Dental Practice Fraud: You Cannot Eliminate It, But You Can Catch It Early
- Spiro Leunes
- Feb 7
- 4 min read
I will say this clearly, because practice owners need the truth, not theory. Dental practice fraud is not 100 percent preventable. What is preventable is the size of the loss and the length of time it goes undetected. Fraud can go on for many years without the dentist noticing and can be several hundred thousand dollars before it is caught.
That is the core issue in almost every dental embezzlement case. It is rarely one giant event on day one. It is usually a series of smaller actions, hidden over months or even years, then discovered too late.
Fraud isn’t limited to cash embezzlement. Expensive dental supplies and instruments can be very easily stolen and auctioned off on a website. Gold and silver fillings, if not safely guarded, can also be stolen and sold. From these examples, there are many ways to defraud a dental practice.
If you want to protect your practice, focus on early detection, and properly safeguard supplies and small instruments. The practices that find fraud early are the practices that build systems, not just trust.
Why dental practices are exposed
Most dental offices run lean teams. That is efficient, but it creates risk when one person controls too many money functions.
Common high-risk setup:
One person receives payments
That same person posts to the practice management software
That same person also does the bookkeeping (I’ve seen dentists delegate bookkeeping to their office manager, big mistake!)
That same person handles adjustments and refunds
That same person helps reconcile accounts
That same person deposits
That is exactly how concealment happens. This is why segregation of duties in dental offices is not optional. It is foundational.
Dental fraud is not 100% preventable
Even with good people and a strong culture, fraud can still happen. Controls can be passed. Someone can override a process. Collusion can occur.
So, the goal is not perfection. The goal is:
Reduce opportunity
Increase visibility
Detect abnormalities faster
Contain damage quickly
Store and lock away expensive supplies and instruments
If your systems surface issues in 30 to 60 days instead of 12 months, your financial exposure is dramatically lower.
Red flags every dentist owner should watch
No single red flag proves fraud. But patterns matter.
Watch for:
The employee who wants to know everything and control everything
The employee who never wants cross training
The employee who resists anyone reviewing their work
The employee who never takes vacation and never wants backup coverage
The employee whose lifestyle appears inconsistent with known income
Again, these are indicators, not accusations. The right response is to verify controls, review activity, and test the data.
Real world patterns from dental fraud cases
Public enforcement matters because it shows how schemes actually happen in real practices.
Across multiple dental fraud cases, the pattern repeats:
Too much authority concentrated in one role
Weak reconciliation and limited owner review
Manipulated refunds, write offs, deposits, or billing activity
Detection delayed until losses are significant
Different states, different fact patterns, same operational weakness. When duties are not separated, and reviews are not independent, losses can scale quietly.
Segregation of duties in dental offices: practical model
A smaller practice can still separate duties. You do not need a massive team; you need clean control points.
At minimum, split these functions:
Payment intake (front desk or designated staff)
Ledger posting and adjustments (different person)
Deposit preparation (different person)
Bank reconciliation review (owner, partner, or outside controller)
Refund approval (owner level approval above threshold)
If staffing is tight, use compensating controls:
Owner review of daily deposit log versus PMS collections
Weekly refund and adjustment review
Monthly independent reconciliation by outside bookkeeping/CFO support
This is how you implement segregation of duties in dental offices in the real world, even with a lean team.
Your monthly dental fraud control checklist
Use this every month, no exceptions:
Review bank reconciliation summary for outstanding checks
Review adjustments by user, reason code, and amount
Review refund log and supporting documentation
Review patient credit balances and aging
Compare PMS collections to bank deposits and merchant batches
Review deleted transactions, voids, and write offs by employee
Confirm role based permissions are still appropriate
Confirm at least one finance facing process is cross covered
Require practice management software passwords to be changed every six months
If you do this consistently, you will catch anomalies much earlier.
Mandatory vacation is a control, not a perk
In finance sensitive roles, uninterrupted time off matters. Why? Because many schemes require continuous involvement to keep the records aligned and questions suppressed.
When someone else runs the function during time away, hidden issues have a better chance of surfacing.
Mandatory vacation plus cross coverage is a simple, practical anti-fraud control for dental offices.
Build a speak up culture
Many fraud cases are discovered because someone noticed something and said something.
Your team should have:
A clear reporting path
Confidential options
No retaliation policy
Owner level follow through
People report concerns when they believe leadership will act professionally and fairly.
Bottom line for dental owners
You do not need fear-based management. You need system-based management.
Dental practice fraud is not fully preventable
Dental embezzlement risk can be reduced
Early detection is the real goal
Segregation of duties is the anchor control
Consistent monthly review is the difference maker
The practices that survive fraud risk are not the ones that assume it cannot happen. They are the ones that make concealment difficult and detection fast.
Sources
From your New Jersey Dental CPAs, New York Dental CPAs.
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