5 Ways to Prevent Employee Embezzlement With Your Membership Plan

Dental practices have long been victim to employee embezzlement, an astonishingly common practice across the industry.

This happens most often due to unsupervised balancing of the books, or incomplete supervision, via a practice’s patient management system (PMS). Employees can steal directly from the daily deposit or can mischaracterize payment types to disguise theft.

Recently membership plans have developed a reputation for being more open to employee embezzlement. While technology is powerful for automating financial aspects of the dental business, these technologies, including membership plan management software and patient management systems, can leave your practice vulnerable to employee embezzlement.

However, dental professionals can build systems to safeguard their membership plan – and their dental practice – from employee embezzlement. The following five best practices can help (and stay tuned for a downloadable guide at the end).

1. Create a Unique Membership Plan Type and Fee Schedule in Your PMS

Create a new fee schedule in your PMS called “Membership Plan,” or however you want to designate patients enrolled in your membership plan.

Add a membership plan to your PMS to match to your plan’s fee schedule. The plan’s included services should be entered as $0 dollars. The non-included services should be entered at the discounted rate, as applicable.

This best practice reduces the need for manual adjustments, when employee embezzlement is more likely to occur. In other words, the more manual adjustments needed, the more likely embezzlement can occur.

2. Assign Each Member to Your Membership Plan in the PMS and Update Regularly

This is done by assigning patients as members to the correct Membership Plan in your PMS.

Patient’s membership status should be checked monthly as well as during appointment verification prior to their appointment. If a patient is no longer an active member on your plan, they should be removed from the membership plan fee schedule assignment. This same process applies to adding new member patients as well.

Cross-reference your membership plan software or inhouse database with your PMS for accuracy.

The point of this best practice is to prevent non-members from receiving free or discounted services by accident. Such an occurrence may not technically be categorized as embezzlement, but this is still another way your dental practice can lose money that can be avoided.

3. Limit Payment Types to Third-Party Transactions (Only Credit Card/ACH)

Accepting cash, checks, and credit card payments in-office can leave your practice open to risk of fraud and embezzlement.

Limit payments accepted for membership plans to credit card/ACH payments through verified and trusted third-party software.

If in-office payments must be taken, then we strongly recommend implementing significant oversight throughout the process. Try to limit having multiple points of entry for payments, as this can create obscurity that can open you up to embezzlement.

Paying cash for a membership plan, especially, creates both an administrative hassle as well as potential for embezzlement. This occurs because patients would be paying monthly cash payments with no particular offsetting service at the time of payment, unlike your fee-for-service patients, where the services and payments are more clearly aligned in your PMS.

Within the DentalHQ membership plan management platform, the dental practice owner receives an email every time an in-office transaction occurs. This additional layer of oversight increases transparency and reduces potential for mishandling funds.

4. Reconcile Membership Payments By Itemizing at the Individual Patient Level

How you reconcile your membership payments each month is key to preventing embezzlement and accurately balancing your books.

You have two options for reconciling membership payments:

• Option A - Recommended Best Practice: Post each membership charge directly to each individual patient’s account. This is by far the most ideal solution.

With this best practice, you itemize each patient’s payment, on a per-patient basis, by setting up a recurring monthly charge on a set cadence. You then simply create the payment against that every month.

Also, a quick and easy review of your patient management system ledger can show that a patient is in fact on a membership plan because of their plan’s payment posted to their account each month.

Further, when those monthly payments are auto-posted by a third-party software platform like DentalHQ, the process removes even more time and effort from the process for your team.

• Option B (Not Recommended): Create a Dummy Patient account and enter the bulk amount each month for membership payments into this patient’s account. Create a charge and payment for the bulk amount.

If you choose Option B, you must review internal patient ledger reports to ensure this number matches. This option may seem like the easier route, but there is no check or balance to help you prevent employee embezzlement.

5. Set Up Dummy Codes to Track Payments for Providers

This point is less directly related to embezzlement, but still a common question within the realm of membership plans and dental practice finances.

For your plan’s fee schedule and included services, create a duplicate code with an “M” (for Membership) preceding the numbers instead of a “D”.
i.e., D1110 → M1110

Because these codes are not needed for external insurance-related reporting, these codes can simply parallel CDTs for internal usage. This best practice can make managing services and finances easier and more streamlined for your office team.

Assign the standard or membership plan rate for each included service, with values assigned to each duplicate code separate from the service code for patients with insurance or fee-for-service arrangement.

You can then run a report with each of these unique codes and their adjusted production payments. This allows you to run a report to see how many times each provider completed a specific code covered by your practice’s membership plan for each member patient.

By assigning a net production value to each plan’s procedure code, you can also more easily adjust production payments for individual providers who perform these services on patients enrolled in your membership plan. Discounted or otherwise non-included codes then appear in the fee schedule normally and would be paid at the net production rate.

In summary, we’ve discussed five best practices for your managing your membership plan to help your dental practice avoid fraud and embezzlement by employees:

1. Create a unique membership plan type and fee schedule in your PMS
2. Assign each member to your membership plan in the PMS and update regularly
3. Limit payments types to third-party transactions (only credit card/ACH)
4. Reconciling membership payments should be itemized at the individual patient level
5. Set up dummy codes to track payments for providers

Follow these best practices to set up your membership plan for success – not theft.

We’ve created an embezzlement prevention guide with further instruction and illustrations to help you best protect your practice and your membership plan – download the guide here.