Credentialing vs. Contracting: What's the Difference?

Both processes are required to bill insurance payors. They work differently and are managed by different payor departments. Each has direct implications for your practice's revenue. Understanding both is one of the most important operational tasks an independent practice faces.

What Is Provider Credentialing?

Credentialing is the formal process by which a payor verifies your qualifications. Your licences, board certifications, training history, and malpractice record are all reviewed and confirmed before a payor adds you to their network.

Most payors run credentialing through CAQH, a centralized database where providers store and update their credential documentation. Keeping your CAQH profile current is one of the most important administrative tasks your practice can manage. An outdated profile is one of the most common causes of credentialing delays.

Credentialing alone does not allow your practice to bill a payor. It adds a provider to the payor's panel. Without a contract and an associated fee schedule, that provider cannot submit claims for reimbursement.

What does the credentialing process involve?

• Verifying provider licences, board certifications, and education history
• Confirming malpractice insurance and claims history
• Submitting provider information to the payor through CAQH or directly
• Payor primary source verification (PSV): the payor confirms your credentials directly with the issuing source
• Provider is added to the payor's panel and linked to your group's existing contract

Most payors use the credentialing process as an opportunity to slow down adding new providers to panels. Expect the process to take 90 to 120 days on average. Some payors take longer depending on specialty. Proactive follow-up and accurate documentation are the two most reliable ways to keep things moving.

What Is Payor Contracting?

Payor contracting is the process of establishing a legally binding agreement between your practice and an insurance payor. Your contract sets out the terms under which your group provides services to the payor's members. It also includes or references a fee schedule that defines your reimbursement for each service.

Without a contract, credentialing means nothing from a revenue standpoint. The contract terms you agree to directly determine your practice's income for the life of that agreement. Most practices accept the first offer without negotiating. Payors are not on your side during the contracting process. Their initial fee schedule offers are almost always lower than what you could negotiate, and most practices leave significant revenue on the table simply by accepting the first offer.

What does the contracting process involve?

• Reviewing the payor's standard contract terms and fee schedule offer
• Benchmarking proposed rates against Medicare fee schedules and market data
• Negotiating reimbursement rates, payment terms, and contract language
• Executing a signed contract with the payor
• Adding additional providers to the group contract once the agreement is in place

Once a contract is in place, individual providers are credentialed and added to your group's panel. They all bill under the same fee schedule. Secure a strong contract before credentialing new providers. Negotiate the rates first, then bring providers on at those rates. If you credential first and negotiate later, providers may spend months billing at the payor's default rates. Those rates are almost always below what you could have negotiated. NGA's payor contract negotiation services help independent practices secure higher reimbursement rates before adding new providers to their panels.

Credentialing vs. Contracting: Side-by-Side

What Is a Fee Schedule and Why Does It Matter?

A fee schedule defines your reimbursement for each service on a per-CPT code basis. It is either included directly in your payor contract or attached as a separate exhibit.

Most fee schedules are structured as a percentage of the Medicare fee schedule for your locality. A payor might offer 110% of Medicare for primary care services, for example. Many payors structure their contracts to obscure what you are actually being paid. The fee schedule may not be attached to the contract at all. It may reference a rate table that is difficult to interpret.

Never sign a payor contract without a complete, readable fee schedule attached. Make sure you fully understand the reimbursement structure before signing. Once signed, you are locked into those rates until the contract's renewal date. That renewal may be one to three years away.

Should You Outsource Credentialing and Contracting?

Outsourcing credentialing

Credentialing is documentation-intensive. It requires consistent follow-up with payors over a period of months. The most common reasons practices outsource it are speed and accuracy. A credentialing team with established payor relationships will typically complete the process faster and with fewer errors than an in-house administrator handling it alongside other responsibilities.

If you are evaluating a credentialing service, look for three things: regular status updates, a clearly documented process, and HIPAA compliance. Lack of transparency is the most common complaint about credentialing companies. NGA Healthcare's credentialing services include active payor follow-up and status reporting throughout the process.

Outsourcing payor contract negotiation

Obtaining a contract with a payor is straightforward. Negotiating one that actually pays your practice fairly is not. Payors have built systems specifically designed to make negotiation difficult. Finding the right person to negotiate with takes experience. Knowing what rates are achievable in your market takes data. Having the leverage to push back on an initial offer takes both. Most practices do not have any of that in-house.

There is one non-negotiable when selecting a negotiation service: they must charge based on performance. A service that charges hourly or a flat fee has no incentive to get you better rates. NGA's negotiation services are performance-based. If we do not improve your rates, you do not pay.