Digging One’s Teeth Into Insurance Fraud…

Kumar P. Setty, BS, MS, MBA

Several months ago I received a phone call from my old college roommate Ricardo (not actual name). I was happy to hear from my friend. When I asked him how things were going, he mentioned that he was working very hard but he didn’t seem to be reaping the harvest of his labors. As an auditor who has worked on many fraud cases, I immediately became suspicious and I asked my friend if he had been a victim of a potential fraud. Ricardo then indicated that he had some misgivings regarding his office manager, Julie (not actual name). Julie, a single mom with an 8-year-old son, worked as an office manager for Ricardo’s dental practice. Julie’s husband had passed away several years before she had obtained her job. She had lupus, which was a long-term health issue for her. The medications for Julie’s condition were partially covered by her insurance policy so she accrued large and frequent out-of-pocket expenses. These expensive medications were required to stabilize her symptoms. Since Julie was young, she would have to continue her purchases of the expensive medications for treating her condition.

After a month, Ricardo then recounted the following story in a phone conversation: I met Julie during an interview for a position as a receptionist. She seemed ideal for the position. She worked for me for about a year until I had to hire an office manager. She knew what she was doing, she seemed diligent and she also had a talent for understanding the operations necessary for running my dental practice. I offered her the position and she accepted my offer. I placed a tremendous amount of trust in her and I delegated to her the task of examining and processing insurance payments on a daily basis. She had full access to the computer, mailbox and office suite. I have a small operation, so it wasn’t feasible to spread the duties among additional staff. In retrospect I should have handled the key duties that involved accounts receivable and payables.

Another year had passed and I was wondering why my office didn’t seem like it was growing, yet I was working very hard. I noticed small things like insurance claims that were closed without payment, and a lack of organization in the accounting. I asked Julie a couple of times about the sloppy accounting and lack of practice growth. She told me that because many patients had switched insurance providers, she had to close claims from the previous insurers to bill the patients. I asked her for the records of the billings and she told me no one had told her how to do it and didn’t think to record the billings. Basically she supposedly sent the patients a bill and left the amount as unpaid on the accounts. I got upset that the accounts were a mess, but I didn’t suspect that she was stealing.

Several months later I got the gnawing feeling that something was not right. I confronted her and asked for an explanation. She denied any wrongdoing and said that no one showed her how she was supposed to account for the payments and receivables. This was not true. I let it go for some time. I waited for a day when no one was in the office and I called a sample of the insurance providers in the patient accounts with closed claims that had no payments attached. I asked for cancelled checks and found out that a lot of the checks didn’t have my rubber stamp on the back, but had a handwritten account number.

I contacted that bank where the checks were being deposited, but was told that no information would be given about the accounts without a request from the police. I then confronted her again with the evidence and she finally broke down and admitted to the theft. I let her continue her explanation and she stated that she was undergoing severe financial hardship, lack of family support, medical expenses, and that she was doing it for her son.

What Causes Employees to be Fraudulent?

Most frauds are the result of several factors that can be illustrated by the Fraud Triangle (a trademarked term from American Institute of Certified Fraud Examiners). At each of the vertices of the Fraud Triangle, there are 3 factors: pressure, opportunity, and rationalization. In this particular case, there were several “pressures” that were compelling Julie to commit the fraud. The first pressure was Julie’s health condition and the resulting prescription expenses accrued along with other treatments. Other pressures were that she was a widowed mother and that her salary as an office manager most likely could not cover her medical expenses, her parental obligations, and her lifestyle.

Julie’s “opportunity” presented itself when she noticed the volume of insurance claims being processed. Upon seeing the cash flows she must have been tempted enough to consider how these payments could be diverted to her for her financial benefit. Since Julie had physical access to the office suite, had primary access to the incoming and outgoing mail, and was responsible for the entire claims process, she had ample opportunity to divert funds from the insurance company to her personal account. Since there were no checks or reconciliations performed by the owner, Julie was able to cover her tracks.

Julie’s “rationalization” was rooted in the fact that she was undergoing financial hardship due to a long-term medical condition, she is a widowed mother, and her salary was not enough to meet her obligations. Rationalizations present themselves in varying degrees and varying forms. She may have thought that she was “borrowing” the payments meant for the owner and that she would defer repayment of the funds to a future date.

The simplified process for any medical practice is as follows:
1. The patient’s ability to pay for a medical service is confirmed by the medical professional staff.
2. The patient receives a service from the medical professional.
3. The medical staff then compiles the information regarding the service to the insurance company and then requests commensurate payment or adjustments to the requested claim.
4. The insurance company submits a check payable to the medical practice.
5. The medical staff member or office manager deposits the checks from the insurance company into the receivables account for the medical practice.

In this particular case, Julie had total control of the entire process along with physical access to the office, logical access to records, payments and authority over bank accounts. Essentially, committing this fraud was a “slam dunk” for her. Julie simply waited for the checks to arrive by mail from the insurance company and she deposited the funds into her personal bank account. In many cases, banks typically do not care about the “payable to” field on the check. They will accept any endorsed check for deposit as long as the funds are available from the payer (the insurance company). Most banks leave it to the responsibility of the account owner to perform their own bank reconciliation and to follow up on any inconsistencies. Banks just want deposits. They don’t argue about who gets the payment or who pays. Julie was able to cover her tracks by feigning a lack of knowledge of simple bookkeeping. Since Ricardo did not have time to go through the weekly deposits, this fraud persisted.

Ricardo finally checked with the insurance company and received the cancelled checks. He noticed that the checks were not endorsed by his business, but by Julie for deposit into her personal account.

Fraud’s Red Flags

One common red flag for this type of fraud is if Julie never took a vacation. Many times, perpetrators of fraud do not want to take any vacation because they fear being discovered and they also fear missing out on the opportunity to abscond funds by not being present in the office. Other red flags include: adverse credit history, living beyond one’s means, gambling, and health issues.

Steps to Prevent Embezzlement

In this particular case, when there are staffing constraints, it is difficult to hire additional staff members to perform periodic checks. In this particular case, it is incumbent on the owner of the business to take the additional step to perform weekly or monthly bank reconciliations where individual claims are matched to payments from the insurance company and deposits on the bank statement. If it is practical to do so, it may be feasible to institute electronic funds transfer (EFT) so that the insurance company can wire or electronically transfer funds to the payee or owner (Ricardo). Another alternative is to set up a bank lockbox so that payments (manual checks or EFT) are sent to the lockbox and are immediately deposited by a third-party into the bank account. The matching process of the claim and deposit should still be performed to ensure that all checks are received and deposited, and that the bank has recognized and confirmed all deposits.

As an alternative, it might be feasible to have 2 people trained in the payments process so that they could each take turns receiving and depositing checks. Although it is difficult to detect collusion among staff members, sharing duties makes any deviations easier to detect and this practice provides as a balance of power.

The bottom line is that there must be a system wherein critical processes are segregated as much as possible and then all payments must be verified by an additional, trusted party.

In tough economic times it is important to implement oversight processes to ensure that embezzlement is prevented or at least detected within a reasonable period of time. It is also important to understand the common drivers and motivations that would lead an employee to commit theft. Despite the fact that it is difficult to detect collusion among 2 or more employees, the proper checks can empower a business owner to detect suspicious activities.

In situations where hiring constraints are common, a business owner can still institute processes to detect and prevent embezzlement. With a small investment in technology many of the oversight processes can be automated.

Screening potential employees is an important step in preventing the hiring of potential embezzlers. Screening criteria may include checking credit history, criminal background check, drug testing and obviously checking references from previous employers. Screening, however stringent the process may be, will not prevent a person from deciding to try fraud for the first time. In order to implement a sound system for detection of embezzlement or fraud, it is important to emphasize effort on designing an effective process to prevent fraud.

Closing Comments

It is impossible to design a foolproof method for preventing an employee from stealing from your business, but it is possible to greatly reduce the possibility of being subjected to a fraud. A combination of preventive and detective controls represents a key feature of an effective anti-fraud strategy.


Mr. Setty holds a BS in Chemical Engineering from University of Rochester (NY); a MS in Software Engineering from the Carnegie Mellon University (Pittsburgh, Pa); and a MBA from University of Illinois. He is a certified information systems auditor and oversight knowledge developer (Oversight Anti-Fraud Software), and is an active member of Mensa. With more than 10 years of experience in the areas of auditing, computer security, and fraud analysis and detection, Mr. Setty is currently employed as an Audit Manager for a consumer packaged goods company in Chicago, Ill, where he focuses on computer security, financial auditing, and fraud prevention. He also worked as a consultant for many small to large companies performing Sarbanes-Oxley compliance, auditing, fraud detection and prevention, and computer security reviews for a variety of industries. He can be reached at (312) 593-8846 or This email address is being protected from spambots. You need JavaScript enabled to view it..

Life Coaching for Dentists: The Secret Ingredient to Practice and Personal Success

Don Deems, DDS

For a dentist to work with a personal coach is a relatively new concept to dentistry. As one of only a handful of dentists in the United States who is both a practicing dentist and a trained professional personal and business coach, I can tell you that the use of a professional coach is a rare phenomenon. Why would a dentist use a professional coach instead of a practice management consultant, therapist, industrial psychologist, financial planner, or any one of a number of other professionals to help them and their practice? The answer seems to elude many, so I will tell you the story of a young dentist who chose to work with a professional coach, and what happened as a result.

Meet Dr. Bob

As a young dentist of 34 years old, Dr. Bob was finally the owner of his own dental practice, on paper at least. The world was at his fingertips and he was ready to settle in, to work hard, to be his own leader, and to enjoy the fruits of his labor and training. He had been an associate for the past 7 years and wanted to run and own his own practice. After negotiations with the owner, he purchased the practice.

Soon, he was studying with the best clinicians, learning how to do better comprehensive dentistry, and seeing his practice grow bigger with many new patients. Life was good.

Then, tragedy struck. Less than 9 months into ownership of the practice, his partner of the past 7 years committed suicide; Bob was in shock. Instantly, Dr. Bob was $600,000 in debt to his partner’s estate for the practice sale, with no way out of the contract. Dr. Bob had done his homework for the practice purchase, having the practice properly valued by an expert, and using an experienced lawyer for the transaction and setting up the corporation, among many other things.

Unfortunately, his partner had a chronic disease that prevented him from purchasing a “key man” life insurance policy in case of his death. Additionally, the contract that did not allow for renegotiation for the purchase of the practice, something Dr. Bob had conceded to close the deal. Of course, had Dr. Bob known what would have happened, he would have never agreed to such a contract. But, hindsight is always 20-20, isn’t it? Our young dentist was stuck in a really bad way.

For several months, Dr. Bob worked 70-hour weeks seeing patients, and he knew that couldn’t last forever; there was going to be a breaking point somewhere down the road. He hurriedly hired an associate to help with the work and that turned out to be a mistake. After letting the associate go in less than a year, he knew he needed to do something. The stress of it all was eating him up, affecting his marriage, friends, employees, and patients. He knew that something needed to change—he just did not know what, or how, it needed to happen.

A year after his partner’s death, Dr. Bob finally took his first week off, something he didn’t want to do because of the debt he owed. He combined the family “vacation” with a dental conference. On the program was a speaker who talked about financial planning for dental practices, so he thought he would attend. Dr. Bob was looking for guidance.

The speaker gave sound advice on the usual financial decision-making process, and after listening to him for about the first 30 minutes, Dr. Bob knew that he needed immediate help with his money management. As a result, he left the seminar determined to work with someone who could give him some direction.

As Dr. Bob later found out, money concerns can be what bring dentists to the point of asking for help. Dr. Bob got the help he needed and a huge load was lifted off his shoulders. Several months passed and then this nagging feeling that something still was not right returned. Little did Bob know but he had just struck gold. He was now at the point of finding answers that would serve him longer than any short-term business solutions which attracted his interest. Dr. Bob had discovered that the answers he was looking for would not come from the outside, they were inside…himself. Serendipitously, he had been referred to a personal coach. He knew very little about personal coaching but agreed it was worth investigating.

As Dr. Bob began working with his coach, he was encouraged to investigate his thoughts and feelings more deeply; to understand more clearly his needs, concerns, and values. This was a radical departure from anything Bob had experienced before! Yet, he was enjoying the journey; a sense of serenity was beginning to grow. His office team wondered why he was changing. Was he on drugs? Had he joined a cult? Dr. Bob seemed less apprehensive and more approachable; he was even taking vacations now, something he had been afraid to do before, among many other things. Patients responded warmly to him and despite the looming debt, Dr. Bob had the focus and determination to make it all work out.

Out of Dr. Bob’s personal growth came a natural growth of his business acumen. Dr. Bob was now able to pinpoint where he had concerns and to get the appropriate help—instead of asking for the right help from the wrong person.

Dr. Bob was also becoming a better leader. He was getting more in touch with his own feelings and concerns. Therefore, patients, employees, family members, and friends were finding it easier to discuss their own concerns and problems with Dr. Bob. Dr. Bob was beginning to experience a sense of peace and fulfillment that he had wanted for many years, even long before his dental school days. Dr. Bob now knew that nothing would derail him—he was free at last.

The Coach’s Role

Unlike practice management consultants who give sound advice and strategies to handle business decisions, a personal or “life” coach integrates the “who” of a person with the “what” they are doing—no matter the person’s goals.

As a practicing dentist who has worked with practice management consultants, I applaud the vital role that they play in what we do daily in our practices. There is no doubt in my mind that my practice would not be what it is without the help of a practice management consultant.

But what about all of the “intangibles” of being in practice, and even just living, brings to us? Whom do we talk to about the million other pieces of the puzzle that being in our own business involves? What professional falls into that category?

Historically, dentists looked to each other for support, morale boosting, and camaraderie, which is something that is almost missing from our profession these days. Those intangible, hard-to-describe elements have a huge impact on our feelings of success and fulfillment as dentists. They all but elude us in these days of perceived competition, economic recession, increased threat of malpractice, and the difficulty in finding qualified employees. It seems that our feelings, concerns, and emotions end up taking a back seat to working in our practice each day.

In reality, the connection between “who” we are as dentists and our feelings of success and fulfillment come about when we are able to reconnect to our identity as human beings. It happens when we acknowledge our wants, needs, and concerns, and begin to develop this relationship with ourselves that has all been but lost in today’s business world. This connection to our “inner self” is essential, and a personal coach is most helpful in navigating that quest.

Coaching as a Cutting-Edge Resource

Professional coaching is a resource available to dentists who want to have an edge in their life and their practice. Whether you want to learn to say “no” to your limited time schedule, clean out the clutter out in your life, reconnect with what’s most important to you, find meaning in your work, or more balance in your life, a personal coach can help you do it.

By now, most dentists have heard of coaching, but many really do not know how these professional services can help them. For many dentists, coaching may seem to be reserved for CEOs of large companies. Truthfully, more than 25% of the Fortune 500 companies now utilize coaches to assist their executives, CEOs (dentists are CEOs too, by the way), and managers. Why do you think this is?

According to a study completed at The Harvard Business School by Kotter and Heskett, performance-enhanced cultures (those organizations utilizing coaches for their executives and top-level managers) showed a greater than 4-fold improvement in business success among all parameters.

Coaching originally began about “life designing”—situations that ranged from lifestyle to career transitions. From there, the coaching model began finding applications from business turnarounds to profitability, from life/work balance to creativity, and many more. Coaches who work in business environments assist clients in improving communication skills with their clients and teams to create a larger picture of their practice, and to be a private sounding board for ideas, frustrations, and goals of the client. Personal coaches work with clients looking to enhance and enrich their personal life, find balance and fulfillment, improve relationships, and more. Articles about coaching have appeared in magazines that range from Time Magazine to Real Simple, newspapers from USA Today to The Wall Street Journal, and locally and nationally produced radio and TV shows.

Coaching and Other Forms of Growth and Development

Coaching has been compared to older, more widely known models of personal and professional development, but coaching is really something unlike any of these. Let’s look at the most common comparisons to coaching:

  • Unlike mentoring, the coach has no personal agenda for the client. The coach’s basic objective is to assist the client in designing a life that is consistent with the client’s values, goals, and dreams.
  • Unlike consulting, the coach is not the “expert” who tells the client what to do. Coaching views the client as the expert in determining what are the things most important to the client, and then supports the client in staying true to what he or she really wants. Coaches assist clients in finding their personal truth, and then to live it.
  • Unlike therapy, coaching is not concerned with resolving past issues. The coaching model is forward-looking and action-oriented. The ultimate objectives are to identify what the client wants, determine the steps to get there, and act on it.

Coaching is not a “one size fits all” proposition. Coaches come from every type of professional background, including business, sales, medicine, law, psychology, human resource…and even dentistry. Professional coaches participate in some type of training program. These programs vary, and not all are accredited by the International Coach Federation, which also enforces the standards for the practice of coaching.

Coaches can find themselves working in a niche, a specialized area of coaching, either by training or interest, or by previous background and experience. Coaches can specialize in areas as diverse as attention deficit disorder, health and fitness, nonprofit organizations, and organizational development. If you’re looking for someone who understands what you face in your practice from day to day, there are coaches available who are practicing dentists and there are professional coaches.

Working With Your Own Coach

Dentists typically find themselves consumed with running their practice and dealing with the unlimited demands that seem to surface daily. Working with a coach, dentists have the unusual opportunity to work on their business, instead of inside it. They have the opportunity to reflect on what they’re doing, to identify their interests and values, and have a silent, objective partner—like having your own private board of directors.

Because most dentists have a solo practice, they’re constantly second-guessing what they’re doing, trying to identify market trends, trying to keep up with changing technology and knowledge, hiring, firing, managing—you name it. Add a little government or other third party intervention, and it’s overwhelming to most. Attending practice management programs, workshops, and seminars help, but the underlying message they are often left with is “Do it like me.”

Thus, many dentists struggle for years trying to emulate other dentists and nearly always without success. Coaching draws on the client’s knowledge, intuition, innate wisdom, individual experience and skills, using those aspects to assist them to develop the practice of their own dreams—not someone else’s dreams. A coach may enhance those client’s skills with further skills training, such as relating, listening, advising, strategizing, and the like. The possibilities are practically endless, and a dentist may choose to work with a coach for business or personal reasons—usually both.

What makes coaching so effective is due to many aspects inherent in the coaching process. For example, accountability is critical. Once you’ve identified what you want for your practice or for yourself, a coach assists you in keeping on track. Coaching is also highly valuable because it gives you someone else’s perspective—someone you trust because he or she knows you and your goals—which in turn opens possibilities that may have been hidden. A coach is a great sounding board for what’s working and what’s not…extremely valuable to dentists who are mostly isolated from one another.

On a more personal level, because many dentists are so successful in the eyes of the public, they typically have no one to talk to about their own reality. What good is it to own your own practice, make good money, and be involved in the community, if you really aren’t happy or having fun?

Who Was “Dr. Bob”?

“Dr. Bob” was in fact, me! In fact, I ultimately became a coach because of the kindness and support I received as a client of a coach. My personal coach started me on a journey of personal development that continues today. From those terrifying days, immediately following the death of my partner, I began the incredible discovery of who I am and where I am going. Now, I have the privilege of guiding others on their journey.

For me, I lucked into finding a coach. This was because, at that time, coaching was not really a recognized profession. These days, coaching is a buzzword used by almost everyone in the helping professions, but trained professional coaches are a wholly different concept. For you, all you have to do to find a professional coach is to ask.

Resources
About Coaching or Finding a Coach

The International Coach Federation (ICF) (internationalcoachfederation.org), the international regulatory group which sets standards for coaches who want to be certified, also offers an online referral service for people looking for a coach. A specific Web site exists for doctors looking for a professionally trained coach who is also a dentist at dentalcoachassociation.org. The ICF also lists the 17 accredited coach training programs, many—but not all—of which are in the United States.

About Coaching—Books

Although many self-help books mention coaching, some noteworthy titles include:

Coaching: Evoking Excellence in Others by James Flaherty. This book is an incredible resource that links coaching knowledge and theory.

Co-Active Coaching by Laura Whitworth, Henry Kimsey-House, and Phil Sandahl. A wonderful book that includes a multitude of practical coaching tools, exercises, questions, and knowledge.

Coaching for Performance by John Whitmore. This book helps you learn about the art and skill of good coaching, and to understand the immense value that coaching has to offer.


Dr. Deems is one of the few practicing dentists who are also professionally trained personal and business coaches. Honored as one of the Top Leaders in Continuing Education for the past 5 years by Dentistry Today, and is the only dentist recipient of the National Best Practices Honors by the American Psychological Association. Co-author of Roadmap to Success: America’s Top Intellectual Minds Map Out Successful Business Strategies with Ken Blanchard and Stephen Covey. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Practice Transitions Part 3: Traditional Sales and Mergers

Maryam Beyramian, DDS

In part 2 of transitions, we discussed distressed sales where the practice owner is not the sole decision maker, hence causing the due diligence process to be unpredictable and accelerated. Traditional sales, however, allow the purchaser more freedom to gather and analyze the information over a period of time in order to determine if this practice is the right “fit.”

Traditional Sales

In a traditional dental sale, the practice owner(s) has autonomy in the entire process of the sale. As varied as dental practices can be, so can transitions of each practice. 



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