Hygienist Steals Patients, Leaves Dentist with Huge Legal Bills

A Dentist’s Patient List Is Not Protected, Rules Michigan Judge
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“Any dentist who’s considering purchasing a practice needs to know what happened to me,” said Dr. Michigan. “My story has global ramifications.”

I could hear an edge of exhaustion in the doctor’s voice. Working seven days a week at two practices is clearly taking a toll. Though he’s been practicing dentistry for over 30 years, this is the only way he’s able to make ends meet.

It wasn’t supposed to work out this way. Dr. Michigan had a solid plan. The practice he purchased was supposed to help pave the way for his eventual retirement. Instead, he got ripped off, and is now looking at close to $100,000 in legal bills.

He decided to purchase an established dental practice that was producing close to a million dollars annually. He wanted to protect the 1,000 or so names on the practice’s patient list, so he had the previous dentist sign a standard non-competition agreement.

“Everyone tells you to have a non-competition clause with the dentist. No one had ever brought up the issue of staff, particularly hygienists,” he sighed.

Along with the practice and patient list, Dr. Michigan also inherited several staff members. His relationship with Hygienist X seemed fine at first. He didn’t mind when she picked up extra hygiene hours at another dental office. Even after she left to work full-time for the other dentist, he wasn’t aware of any problems.

Dr. Michigan knew that production had slowed at his newly-purchased practice, but he didn’t know why until he received a few anonymous phone tips from former employees of the practice where Hygienist X now worked. They had shocking news for Dr. Michigan.

While Hygienist X was still working at both practices, she stole Dr. Michigan’s patient list and brought it over to the other practice, and apparently proceeded to solicit away Dr. Michigan’s patients to the other practice.  She even had the audacity to solicit a patient she was treating in Dr. Michigan’s office! This certainly explained the sharp drop in production he had suffered. He estimates she solicited away nearly 150 patients, costing him over a projected $1,000,000 in lost revenue over a five-year period, according to his consultant.

So Dr. Michigan immediately called his lawyer and started a lawsuit.

You’d think it would be a slam-dunk. In court, Hygienist X point-blank admitted under oath that she had taken Dr. Michigan’s patient list.

Here’s the unbelievable part: the judge threw the case out, ruling that the patient list was not covered under the Michigan Uniform Trade Secrets Act. The judge was in effect saying that a doctor’s patient list is not protected information. (In a similar Pennsylvania case, the patient list was found to be a trade secret, but that’s of little help to Dr. Michigan.)

So Dr. Michigan now finds himself working two jobs just to pay his legal bills. And, as you might expect, he is unhappy. “I wish I could offer you more than just sympathy,” I told him, feeling helpless.

“You can share my story with other dentists,” said Dr. Michigan. “Anyone who’s buying a practice should work out terms with the staff, particularly anyone who has access to the computer, right off the bat. I’d recommend having every staff member sign a strongly worded confidentiality agreement, whether they stay or not.”

A Side Note on the Joys of Insurance

Dr. Michigan’s insurance company would not reimburse him for any of his losses. His Employee Theft and Dishonesty Policy would have given him a payout of up to $20,000 if Hygienist X had stolen equipment or furniture. But his patient list? Sorry, not covered!

But it was a different story for the other dentist in the story. While Dr. Michigan spent a year’s worth of his hard-earned money on legal expenses, the offending dentist’s insurance company paid the bulk of his legal costs.

Taking over an existing practice can leave a dentist exceptionally vulnerable. Patients who have known the hygiene staff for years are suddenly faced with a new doctor. The previous dentist often helps introduce the new dentist to the community, but the hygienists generally have closer personal relationships with patients.

I’ve heard stories of hygienists who leave after a new dentist purchases their practice, only to take out a big ad in the local newspaper announcing that the hygienist will now be seeing patients at another dental office just down the block.

But taking the patient list with you?!? That is shocking, appalling, and blatantly unethical theft. I’m frankly frightened by the possible ramifications of this Michigan ruling.

I would have expected a patient list to be covered by both the Trade Secrets Act and by the Health Insurance Portability and Accountability Act (HIPAA). But apparently not! And patients… Beware too!

Dentists: I want to know what you think of Dr. Michigan’s story! Post your comments below. Plus, contact me if you’d like to get in touch with Dr. Michigan.

Dentist Accused of “Biggest Ever” NHS Dental Fraud

Dental fraud by NHS dentistA dentist in the UK has been charged with one of the largest NHS dental frauds ever committed. The dentist, now suspended, is accused of stealing £1million from the National Health Service.

The dentist submitted as many as 5,000 false invoices between 2006 and 2009.

The Birmingham cosmetic dentist also operated a medical spa and advertised her services for dental Botox and dental makeover options such as braces and veneers.

Read more: Woman dentist charged with stealing £1m in ‘biggest ever’ NHS fake invoice fraud

Dental Practice Fraud Causes 200k Embezzlement Warning

dental embezzlementThe Colorado Dental Association recently sent an email alert to member dentists regarding a $200,000+ embezzlement that occurred in a dental practice related to the processing of credit cards.

According to the Metropolitan Denver Dental Society, experts estimate that more than 50% of dentists are embezzled with an average loss of $50,000.

But, because embezzlers often steal relatively small amounts over a long period of time, the misappropriation of funds goes unnoticed.

The U.S. Chamber of Commerce estimates that 75 percent of all employees steal at least once, and that half of these steal repeatedly. The Denver District Attorney’s Office website warns, “embezzlement is at epidemic proportions accounting for 20 percent of all cases filed by the Denver District Attorney’s Economic Crime Unit.” In 1970, one in 200 employees was dishonest; it is estimated that today, one in six employees is dishonest.

The MDDS states that the most common method of embezzlement in a dental practice occurs through theft of cash, checks or supplies.

Here are a few embezzlement scenarios that occur in dental practices –

  • Cash is pocketed from patients.
  • Petty cash is stolen.
  • Cash or checks are removed from the daily deposits and replaced with subsequent receipts.
  • Insurance fraud.
  • Endorsements are forged.
  • Writing duplicate accounts payable checks or writing checks to phony vendors.
  • Stealing supplies and re-selling or returning to vendors for refunds that are pocketed by employees.

In a survey The Wealthy Dentist performed in 2010, 59% of the dentists surveyed said they had discovered evidence of embezzlement. With such a high degree of fraud, how does a dentist diminish the risk of embezzlement?

The American Bar Association offers the following checklist on how to prevent fraud and embezzlement –

  • Adopt an effective, documented system of internal controls to protect against acts of dishonest staff.
  • Bank and credit card statements can be delivered to the business owner’s home or separate address for personal review.
  • Checks and debit transactions should be reviewed with the statements.
  • Checks should require two signatures, or be reviewed by the owner.
  • A copy of the bank reconciliation should be attached to each monthly bank statement and reviewed by two parties.
  • Finance or accounting personnel should not be signers on all bank accounts.
  • Checks received in the mail should be immediately endorsed by a two-person team who opens and processes the mail.
  • After checks are properly endorsed and verified, the bookkeeper should take charge of the checks for deposit.

Have you recently experienced embezzlement in your dental practice?

For more on employee embezzlement and how to prevent it see – The Metropolitan Denver Dental Society Watchdog

Dental Office Embezzlement of $100,000 in Dental Insurance Payments

Dental Office Embezzlement of $100,000 in Dental Insurance PaymentsDental office embezzlement is still alive and well in California.

Deborah Lynn Kessler, 45, pleaded guilty to four counts of grand theft over charges that she embezzled more than $100,000 in dental insurance payments at the dental practice where where was manager.

The Orange County Register reports that Kessler signed dental insurance payments over to her personal bank accounts over the course of about three years. Investigators initially said she may have used the money to pay for an RV, boats and trips, and to cover her personal bills.

She was sentenced to two years in jail, plus an additional two more years of community supervision.

According to a 2010 Association of Certified Fraud Examiners report almost one-fourth of all embezzlement cases report losses of at least $1 million with smaller businesses being the most susceptible to fraud.

The average embezzlement scheme lasts for 18 months before detection.

The U.S Chamber of Commerce estimates that employee embezzlement costs American companies $20 billion to $40 billion a year. A long-term employee is 15 times more likely than a stranger to steal from a company.

Some of the best ways to prevent dental office embezzlement is by implementing a segregation of duties, keeping petty cash to a minimum and requiring dual signatures on checks.

Has your dental practice ever been the victim of employee embezzlement? What happened, and how did you handle it?

For more on the Orange County Register story see: Dental worker guilty of stealing more than $100,000

Protect Your Dental Practice by Bonding Your Employees

by Bryan Truitt and Jim Du Molin

Even if you have an internal controls system that makes embezzlement difficult, the danger of collusion still exists. (I’ve already told you that embezzlement is common, it can be detected, and it can be prevented.) One of the ways in which some dental practices protect themselves from employee dishonesty is by bonding their employees.

Bonding is the process by which an employer can be indemnified for the loss of money or other property sustained through dishonest acts of a “bonded” employee. Bonding can cover many types of acts including larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, willful misapplication, or other fraudulent or dishonest acts committed by an employee, alone or in collusion with others.

There are several types of fidelity bonds. Discuss each with your agent to determine whether damages from negligence are covered. Basically, your practice has several options at its disposal:

  • Individual: covers one employee. Usually purchased by small practices or family-operated businesses with only one employee.
  • Name schedule or position schedule: covers either the employees or positions specified.
  • Blanket fidelity: covers all employees.
  • Commercial, blanket, and blanket position: provides multiple protection (comprehensive dishonesty, disappearance and destruction coverage, or a blanket crime policy).

There is wide choice in features and coverage as well as cost differences in bonding coverage. It difficult to understand why only two practices in ten have this economical insurance.

Next week, we’ll talk about what to do when you have discovered a problem.


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