Best Practices: Should a Credit Check Be Part of Your Medical Practice Hiring Process?

Laurie Morgan March 5th, 2012

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When considering a new hire for your medical practice, learning as much as you can about the candidate’s background before moving ahead is critical.  After all, embezzlement and other types of fraud are huge concerns for medical practices.  (Medical practices trail only financial institutions and the government as targets of internal theft.)  Yet in today’s litigious environment, prior employers often give only watered-down references (and sometimes only dates of employment and job titles), making it difficult to get a third-party view of a candidate’s character.

Banks and other financial companies have long used credit checks to bolster screening, believing that financial distress will increase the temptation to steal, especially for those whose jobs put them in control of other people’s money.  In recent years, a wider range of employers have begun checking credit reports, even for non-financial employees; some estimates suggest that more than half of all employers use the reports as a screening tool, and financial pundits like Suze Orman advise consumers that poor credit can undermine their job prospects.  Yet the medical practice hiring processes we see include credit reports infrequently in candidate screening.  Should you add credit checks to your new hire screening process?

Embezzlement is not the only concern

Deterring potential embezzlers is one reason practices consider checking credit pre-employment, especially for staff who will handle the practice’s books or receive patient payments.  According to the Association of Certified Fraud Examiners (AFCE), about one-third of embezzlers are motivated by personal financial difficulties that could be indicated by reviewing credit. 

But practices may need to consider other risks besides their own revenue:  in a modern medical practice, staff have access to reams of highly sensitive patient data.  Unfortunately, this data has high criminal value, and theft by employees for resale on the black market is not uncommon – and can be difficult to detect.  Getting a clearer picture of financial pressures on candidates for staff jobs can help identify those who might succumb to temptation, while also helping to demonstrate commitment to safeguarding patient information.

Background checks versus credit checks

Credit checks differ from background checks, which typically include research of important public databases for records of criminal activity or fraud along with verification of past employment.  Background checks are more commonly performed by medical practices, and can be outsourced to save physician or manager time.  Moreover, for many practices, some verification is absolutely essential, including screening for exclusion from Medicare programs.

Employment credit checks are an additional step that can help provide more detail on a candidate’s suitability – if used properly.

Credit alone ≠ character

Using credit information judiciously is critical.  In today’s economic environment, many honest and capable people have credit problems – whether due to lengthy unemployment, divorce, unplanned medical bills or other unexpected difficulty.  Identity theft can also wreak havoc with a candidate’s credit, leaving false black marks that can be all-but-impossible to remove.  Given this, credit information should be considered in conjunction with important data – references, experience, education, knowledge, personality – to create as complete a picture as possible of the candidate’s suitability.

If you decide to use credit reports in your screening of new employees, you’ll be legally required (under the Fair Credit Reporting Act (FCRA)) to secure the candidate’s permission first.  This will allow your candidates an opportunity to explain any negative issues that might show up on the report beforehand – so you’ll have a chance to evaluate both sides of the story. 

Understand your legal obligations

Besides your obligations under the FCRA, many states have enacted laws to restrict use of credit information for job screening.  Be sure to work with your attorney to develop a process and written policy that is appropriate for your practice and protects candidate rights. 

You should also be sure that your practice is accessing an employment-only credit report on potential hires.  This abbreviated report protects some of a candidate’s sensitive information, while allowing employers to view significant items that could be relevant to hiring.

Information, not inoculation

Handled properly, credit checks can be a helpful tool in avoiding hiring employees who could cause problems for your practice down the road.  But, neither a background check nor a credit check is a substitute for implementing proper financial controls in your practice. 

Remember, if a third of embezzlers had detectable financial difficulties when they were hired, that means two-thirds did not.  In some cases, financial difficulties develop during a employee’s tenure, not before.  Some employees develop problems with a failing family business, gambling or substance abuse that couldn’t have been predicted.  If an employee has successfully embezzled elsewhere, that could enable him or her to have perfect credit.  And, above all, some once-honest employees who’ve never stolen before simply succumb to temptation when controls are lax.  Financial controls are essential for any practice – regardless how much scrutiny is applied in hiring.

Laurie Morgan is a management consultant with Capko & Company. She specializes in marketing, management and technology for medical practices and blogs about practice management issues at www.capko.com/blog. Laurie has a BA in Economics from Brown University and an MBA from Stanford. Her last article for Getting Paid was A Benchmark Practice Review Can Help You Evaluate Your Practice’s Health.

1 Comment »

    Internal Controls: Keys to Avoiding Medical Practice Embezzlement | Kareo said:

    [...] Laurie Morgan is a management consultant with Capko & Company. She specializes in marketing, management and technology for medical practices and blogs about practice management issues at http://www.capko.com/blog. Laurie has a BA in Economics from Brown University and an MBA from Stanford. Laurie recently wrote for Getting Paid on Best Practices: Should a Credit Check Be Part of Your Medical Practice Hiring Process? [...]

    Monday, April 9, 2012 - 9:02 pm

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