvy with accounting terms like revenue [crosstalk 00:20:17]-

David Harris:

Absolutely. And for the benefit of the non-accountants in the audience, what Joseph's asking about really is there are two ways that people could conceivably steal and he's wondering which of them is dominant. So by revenue side stealing, we mean somebody taking payments that come into the practice from either patients or insurance companies. And expense side stealing would be things like tampering with payroll or if the practice has a bonus plan trying to do things that will maximize the bonus. Or something we've been seeing a lot of lately is staff members making personal purchases because the practice has an Amazon account. So that's expense side stealing. Revenue side means patient or insurance payments. What we see Joseph is probably 80% revenue side theft and 20% expense side theft. So revenue is by far and away the dominant thing.

David Harris:

And if I'm the office manager and I want to steal on the expense side, it takes work. I have to do things to make that happen. And while I'm doing those things, people are putting $20 bills on my desk. So the temptation is much stronger on the revenue side. The other issue is this, let's say that I steal by inflating how much I get paid. There's a real limit to what I can do there, because at some point there's salary expense relative to revenue is going to climb to something that's extreme. And people like my CPA firm will say to the doctor, "Well, why is your expense ratio so high? Did you give all your staff a huge raise or something?" So it becomes conspicuous. Statistically, on the other hand, I can steal the same amount of money on the revenue side and it won't move any of the major key performance indicators enough to be conspicuous.

David Harris:

So if I'm a little bit analytical about it, I'm going to say I could easily take 5% of practice revenue without waving any particular red flags. On the other hand, if I took 5% of revenue in the form of salary it's certainly going to be noticed.

Joseph Rugger:

Had a practice owner the other day, brand new practice owner, he said, "Well, I feel like I'm doing a good thing here from a controls perspective. And we've gone cashless at our office, so we don't receive cash so that kind of inundates me from this revenue side." What would be maybe some of your thoughts on that? Certainly brand new practice owner, super great dentist, successful, does well but that was kind of one of his I'm preventing embezzlement because I'm not accepting cash at the window.

David Harris:

Yeah. First of all, I agree with his decision not to accept cash. It's a nuisance to handle it. It poses a lot of accounting challenges for practices. When they do things like take cash that came in and use it to pay off as expenses. I mean, you guys have both probably tried to work through the little accounting tornado that that can create. So I love the idea of being cashless. If I were an embezzler, would that stop me in my tracks, not a chance. It is much easier than most dentists realize to cash a check payable to them. And it is also not that hard to monetize a credit card payment, or even what's an ACH deposit. And for the benefit of the audience, ACH means automated clearinghouse. So that's when somebody like an insurance company, for example, deposits money directly into your bank account. As long as the thief is a little bit motivated and they normally are they will always find a way to monetize incoming money.

David Harris:

Again, I don't think we should take this out of context, Joseph. I think what your friend did was a good idea. However, it won't stop an embezzler. It will simply challenge channel them into some other way of stealing.

Joseph Rugger:

Whenever you look at the stuff that you've done and investigated, I'm sure that you guys come back and have a number of recommendations that you have. So to the extent that you feel comfortable sharing, what are maybe just some common steps that a practice owner might take to... I mean, I feel like you're not ever going to eliminate completely the embezzlement risk, right. You're going to do everything that you can to mitigate it. What are maybe some practical takeaways that they might be able to do to just help start to minimize that risk or minimize that opportunity?

David Harris:

Absolutely. Well, let's go right back to the very beginning to when dinosaurs roamed the earth. And the first thing I'll say about dentists is that they categorically hate the hiring process. And like any job you hate, mine is cleaning the garage, when a shortcut appears you tend to grab it. And a lot of dentists will take shortcuts in hiring. Shortcuts will include things like not calling former employers, not doing a criminal records check. It astounds me the low percentage of dentists who drug test applicants. I mean, I can't get a job at FedEx delivering the crap people buy on Amazon without a drug test. And yet I can work in a dental practice that can prescribe narcotics. That makes absolutely no sense. So the first thing is that dentists hire people knowing far less about them than they should and that's really easily correctable. So let's start there. We've got to do a better job of screening people before we hire them. I'll give you a sobering statistic. 70 million Americans so that is one in four adults has a criminal record.

David Harris:

And yet the majority of practices don't check criminal records before they hire. It's easy to do and they just don't. I wouldn't hire somebody today without looking a little bit at their social media activity, because you can learn a lot about people by the way they conduct themselves on Facebook or Instagram or whatever.

Jonathan VanHorn:

As a person who has a team of 16 people, I have gone through the hiring process many times I can tell you, yes, you can find out a lot with just a little bit of social media digging.

David Harris:

Yeah. It's even more basic than that, Jonathan. When I'm interviewing somebody face to face, one of the things I should say is I just need to check your eye identification so can you please show me your government issued photo ID and a couple of secondary pieces of identification. And the secondary stuff could be anything. I mean, a gym membership, a library card, a credit card, whatever, but I want to see one with a photo and two others with your name. Because if I have baggage and I'm applying for a job with you, one of the easiest ways to hide that baggage is to pretend to be somebody else like my brother.

Jonathan VanHorn:

That's a really good point. Yeah. That would be pretty simple to do. Just go by a different name everyday.

David Harris:

It's so simple. So Joseph, to answer your question, the first piece is hiring. The second piece is this and it's really simple. Your practice management software, every single day, will produce a report at the end of the day that says here's how much money you collected. And that should be the amount that gets deposited into your bank. There are two kinds of dentists. There are those who know how much money should go in the bank today and check their online banking to see if it happened and there are those who don't. The majority are in the second category. Again, I think this is probably 20% of doctors know how much the deposit should be and check it and 80% just kind of blindly hope that the amount of money that goes in is right. If you're in that 80%, you make it really easy for me to steal from you because I can simply partition the deposit into the part that I'm going to put it in your bank and the part I'm going to put it in mine.

David Harris:

If you check this, I can still steal from you, but now it gets a little tougher because what I have to do is I have to teach your practice management software how to lie to you about how much money came in. It's far from impossible. In fact, it's relatively easy in most software, but if you check one against the other immediately, you have ruled out the bottom core tile of thieves, right. The laziest, the least imaginative can't steal from you anymore. Okay. So if you don't check deposit against what goes in the bank, then the laziest, dumbest thief on the planet can successfully steal from you. Okay. So let's start there. It's easy in theory, the practice is a little more complicated because some of the money that comes into a practice arrives at a different time than when it's recognized by the practice management software.

David Harris:

So for example, if I go to your practice and I pay by credit card your practice management software records it today, but there's a processing lag of typically a couple of days before that same money hits your practice bank account. So it's a little bit challenging for a doctor. And it's one of the things often that I suggest they outsource to somebody, but if you're not doing that, as I say, you're vulnerable to very unimaginative stealing.

Jonathan VanHorn:

This is one of those areas that as CPA's, we run into a lot because we get a lot of on this. And one big misconception that we want to make sure is very clear in this episode is your CPA's job is not to help you with fraud. Your CPA's job is to create a reconciliation of your accounting if they're doing your bookkeeping and create financial statements. If you read any reports that come with financial statements being issued and any engagement letters, it's going to stay in there that we cannot catch fraud by doing those steps. That's not what we're doing. We're technically by compiling that information we're just technically putting on a piece of paper what your practice has told us has happened.

Jonathan VanHorn:

And so very often get people that speak to me and said, "Okay, so you're my CPA, and you're going to protect me against fraud." And you have to very quickly say, "No, that's not what the CPA does." I mean, the highest level engagement that a CPA typically in a public accounting firm does for small businesses is usually an audit. And in an audit you typically say an audit is not designed to catch fraud. It's supposed to help you determine how your internal controls are working. It's not there to catch fraud. And if there's fraud occurring, we may not even catch it if we do an audit, which is the highest level engagement that an attest service can be done for a public CPA firm. That is not engaging in something like forensic accounting or something along those lines. Right. And so-

David Harris:

Even there the majority of dental practices don't get an audit. They get a lower level of engagement with the accountants.

Jonathan VanHorn:

Exactly.

David Harris:

The chance of finding embezzlement goes down even more. Let's lay out the problem though, maybe in a little different way. Jonathan, let's say, I go to you as my CPA. And I say, "Jonathan, I'm so excited. I'm going to start a business." And you say, "That's great, David, how are you going to keep the books for your business?" And I say to you, "Jonathan, I've got this great idea. I'm going to have one piece of software track my revenue, and I'm going to have a totally different piece of software look after expenses. And Jonathan, here's the best part. These two aren't even going to talk to each other." You would say to me, "David, that's the stupidest idea I ever heard. I mean, there's no way that would work."

Jonathan VanHorn:

Yeah.

David Harris:

And yet that is every dental practice.

Jonathan VanHorn:

It drives me crazy that the practice management softwares do that. Open Dental talks to QuickBooks online, but it's such a shoddy like API grab thing. It doesn't really do anything.

David Harris:

Yeah.

Jonathan VanHorn:

So, yeah. It's frustrating.

David Harris:

But most businesses use a one piece of software that tracks both the revenue and the expenses and dentistry is different. It's a goofy, complicated system. And when accountants do their work... To do what they're mandated to do, which is as you say, produce financial statements and ultimately information for the IRS, they really don't even need to look at the practice management software to do that at all. I mean the other side, the expense side, is really all you need plus the bank statements. So most accountants don't even look at practice management software. And as you point out, they're not really paid to. And even if they were, then we get into the question of whether they have the expertise to make much sense of what's happening in that software. So the accounting processes is kind of an uncommon one for dentists.

David Harris:

And it really means that the chance of the CPA's finding the embezzlement is very low. And I'll give you some statistics on this. When we look at how embezzlement is found across all industries. So dentistry plus everything else, accountants find about 40%. When we narrow the focus to just dentistry, that number goes down to about 8%. And it's not because the accountants who deal with dentists are dumber than all the other accountants. I mean, that very clearly is not the case. In fact, I think you could argue the opposite. You guys aren't in a position to contest this point of mine, but it's that the accounting system in this divided fashion just really does not lend itself to somebody following the accounting process, identifying embezzlement.

Jonathan VanHorn:

Absolutely. Well, I tell doctors all the time, "Look we're not in your office every day. When you do that into the day close, we're not there with you. We can not tell you if that day sheet is correct or not. We will never know if that day she has deletions or adjustments or what they were for or why they were done." All that we can do is if you put a deposit into the accounting system or your office manager does, or whomever does, we can then tell you if it hit the bank account, that's all we can do. But we can't tell you if that piece of paper was right or not.

David Harris:

That's right. And to go back to Joseph's question about what a doctor can do, that's my next point. That day end report that your software produces needs to be something that you scrutinize. If you simply stick that in a drawer somewhere and don't look at it, then you're vulnerable to the other type of manipulation that somebody does. And as I say, if we're stealing on the revenue side, if you don't look at the deposit, I just partition the deposit. If you do look at the deposit, now I have to make practice management software misrepresent how much money you make. And the way I do that is I make deceptive entries in your software. So you need to look at that day end report and you also need to compare all of the day end reports that you have to a month end report printed on the same basis. In other words, if I have 20 reports from my business days in the practice, and they don't add up to the month end report, then something happened on a Saturday.

Jonathan VanHorn:

That's a great point. Yeah. And just to hammer this point in, this is from another consultant that was in the practice management world. They said one thing that happens that's really common on day sheets is that stuff doesn't get billed that was done during the day. And it's not because someone is stealing from you it's because they just forgot to put it on there. And so you should be doing this just from a revenue standpoint, one way or the other. Like there's no reason to not be doing this in other words. There's multiple reasons other than just than this to have that be a part of your business practice.

David Harris:

Early in my career, Jonathan, I was hired by a dentist who was convinced that his staff are stealing from him. And the basis really was that he just didn't see the amount of revenue that his level of activity would suggest. And I started digging in a little bit and what I saw was that the hygienists in the practice were not actually billing any x-rays. And I asked the doctor, "Well, is all the radiography done by your assistant and your own operatory?" And he said, "No, my hygienists do the films." What came out of this was a really stupid thing. Now this was back in the days of when x-rays were taken on film, not digital, the hygienists would take the x-rays and she would put them in the chart. She would give the chart to the front desk.

David Harris:

And her expectation was that the front desk would see the x-rays there bill a code. And the front desk people are saying, "I see an x-ray in there, but I don't know if it was taken today or last millennium. If you did something hygienist write it on the chart and then I'll bill it." So it was just a little communication thing, but it was costing the doctor about $80,000 a year.

Jonathan VanHorn:

Yeah.

David Harris:

And when I told him what the problem was, I said, "Okay, that's the kind of symptom. The real problem is you're not looking at the day end reports because if you did, you would notice that there's no possible way that a hygienist could see 12 patients today with no radiography." So your point is spot on, that this is your chance to miss or to spot where somebody made a clerical error and it could cost you $300 as well as looking for the stuff that is, as I say, deceptive kind of entries. So we need to look at day ends. Doctors think that month end is something the staff do that they don't really understand. And the final point Joseph is that if I'm a dentist and I own a practice, the reports that I review should be ones that I printed myself. As soon as I allow a staff member to print a report and hand it to me, I have no control over the assumptions used to generate that report. And if a staff member wants to hide stuff from me, that's a huge enabler.

Jonathan VanHorn:

So we get this question all the time. And it's one that I struggle with is I'm a new doctor, I don't even know what practice management software we use. How do I figure out how to print the reports out? It dumbfounds me that people don't get training... There's no training in this like dental school or something like that.

David Harris:

Well let's be honest. Nobody became a dentist because they had this burning desire to be a business owner. It's the nasty trick, Jonathan, that they spring on them in fourth year dental school when they say to them, "Oh, and by the way, you also have to run the place." And at that point, they owe $380,000 in student loans and it's just way too late to turn around and paint houses for a living. For every dentist I've ever met, the running of the practice is kind of the unwanted stepchild in the marriage. But let's call a spade, a spade here. Practice management software is not going to go away. It's going to be with you if you're a dentist for the rest of your career. And it is more important to your financial wellbeing than your hand pieces.

David Harris:

And yet they all know the hand piece, like it's their child, but when they get to practice management software it's like, "I don't want to touch it because I might break it." You started your sentence to me by saying, "When a dentist..." The one thing we know about dentists is that they can all learn to get into and then out of dental school, they had to do a lot of that. So the question is, where do you get the information? Every software company has trainers whether it's Eaglesoft or Dentrix or Orthotrac. They all have this whole army of trainers who would love to sit with a doctor for a couple of hours and say, "Okay, doctor, here are the reports that are going to be most valuable to you. And here's how you actually print them in your software."

Jonathan VanHorn:

And they're usually paying for that already, too with their monthly fee or whatever their fee is right?

David Harris:

Whether they are or they aren't, if you had to buy a couple of hours of a software trainer's time and it costs you $300, like the return on that investment is phenomenal.

Jonathan VanHorn:

True. So we've covered some really cool stuff today. David, is there anything else that you feel like needs to be covered in the realm of this conversation? There's probably dozens of hours worth of information we could probably be discussing right now, but in terms of what we talked about so far, is there anything that we missed or that we glossed over that you think needs to be reemphasized?

David Harris:

Dentists in general, aren't natural skeptics. As I said before, there are people who deal in a physical scientific world and they're used to linear problems with linear solutions. And it just doesn't come naturally to them when they're talking to somebody to ask themselves, what if this person has a hidden agenda. And when you think about how dentists relate to each other in a clinical sense, I mean, a general dentist sends a patient to an orthodontist for assessment and the orthodontist writes the general dentist back and says, "Yeah, I think this patient would benefit from treatment." There's an altruism involved. I mean, the general dentist is a hundred percent entitled to believe that the orthodontist is doing that because it's in the patient's best interest, not because the orthodontist is trying to buy a boat. That's the code that they have. And it serves them really well inside the clinical bubble and horribly outside of it. And when you're hiring somebody, which again, most dentists find a stressful and challenging process to step back a little bit when you're interviewing somebody and saying, "Well, what if, what they're telling me isn't completely true", is challenging.

David Harris:

But I've given this statistics, I've given the sad news that most of your clients sooner or later will be victims. And the biggest thing that you can do to prevent that is to be a little bit skeptical.

Jonathan VanHorn:

That's right. So if we have some people that are listening right now that are currently skeptical, how can they find you? What can they do to hear more about this topic or read more of your stuff or even connect with you or your company?

David Harris:

Absolutely. And I should start by saying, we provide really two distinct services. One thing that we do is when a dentist is suspicious or they've caught somebody, or the thought of somebody stealing their money just keeps them up at night we can do stealthy investigations. So staff don't even know that we're on the job. We can see if stealing is happening. And if it is help the doctor deal with the fallout that comes from that. The other thing that we do Jonathan, is that we work with dentists to help lower their risk. So we will teach them how to generate the reports they need and what to look for on those reports. And we even will look at things like hiring and security settings in their practice management software. So we will help somebody set up their control system so they're as protective as they can be. Those are the two things we do.

David Harris:

If somebody wants to reach us, they can call our toll free number, which is 888-398-2327 or they can reach us on our website. And once they hear it, they'll never forget it, www.dentalembezzlement.com.

Jonathan VanHorn:

Fantastic. Well, as always, it's a pleasure getting to reconnect to my friend. I urge anyone that is more interested in this topic it's absolutely fascinating... If you follow David on Facebook, he's put up posts about all these people that have been caught. It's really interesting to be a part of and to see a little bit of a glimpse into David's world. And I urge you to reach out to David. He's a fantastic resource to the dental community at large, and he helps put people that want to take advantage of the people that we care a lot about, which is are you guys the dentist behind bars and hold them accountable and take care of those things inside of this industry. So, David, thank you for what you do for the industry and everyone listening. I hope you have a great time, a great day, and we will see you on the next episode.

Jonathan VanHorn:

That's it for today, guys. I hope you enjoyed this episode of the Tooth and Coin podcast. If you are going to be a practice owner or a new practice owner, and you're interested in CPA services head on over to toothandcoin.com. You can check out more about our CPA services. We help out around 250 offices around the country. I'd love to be able to have the discussion about how we could help your new practice. We do specialize in new practice owners so people that have are about to be an owner of a practice they're acquiring, about to be an owner of a practice they are starting up, or has become an owner in the past five years. That is our specialty. And we'd love to be able to talk to you about how we could help you in your services with your tax and accounting services.

Jonathan VanHorn:

And if you enjoy today's episode again, go to the Facebook group. Talk to us about what we've talked about, join in on the discussion, and let's create an environment where we can talk about some of these things so that we can all help each other get through these things together so that this adventure of business ownership is more fun, more productive, and better in the longterm. Lastly, if you want access to those resources that we are currently building, just text the word toothandcoin to 33444. That's toothandcoin, no spaces, T-O-O-T-H-A-N-D-C-O-I-N to 33444. Reply with your email address. We'll send you instructions on the Facebook group. We'll send you the resources when they're available and we will see you next week.

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