Dental Tribune U.S. Edition

Dental Tribune U.S. Edition | Month 2012XX Dental Tribune U.S. Edition | January 2012A2 News Most of the fraud that we see is “rev- enue fraud.” Some examples are writing off amounts that were actu- ally collected, deleting treatment that was done so that collections are “off the books” and billing the full amount to two insurance companies when someone has dual coverage. A second type of fraud that we are seeing involves creation of “phan- tom” revenue. Insurance companies are billed for work that was never done, with funds either stolen direct- ly or “lapped” (used to pay someone else’s balance to cover a stolen pay- ment). Obviously, if discovered by an insurance company, this type of ac- tivity can have serious consequences for the innocent dentist. Most thieves use more than one method of stealing; very few stick to a single methodology. Also, we are continually seeing new variants. For example, we recently saw a thief take advantage of a server crash to decrease some accounts receivable balances. When patients paid the correct balances, they would be paying more than the “official” balance in the practice management software, with the thief pocketing the difference. Is there a type of fraud more prevalent in a dental practice compared with other small or similarly sized businesses? Since we investigate only dental embezzle- ment, my knowledge of fraud patterns in other small businesses is limited to what I read. My perception is that much of the fraud committed against other busi- nesses involves expenses: payroll, paying non-existent suppliers, padding expense claims, etc. The majority of embezzlement that we see in dental practices involves revenue. While we do see a fair number of thieves who will steal revenue and also manipu- late their payroll or create a phony sup- plier, very few will commit expense fraud whileconcurrentlyresistingstealingsome of the cash that patients hand them daily. What about fraud that’s more indirect, such as questionable workers’ compensa- tion claims? We have seen an astonishingly wide vari- ety of unconventional thefts, everything from stealing the gold that is recovered from old restorations to misappropriating dental supplies and instruments and sell- ing them online. However, embezzlement typically involves larger amounts and takes place undetected for a longer period. What motivates the typical perpetrator? We see two types of fraudsters. One type we call “dishonest” — these people typi- cally believe that they should live better than their “official” compensation per- mits. I immediately think of one thief who rented a private plane with stolen funds for a New York City shopping trip with girl- friends. Funds from another major theft were used to purchase a yacht and the most expensive BMW available. The other group I would characterize as “desperate.” These people struggle to meet basic needs. There might be an addiction, an unin- sured medical condition, a divorce or an unemployed spouse. In contrast to the dis- honest fraudsters, these people have their moral compass altered by their despera- tion. Many initially plan to repay what they “borrow,” but a continuing deficit frustrates this. Interestingly, the desperate thieves have normally worked for more than eight years at their office. What are the strongest deterrents? Deterrence is effective with crimes of op- portunity or where thieves can choose their target. Embezzlement is not a crime of opportunity; it is carefully planned with complete awareness of the control systems in place, and it is crafted to by- pass these controls. Adding more controls Do you have statistics for average or me- dian losses to fraud based on various sized dental practices? Unfortunately, there isn’t any published data specific to practice size. Bill Hiltz, who heads our investigation department, has a hypothesis that frauds typically range be- tween 4 and 7 percent of monthly revenue while the fraud is going on. In its 2007 Survey of Current Issues in Dentistry, the ADA surveyed dentists who had been fraud victims. The average estimated loss was $18,174. Based on our own experience, this number is tremendously low. That’s not surprising because in the same survey only 51.3 percent of the dentists who were fraud victims completed a fraud investiga- tion, raising questions on how the remain- der determined their losses. We normally find that the amount of fraud that dentists are able to identify without the benefit of professional assistance is far less than the true fraud. We surveyed our own files several years ago and found an average theft of more than $150,000. This is superficially con- sistent with the Association of Certified Fraud Examiners number of $200,000 for the average small business loss, but many of its “small businesses” are much bigger than most dental practices. We have seen a number of dental frauds of more than $500,000 and a few exceeding $1 million. What are the most typical types of fraud cases seen in dental practices? “ Page A1 Ad 'Embezzlement is not a crime of opportunity; it is carefully planned with complete awareness of the control systems in place, and it is crafted to bypass these controls. Implementing additional controls simply increases the circumvention challenge; most of the thieves we see can easily adapt.' Photo/Andriy Solovyov, www.dreamstime.com To honor a professor who profoundly influenced their lives, four graduates from the New Jersey Dental School class of 1989 have established an endowed scholarship in his name. “We have all been influ- enced by people as we travel through life. Sometimes one special person makes all the difference,” said Dr. George Bambara, 1989 class president. “Dr. William Cinotti was the one special person who made that difference for each of us.” The graduates, Bambara, Dr. Michael Donato, Dr. Phil Echo and Dr. William Ranucci, were the four class of 1989 officers. Twenty years after graduation, reflections of their experience with Cinotti spurred their generous pledge of $25,000 to establish the William R. Cinotti Endowed Scholarship. “Through Dr. Cinotti I learned life lessons while be- coming a dentist,” said Dona- to, class secretary.” He taught me to give back to the com- munity, to look out for my col- leagues by helping them and to reach my goals through hard work.” The scholarship is award- ed to a dental student at the University of Medicine and Dentistry of New Jersey who Classmates fund scholarship David Moghadam is the first student at the New Jersey Dental School to earn the William R. Cinotti Endowed Scholarship. Photo/ New Jersey Dental School ” Continue on page A4 ” Continue on page A3