Should your medical practice use a credit report in hiring?

A column about keeping your practice in good health

By — Posted March 19, 2012.

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

A physician practice that wants to get a copy of a potential hire’s credit report has to ask itself two questions. Is it legal? And, if so, is it worth doing?

“You have to make sure the information is correct, and you need to have a really good reason as to why this information means that you are not putting that person in the position,” said Danielle Urban, an employment lawyer and Denver-based partner with Fisher & Phillips.

The number of people working in physician offices is expected to grow 32.7% from 2,315,800 in 2010 to 3,073,600 in 2020, according to the Bureau of Labor Statistics. A bad hire can be costly. A survey of 294 health care hiring managers by the jobs website, released Dec. 8, 2011, found that 77% had been affected by a bad hire. For 34% of this group, the bad hire cost at least $25,000. For 18%, the expense was $50,000, because the new employee led to decreased productivity, reduced morale and poor relations with patients.

To reduce the risk of these problems, along with the possibility of embezzlement, fraud, violent behavior or other malfeasance, many employers check potential employees’ credit, looking for large debts and payment problems. This is usually used in conjunction with a criminal background check and a look into relevant medical licenses. Thirteen percent of companies check a credit history for all jobs, according to the Society for Human Resource Management. An additional 47% do so for some jobs.

However, looking at a prospective employee’s credit history may be illegal in some circumstances and could expose a practice to a discrimination lawsuit, attorneys said.

Federal law prohibits denying employment because of a bankruptcy. Seven states restrict the use of a credit report in hiring, and 29 others are considering or have considered doing so. One major factor driving these efforts: the realization that many credit histories have been dinged as a result of the 2007-09 recession, accompanying housing crisis and ongoing economic malaise.

States that restrict using a credit history in hiring usually allow for exceptions for jobs involving responsibility for money or sensitive information such as patient data. This may mean a medical practice can argue that a billing person or a medical records staffer should be subject to a credit check. The burden of proof, however, is on the medical practice to demonstrate that this information is crucial.

“Proceed with caution,” said Christina Stovall, a director of the Euless, Texas-based human resource outsource firm Odyssey OneSource, which works with several medical practices. “You should have a bona fide business reason to run that report. What is really the purpose of gaining this information?”

Meanwhile, the U.S. Equal Employment Opportunity Commission held hearings in 2010 on the use of credit histories in hiring and is continuing to look at how the issue affects the job possibilities of minorities, women and people with disabilities. The agency cannot ban the use of credit histories, but it can take action if their use disproportionately affects a group of people protected under Title VII of the Civil Rights Act of 1964.

For example, the EEOC filed a discrimination lawsuit against Kaplan Higher Education Corp. in late 2010, alleging that its use of credit histories in hiring unfairly affected African-American applicants and had no job relevance or business necessity. The case is ongoing, and Kaplan has denied all discrimination accusations.

In addition to the possible legal hassles, there is increasing recognition that a credit report may not provide much help. There is no documented evidence supporting a correlation between poor credit and being a poor performer on the job, or even being a greater threat to steal from the practice. Recent economic turmoil means some people with weak credit histories have had bad luck rather than mismanagement of personal finances. Many credit reports also may be in error either because of mistakes made by reporting agencies, or because of identity theft.

“A lot of companies are starting to back off,” Urban said. “Because so many people have been affected by the recession, you cannot draw any conclusions anymore.”

If medical practices want to use credit reports in hiring, they need to tread carefully to reduce the risk of legal problems and alienating potentially valuable employees, attorneys said. Permission must be gained from job applicants to pull their credit reports.

It is legal in most — but not all — jurisdictions to refuse to consider someone who does not give consent. Employment-related credit reports do not include the actual credit score and do not affect this number, unlike those requested when a person is applying for a loan.

“We advise our clients to always explain the screening process to the applicant, especially if they are going to pull a credit report,” said Marc Bourne, vice president of Know It All Intelligence Group, a Bensalem, Pa.-based investigative services company that provides employment screening. “The medical practice manager should explain what they are looking for on the credit report and ask the applicant if they have any questions. Communication is key to putting applicants and employees at ease when conducting background screening and pulling credit reports.”

If a job offer is withdrawn because of the credit history, the potential employee must be notified and given a copy of the report under federal law. The applicant may be given an opportunity to respond or rebut the history. This can be an opportunity for an employee to answer questions about the report to alleviate concerns raised or confirm some red flags. This is important, because experts say a credit history should be considered in context.

“You need to let them know,” Urban said. “If they come back to you and say, ‘Yes, that’s true. I didn’t pay,’ but they have an explanation that they were out of work, they couldn’t sell their house, you need to take that into account. So many people are in that situation. But if they don’t have a really good explanation, you need to give it some thought.”

Back to top


7 states that restrict use of credit histories in hiring

If a practice is thinking about pulling credit reports on potential hires, it might have to rethink those plans. A few states in recent years enacted laws barring or regulating the practice, and others have considered such legislation.

California: Prohibits an employer or prospective employer from obtaining a consumer credit report. Exemptions include jobs with regular access to personal information, authorized to sign banking and financial documents on the employer’s behalf, able to gain confidential or proprietary information, or regularly handling more than $10,000 in cash.

Connecticut: Prohibits employers from requiring an employee or prospective employee to consent to a credit report as a condition of employment. Exemptions include financial institutions, suspicions of a job-related legal violation, or situations where a credit history is substantially connected to the job.

Hawaii: Defines using an individual’s credit history in hiring and termination as an unlawful discriminatory practice. Employers who can prove that credit information is directly related to a bona fide occupational qualification are exempt.

Illinois: Prohibits employers from inquiring about or using an employee’s or prospective employee’s credit history as a basis for employment, recruitment, discharge or compensation. Exemptions include financial institutions and government agencies.

Maryland: Prohibits the use of a credit history in hiring unless an employer can demonstrate a bona fide reason for needing this information.

Oregon: Prohibits the use of a credit history in hiring unless an employer can demonstrate a bona fide reason for needing this information.

Washington: Prohibits the use of a credit history in hiring unless an employer can demonstrate a bona fide reason for needing this information.

Source: National Conference of State Legislatures, Use of Credit Information in Employment, 2011 legislation (link)

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn