Debarred Means Defunded: Mastering Healthcare Hiring, Background Checks, & Compliance

Apr 30, 2023 at 06:43 pm by Staff


By Jeff Ernste

Picture a world where your most intimate health secrets lie in the hands of individuals with proven past financial transgressions, and those entrusted with caring for your loved ones have a history of abuse or fraud. 

This is not a work of dystopian fiction, but a genuine risk that healthcare organizations must tirelessly strive to prevent while trying to fill important jobs in a tight labor market. In the highly regulated healthcare industry, background checks serve as a crucial safeguard, ensuring the integrity and safety of patients and their sensitive information while adding stability and certainty to the hiring process.

The importance of thorough background checks for healthcare organizations at all levels must be addressed, as non-compliance can result in devastating consequences, including risks to patient care or losing vital Medicare or Medicaid funding.

There are consequences beyond public funding, including fines and lawsuits. Data analyzed from 2010 through 2020 showed complaints related to the Fair Credit Reporting Act had more than tripled to more than 5,220, with companies found to have unfair hiring practices vulnerable to fines or lawsuits with damages easily surpassing $1 million and regularly totalling over $10 million.


Today’s Background Check Challenges

The background check process is vital in today’s tight hiring environment where available talented candidates are scarce, but there are inherent challenges and common problems of which employers must be aware. One of the biggest mistakes healthcare providers make with background checks is underestimating the specific statutory obligations of employers when they use a background screening report prepared by a third party such as a consumer reporting agency.

Under the Federal Fair Credit Reporting Act and other applicable state laws, costly mistakes can include:

  • Failing to make proper and stand-alone disclosures

  • Not collecting authorization for pre-employment screening

  • Failing to implement and follow a multi-step adverse action process

  • Falling behind on local laws around employer limitations resulting from state and local Ban The Box and Fair Chance laws, which remove or delay the consideration of criminal history during the hiring process as a way to improve hiring opportunities for those with a criminal past.

Operators in the healthcare sector must stay even more vigilant as there is often state law and background screening programs specifically related to health and patient care including fingerprint screening, adult and child abuse list screening, and other background screening requirements. Accredited hospitals and other healthcare providers may have primary source verification obligations for their professional credentialed staff, and funding or reimbursements are linked to ensuring that healthcare and hospital employers do not employ or work with individuals and entities that have been identified as debarred or excluded by government agencies.

These stringent demands mean that healthcare organizations must not only meet all of their pre-screening and credentialing obligations, but may also have ongoing monitoring obligations for potential offenses or exclusions.

At the state level, there will be myriad specific requirements and potential infractions, such as the practice in Minnesota where the background check for healthcare workers is done by a state agency and then shared with an employer as directed by the healthcare worker. The “study” essentially travels with the employee via the state-level monitoring rather than being initiated and owned by the employer. That distinct framework is an example of the many requirements varying from state-to-state. 

A strong human resources, compliance and risk management team can help employers to understand these obligations and stay current with their obligations, and an experienced and detail-oriented screening partner can help.

Experienced screening services will help an employer understand in which states an employer must work directly with a state agency, and in which situations the service is able to take action on behalf of the employer. Additionally, they’ll provide guidance on knowing under what circumstances primary source verification is required, and for more traditional FCRA regulated screening needs which may augment state specific requirements.

Navigating Debarment Lists

One of the major risk factors that play into background checks for healthcare companies is the chance that an employee is identified as having committed an infraction that bars them from working in the healthcare sector.

At the federal level, The Office of the Inspector General (OIG) maintains the List of Excluded Individuals/Entities (LEIE), which is a database of individuals and entities excluded from participation in federal healthcare programs, such as Medicare and Medicaid. The LEIE includes individuals who have been convicted of healthcare fraud, patient abuse or neglect, and other offenses that could pose a risk to patient safety.  The LEIE exclusions list is included in the list.  

Similarly, the General Services Administration (GSA) maintains the Excluded Parties List System (EPLS), a database of individuals and entities excluded from receiving federal contracts, grants, and other forms of federal assistance. The EPLS includes individuals who have been debarred or suspended from participating in federal programs for fraud, embezzlement, and other criminal activities. The EPLS is also included in the list.

At the state level, similar state entities may make their own debarment and exclusion determinations and professional licensing agencies make determinations regarding individual healthcare professional’s ability to practice in that state and in that profession. Healthcare employers must closely scrutinize lists at both levels and make certain no state-level lists are being overlooked to ensure they don’t inadvertently work with individuals that could put patient and employee safety and funding at risk. 


Pre-Screening and Ongoing Compliance Benefits

The need to detect past misconduct and detect recent potential violations, or actions against a relevant license, puts a high regulatory bar in place for the healthcare field. Beyond a thorough initial background check—for criminal records, employment histories, and professional credentials—monthly debarment checks and ongoing professional license confirmation are the norm for detecting recent violations, with noncompliance for needed licensing bringing penalties in many cases. In addition, as a preventative step to improve retention and avoid eligibility concerns, healthcare organizations should consider providing education to employees on whether individuals and entities are debarred or excluded, to avoid potential issues such as fraud or other financial offenses.

Technology advancements have made it easier to automate the screening process and conduct regular checks of debarment lists. However, as a final piece of the background and eligibility screening process, healthcare organizations must have clearly stated policies for what will happen if a candidate or current employee is found to be potentially debarred at the federal or state level.


Navigating Healthcare Hiring Challenges for Compliance and Patient Safety

In conclusion, healthcare organizations face a unique set of challenges when it comes to background checks and compliance with state and federal laws. The stakes are high, with the risk to patient care and the potential loss of crucial funding and severe penalties for non-compliance. To navigate this complex landscape, healthcare employers must stay vigilant and up-to-date on relevant regulations and processes, utilizing pre-screening services and ongoing monitoring of current employees to ensure compliance and minimize risk.

Investing in technology and employee education can also streamline the background check process and prevent future infractions. By understanding the importance of proper background checks and staying current on the laws surrounding them, healthcare organizations can maintain their eligibility for federal and state funding while ensuring the safety and well-being of their patients. Ultimately, adhering to these stringent standards is essential for fostering trust and maintaining the high-quality care that patients deserve.

Jeff Ernste is Chief Sales and Marketing Officer with Minneapolis-based Orange Tree Employment Screening. For more than 30 years, Orange Tree has provided technology-enabled background screening, drug testing, and occupational health services for clients nationwide. More info at


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