The “Policy Vacuum”

Our CEO once said that embezzlers will happily fill gaps in a practice’s policies to their advantage.  So what are these policy vacuums, and how do embezzlers exploit them?

We hear concerns expressed by many dentists who are aware that their policies are underdeveloped and don’t know how to fix the problem.

Let’s collectively take a closer look at policies needed in a dental practice and how they can protect you.

Organizations have policies for a simple reason; they want people to be treated consistently and predictably.  Airlines want their flights to stay on schedule, and Walmart wants two people in the checkout line with the same item to pay the same amount. 

Often policies target how customers are treated, but sometimes the focus is ensuring that employees are handled fairly and consistently. Many organizational policies exist to protect an organization’s financial well-being and ensure that its records have integrity.

So, how do these apply to your dental practice?  Your basic objective is no different than any other organization; you want to treat your “customers” fairly, have happy employees, and earn a profit while doing so.  And having a clearly articulated set of policies will bring you far closer to this goal than the alternative, a “policy vacuum”, which approaches anarchy.

Continuing with this framework, erasing your policy vacuum requires policies to cover several aspects of your practice:

In which areas do policy vacuums exist?

Operations – this area covers everything needed to deliver high-quality dentistry once a patient is in the dental chair.  This realm is everything from sterilization procedures to your preferred tray setup for endo procedures to how someone calling the practice with a dental emergency is accommodated.

Customer service – this policy set covers all interactions with your patients.  How is the phone answered?  What is the time sequence for confirming a patient’s attendance at an upcoming appointment?  What steps are taken to get a patient’s pending treatment appointed? Policy vacuums often exist here because this area often receives the least attention from the doctor and yet is the most discernable to a patient.

HR – of the four areas listed, this is the one where practices tend to have the most developed policies.  Probably this is because having an employee manual is an externally mandated requirement.  However, while many practices have a handbook designed to defend the dentist against certain legal issues, we often find there to be significant policy vacuums. For example, we see many practices where the amount that each employee is supposed to be paid is not documented anywhere. 

These policy vacuums can present a significant challenge when employees cause themselves to be overpaid because proving payroll embezzlement normally requires first being able to determine the suspected employee’s correct compensation.  If your entire documentation of an employee’s entitlement is a contract that was signed five years ago, with the employee having received three raises since then, proving correct compensation is probably an uphill battle.

Detailed job descriptions and regular and documented performance reviews are also important if termination or other job action is to be taken against an underperforming or dishonest employee.  Many practices rely on the “employment at will” laws in their jurisdiction to bail them out of situations caused by haphazard HR policy vacuums.  Regretfully, some practices have learned the hard way about the danger posed by policy vacuums.

Financial integrity – if we were assigning letter grades to the four areas, this is the one where most practices would receive their lowest grade.  Most dentists feel that their education and experience have not given them sufficient background to understand what needs to be done here. Many abdicate the development and implementation of policy to their office manager.  While it is fine for an office manager to propose policies and to ensure that staff members follow them, the practice owner’s role in identifying and addressing policy vacuums should never be surrendered.

Here are some of the areas you need to think about:

• Separation of functions.  No employee should receive, record, deposit, and reconcile money coming into the practice.  In a bigger practice, this can be accomplished by assigning different employees to each of these functions.  In a small practice, accomplishing division may require the practice owner or spouse to perform one or more of these steps personally.
• Oversight.  Every employee with financial responsibilities, including the office manager, requires oversight.  Some of the supervision of the office manager can be outsourced; for example, an external bookkeeper can perform an independent monthly calculation to ensure that collections according to practice management software agree with bank deposits and that the total of daily reports from practice management software articulates with monthly reporting (which confirms that there was no after-hours activity that was not captured on the reports provided to the practice owner. 
• Software Controls.  Practice management software contains plenty of safeguards, many of which are promptly undermined by dental practices.  For example, we see many practices where there is a single login id that is used by everyone.  This compromises accountability and means that everyone in the practice has administrator privileges, which is never a good idea. 

Administrator powers in software should normally be limited to the practice owner in solo practices and possibly granted to an office manager in multi-doctor practices. 

The treatment of “adjustments” in software is often poorly controlled, both in terms of who is empowered to make adjustments and how adjustments are categorized in software.  We frequently see a catch-all like “miscellaneous adjustment” used to capture the majority of adjustments made in a practice, where it is vastly preferable to have specific adjustment categories for each category of adjustment (e.g., each PPO and each category of “courtesy” adjustments) and to make use of a miscellaneous category a rarity and required to be supported by explanatory notes.

• Internal audit.  One thing that cannot be delegated is the daily review of transactions.  Each provider (dentist and hygienist) should review the report showing their work and sign the report as an attestation of its accuracy.  In addition to reviewing their personal production, a practice owner should generate a practice-wide report showing at least payments, adjustments, deletions, and modifications and personally review that report.

Policy deficits can take two forms.  Some practices function without rules (the “anarchy” that we referred to earlier.  Others have policies, except that they are not properly documented. 

Not committing your policies to writing exposes you to a couple of dangers.  First, undocumented policies tend to drift over time, with the shift invariably being towards what is easier for staff, as opposed to what is desired by the practice owner and what will produce the best outcomes.  Furthermore, such slippage normally takes place without the practice owner being aware of the policy vacuum that exists.

The policy vacuum danger

The other danger from undocumented policies is that they are vulnerable to staffing changes.  We have seen many practices where the owner suddenly realized the perishable nature of their operations when the office manager was caught stealing, and much of the practice’s institutional knowledge suddenly vanished.

If you are reading this and are suddenly aware of the magnitude of your policy vacuum don’t despair.  We are able to help you close much of the policy vacuum you are perceiving.  Our Owner Proactive Strategies involves an experienced specialist from Prosperident working with you to identify and address your policy weaknesses and to lessen your vulnerabilities. We would love to help!

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