Health Care Mergers and Acquisitions: The Potential Background Screening Security Gaps

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The Patient Protection and Affordable Care Act (PPACA), enacted by Congress in 2010, is the largest overhaul of the nation’s healthcare system since the formation of Medicaid and Medicare in 1964. The PPACA’s goal is to reduce both the overall cost of health care and the number of uninsured individuals through the use of various subsidies, tax credits and mandates, as well as improve the health care delivery process and outcomes.

As the different requirements of the PPACA are implemented, health care providers expect increased revenue from more patients seeking medical services but must face lower profit margins and hire additional staff to meet the demand.

Industry Consolidation – Vertical Integration and Integrated Care 
To meet the challenges of the PPACA, both insurance and health care providers are increasingly turning to industry consolidation which is evidenced by recent mergers and acquisitions from Trinity Health, Cigna, WellPoint, and Aetna.

For insurance companies, the PPACA will result in more individuals with pre-existing conditions being insured, while at the same time capping the amount by which these companies can increase their rates. The capped revenue and additional cost of care of the newly insured clients is making insurance providers seek new ways to lower costs. The primary way this will likely happen is by reducing organizations’ administrative costs, primarily through mergers and acquisitions.

Additionally, Accountable Care Organizations (ACOs) are forming in the wake of the PPACA where health care providers will no longer be compensated solely based on services and procedures performed. Instead, they are rewarded based on the quality and outcomes of those services.

For example, it may not be enough for a cardiologist to perform successful heart surgeries. The professional may also have to work with the patient to help prevent future complications, which will, in turn, help lower health care costs. This emphasis on the outcomes of patient treatment(s) will result in an increase of integrated care and may also fuel the trend of increased mergers and acquisitions.

Background Screening: The State and Federal Regulatory Landscape
In the face of the PPACA, the federal and state regulatory landscape during a merger or acquisition can seem like a jigsaw puzzle. Amidst these changes, some of the regulations regarding employee background checks sometimes seem to conflict with one another, making it confusing for those who wish to remain compliant.

In addition, if either or both of the companies involved in the merger or acquisition have gaps in their screening program, the risks of non-compliance may be magnified. When new team members are made part of an organization as a result of merger or acquisition activity, it remains important that the onboarding team determine whether new background screenings are required and, if so, conduct such new screens – even on veteran employees or volunteers.

If an organization has any gaps in their employee screenings programs, those gaps are at risk of expanding during a merger or acquisition, which could make the newly combined organization more vulnerable to increased penalties, fines, lawsuits and other related risks.

Before a merger and acquisition occurs in the health care sector, it’s vital for each party involved to evaluate the employee screening process of the other company rather than assume that it’s thorough and compliant. Given the amount of funding the federal government is injecting into the health care system, there will likely be an increased amount of compliance scrutiny and Civil Monetary Penalties.

To close potential screening gaps that may be identified or arise in connection with a merger or acquisition, organizations should evaluate whether these “best practice” checks were performed on newly acquired employees and consider adding them to their screening program:

  • Identify the names and addresses associated with an individual’s Social Security Number (SSN) using a reputable SSN Trace service.
  • Identify whether an individual has a criminal record history in the jurisdiction(s) corresponding to their address history (e.g. County Criminal, Felony and Misdemeanor Records Search).
  • Expand the investigation of an individual’s criminal history by conducting additional searches that may help identify additional potential criminal records data (e.g. HireRight Widescreen Plus™ service).
  • Identify records for registered sex offenders by checking the registries of an individual’s current or past states of residence or by conducting a nationwide search (e.g. National Sex Offender Registry Search)
  • Confirm if an applicant or employee has been sanctioned or excluded from participating in federal and state health care programs (e.g. FACIS® Level 1M Search).
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HireRight is a leading provider of on-demand employment background checks, drug and health screening, and electronic Form I-9 and E-Verify solutions that help employers automate, manage and control background screening and related programs.

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The HireRight Blog is provided for informational purposes only. It is not intended to be comprehensive, and is not a substitute for and should not be construed as legal advice. HireRight does not warrant any statements in the HireRight Blog. Any statutes or laws cited herein should be read in their entirety. You should direct to your own experienced legal counsel questions involving your organization’s compliance with or interpretation or application of laws or regulations and any additional legal requirements that may apply.