Owner and Director Background Screening for Facility Licenses

When a state licenses a behavioral health program, it is deciding whether to trust the people who run it as well as whether the building and policies meet the rule. That is why so many applications ask for an ownership chart, disclosures about past licenses and convictions, and background checks on named roles. Federal enrollment adds its own layer. A program that discovers an owner's history problem after filing has lost months; one that screens its own team first can restructure, disclose properly, or choose a different path.

Who does the state screen?

It varies more than most operators expect. From the state rules we have verified:

• Florida background-screens owners, directors, chief financial officers and clinical supervisors as part of the substance abuse provider license application (Fla. Stat. 397.407).
• Louisiana requires a statewide criminal background check, including sex offender registry status, on every owner and managing employee, dated within 90 days of the application (LAC 48:I.5607).
• New York reviews the criminal history of the owners and principals of an OASAS applicant under 14 NYCRR Part 805, and asks whether ten percent of owners or principals have prior substantial experience providing or managing SUD treatment (14 NYCRR 810.7).
• Maryland requires the application to disclose license revocations within 10 years and criminal convictions of the applicant, owner, program director or staff, and requires a written criminal history policy for staff, contractors and volunteers (COMAR 10.63.01.05, 10.63.06.02).
• Kentucky requires criminal record checks of personnel, and each alcohol and other drug entity rechecks a random sample of at least 25 percent of personnel every year (908 KAR 1:370).
• Missouri applies DMH background screening rules to certified programs (9 CSR 10-5.190), and Utah applies its human service program background screening rules (Utah Admin. Code R501-14).
• Mississippi does not run the checks itself: DMH makes the applicant or certified agency responsible for them (DMH Operational Standards Rule 2.2(H)).

The common thread is that the applicant gathers and certifies the information. A disclosure that turns out to be incomplete is often a bigger problem than the history it left out.

Can an owner's history block a license outright?

In some states, yes. North Carolina bars a new license, or Medicaid enrollment, for owners, principals or affiliates tied to a recent license revocation, certain penalties or summary suspensions, and the same bars block Medicaid revalidation (G.S. 122C-23(e1)). For opioid treatment programs, Ohio requires the license applicant and its owners, sponsor and medical director to show three years of good standing everywhere they have run an OTP. New Hampshire's OTP application includes a New Hampshire criminal records check for the applicant and administrator. North Dakota bars a program whose license is revoked from reapplying for 365 days, and Missouri's DMH may bar a denied applicant for up to a year, so a past problem can follow an operator into the next application.

What do Medicaid agencies check?

Every state Medicaid agency must, under 42 CFR Part 455:

• confirm the identity and exclusion status of the provider and of every person with an ownership or control interest, agent and managing employee, checking federal databases including the OIG exclusion list, at enrollment and at least monthly for exclusions (455.436);
• deny or terminate enrollment if any person with a 5 percent or greater direct or indirect ownership interest was convicted of an offense related to Medicare, Medicaid or CHIP in the last 10 years, unless the state documents that denial is not in the program's interest (455.416(b));
• require the provider and its 5 percent owners to consent to criminal background checks, including fingerprinting, when state law or the provider's risk level requires it, and to submit fingerprints within 30 days of a request (455.434); and
• terminate or deny if those owners fail to submit timely and accurate information or fingerprints (455.416(a), (e)).

See Medicaid enrollment for behavioral health facilities.

Does Medicare add more?

Medicare screens by risk category. Community mental health centers are moderate risk, which brings a site visit (42 CFR 424.518(b)). Newly enrolling opioid treatment programs that have not been "fully and continuously certified" by SAMHSA since October 23, 2018 are high risk, and at that level the Medicare contractor requires fingerprints for a national background check from every individual with a 5 percent or greater direct or indirect ownership interest and runs an FBI fingerprint-based criminal history check on each (424.518(c)).

OTPs face a staffing bar as well. An OTP enrolled in Medicare must not employ or contract with a prescribing or ordering practitioner, or anyone legally authorized to dispense narcotics, who has been convicted in the preceding 10 years of a federal or state felony that CMS deems detrimental to the program, and it must report the program sponsor and medical director as managing employees (42 CFR 424.67). Every enrolled provider certifies that it does not employ or contract with individuals excluded from federal health care programs (424.516(a)(3)).

Before filing, whom should you screen?

1. Map ownership to the people behind every entity, down to 5 percent, since that is the federal threshold and many states use something similar.
2. List each named role the state rule covers: directors, officers, financial officers, clinical supervisors, program directors, administrators, managing employees, and for an OTP the sponsor and medical director.
3. Run the federal exclusion checks on all of them before the application goes in, and keep the results.
4. Ask each person, in writing, the same questions the application will ask about prior licenses, revocations, discipline and convictions.
5. Schedule fingerprints early with the vendor and codes the state or contractor specifies; prints taken for another agency often cannot be reused.
6. Write the staff screening policy your state requires, with a recheck schedule if the rule has one, as Kentucky's does.

Clinicians go through their own licensing board's checks; our sister site White Glove MFT explains fingerprinting and background checks from the clinician's side.

How do we help?

The ownership and background packet is part of every state license package: Outpatient Program License at $1,995 per site and Residential or Detox Program License at $2,995. We build the ownership chart, prepare the disclosures, schedule the screening steps and keep the exclusion-check record. A change in owners later is our Ownership Change or Relocation service at $795; see buying a treatment program. Each person answers their own disclosure questions and signs their own forms. We do not run consumer background reports or give legal advice on how a particular history will be treated.