Understanding Credentialing vs. Contracting in Healthcare

Welcome to your introduction to two of the most fundamental processes in healthcare administration. For a healthcare provider to work with an insurance company, they must go through two essential, parallel pathways: credentialing and contracting. These are "two different Pathways that move in the same direction simultaneously parallel," and both are required before a provider can see patients and get paid for their services.

This guide is designed to clearly define each process, explain the crucial differences between them, and show why both are absolutely necessary. By the end, you'll have a solid understanding of how insurance companies and healthcare providers establish a working relationship, starting with the core definitions of each term.

1. Defining the Core Concepts: Two Sides of the Same Coin

While credentialing and contracting often happen at the same time, they focus on entirely different aspects of the provider-payer relationship. Credentialing is about verifying the provider's qualifications, while contracting is about defining the business relationship. The table below breaks down the key differences, and understanding this distinction is the first step to mastering the overall process.

2. Why Both are Necessary to See Patients

Credentialing and contracting are sequential and codependent: credentialing must be finalized before a provider can be officially associated with a contract. You cannot have one without the other if the goal is to become an in-network provider.

A simple analogy helps clarify this relationship:

• Credentialing is like getting a driver's license. The insurance company (acting like the DMV) thoroughly vets your qualifications and background to certify that you are a safe and competent professional, fit to serve their members.
• Contracting is like signing a car rental agreement. Once you have your license, you can be added to the business agreement that outlines the rules, responsibilities, and payment terms for using the car (i.e., being part of the insurance network).

A provider needs the "license" from the insurance company before they can be included in the practice's "rental agreement." This is a crucial distinction, as the workflow can differ based on the practice's status. For a brand-new practice, both credentialing and contracting are initiated from scratch. However, for an established practice with an existing contract, the primary focus is on credentialing the new provider and then formally linking them to that pre-existing business agreement. In either case, this two-step process ensures insurance companies only pay qualified providers who have formally agreed to their business rules, which we will explore in the practical steps ahead.

3. A High-Level Look: The 7 Steps of Credentialing

The following is a high-level overview of the typical steps required to get an individual healthcare provider credentialed with an insurance company. This sequence provides a roadmap for navigating this detailed and essential administrative function.

1. Step 1: Gather Information This first step involves collecting all of the provider's professional and personal information. This includes everything from their education and work history to licenses and certifications needed to complete the applications.
2. Step 2: Identify Insurances A target list is created of all the insurance companies the provider or practice wants to be in-network with. This focuses the effort on the most important payers in their specific geographic area.
3. Step 3: Update CAQH The provider's profile in the Council for Affordable Quality Healthcare (CAQH) system must be updated. Many insurance companies use this centralized database to verify a provider's information, so you must "re-attest" that it is current and accurate.
4. Step 4: Research and Discovery In this phase, you research each target insurance company to understand their specific requirements. This involves finding out how to submit applications, where to send them, and what specific supporting documents are needed, which might include a provider roster or even a business organizational chart for a new contract request.
5. Step 5: Complete and Submit Applications All required application forms are completed and submitted to the insurance companies. It is strategic to prioritize submitting applications to payers that are known to take longer, such as government plans.
6. Step 6: Diligent Follow-Up This is one of the most critical steps. You must proactively follow up with each insurance company to confirm they received the application and to check on its status throughout the process. As the saying goes, "the squeaky wheel gets the oil."
7. Step 7: Receive Confirmation and Connect The final step is receiving the credentialing effective date from the insurance company. Once that is confirmed, you must not only record this date but also document the provider's future recredentialing deadline, which is typically every three years. With this information secured, you can take the necessary action to officially connect that newly credentialed provider to the group's contract.

Following these steps methodically is vital, but your success will ultimately depend on the mindset and work habits you bring to the task.

4. Keys to Success

Success in credentialing and contracting doesn't just come from following the steps; it relies on a consistent approach built on three key attributes. Cultivating these habits will set you apart and ensure a smoother, more effective process.

• Be Detail-Oriented: Every piece of information on every application must be completely accurate. Small errors or omissions can cause significant delays.
• Be Super Organized: You must meticulously track every submission, deadline, and communication for dozens of applications at once. A well-organized system is essential.
• Take Thorough Notes: Your notes on conversations and application statuses should be so clear that a colleague could step in and understand exactly where things stand at a glance.

By keeping these principles in mind, you can navigate these complex but crucial healthcare processes with confidence and build a strong foundation for your administrative career.

5. Conclusion: Your Foundation for Success

You now have a clear understanding of the fundamental differences between credentialing and contracting. Remember the core distinction: Credentialing verifies the provider, while Contracting sets the business rules.

Grasping this dual process is a foundational building block for anyone pursuing a career in healthcare administration. With this knowledge, you are better prepared to understand the intricate and essential relationships between those who provide care and those who pay for it.