What is the difference between credentialing and contracting?

Words are important. Often, we must parse out minor differences to understand the correct meaning of any given term. This is no truer than when discussing provider enrollment and deciphering the difference between insurance credentialing and contracting.

People often use the terms “credentialing” and “contracting” interchangeably. This is understandable, as it is not necessarily wrong to use them interchangeably. The processes are so closely tied together it is impossible to have one without the other.

Nevertheless, they are both still distinct steps in the overall undertaking of becoming a well-established, enrolled provider. Sometimes, the full process of provider enrollment is only called “contracting.” This is probably because getting a contract is the end goal of the entire process. However, credentialing is a necessary step on the way to that goal. It is helpful, then, to consider credentialing as a sub-process of contracting. Both together lead to provider enrollment.

The Credentialing Step

The credentialing step is complete when an insurance payer examines and approves all the necessary documents that verify a provider’s qualifications. Credentialing is a paperwork-intensive process. But it is essential in ensuring that a provider is trained and has the requisite experience to provide top-notch patient care.

Simply put, getting credentialed means that a provider’s state licenses, national provider identifier (NPI) number, degree certificates, training, etc. are all current. A provider must make the above information accessible on his or her Council for Affordable Quality Healthcare (CAQH) profile at the time of an insurance payer application. Once these credentials are verified, an insurance payer will add the provider to a contract roster.

Only then can a provider begin discussing a fee schedule, and without a fee schedule, a provider cannot get paid. This makes credentialing vital, as a provider will not be allowed to move on to the contracting stage until they have been credentialed.

This is an ongoing process. Providers must properly maintain their verification. Even after completing a successful contract, providers without the latest medical credentialing are unlikely to receive reimbursements from most insurance payers.

The Contracting Stage

While credentialing is essential to verify a provider with an insurance payer, contracting is essential for getting a provider paid. Essentially, contracting is a legal relationship between two or more parties, usually the provider and the insurance payer.

In the contracting stage, a credentialed provider will apply for what is called a participation contract with an insurance payer. This allows the provider to become ‘in network’ with an insurance payer and accept patient plans. Applications for a participation contract are usually submitted in tandem with credentialing applications, as all the same basic information, like NPI, license, education, etc., is needed for the approval of both.

During the contracting process, providers and payers will negotiate targets, benchmarks, services, and fee schedules. An insurance payer will then offer a binding contract with an associated fee schedule. During this process, a provider will also agree to the rates they will charge patients for services.

Depending on the specialty, size, and location of a practice, contract requirements may vary. It is important to note, that any new provider who joins a practice must go through the credentialing process to be able to accept payment, but they may be able to use the existing contract.

An Example

Imagine a new doctor. Dr. James for ease. Dr. James has just completed all the necessary steps in his education and licensing and now wants to start seeing patients.

He updates all his documents and information on CAQH, and with the help of credentialing specialists, he puts in applications for his practice to be verified and approved by insurance payers. At the same time, he has put in applications for participation contracts with the same payers. His credentialing team is helping him review contract agreements and rates while relentlessly following up with payers.

After 3-6 months, insurers approve the credentialing application. But Dr. James is still not ready to start treating patients, as his contract has not come through. Once his approval date for credentialing is effective, the participation contract can be finalized, and only then can Dr. James start his practice.

About a month or so later, Dr. James signs the participation contract. He will start seeing patients and submitting claims to insurance payers. The patients get treated, and Dr. James gets paid!

The Enrollment Process Completed

Obtaining a contract with an insurance plan and completing the credentialing application are the two major steps involved in the provider enrollment process. Both are vital to successful participation in an insurance network as an enrolled provider. Professional credentialing and contracting services can make these steps faster and more accurate, ensuring that after enrollment, a practice captures the most revenue and sees patients as soon as possible.