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What’s the difference between Credentialing & Contracting a provider?

Medical Billing

Disclaimer: This blog article was written by an AdvancedMD partner. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of AdvancedMD.


What is credentialing?

Credentialing is the formal process of verifying a provider’s qualifications. This ensures that doctors and nurses have the proper training and experience to provide the highest level of care to patients. The provider credentialing process is completed by verifying all provider documents and ensuring that they are valid and current. Most health insurance companies will not even offer reimbursements if providers lack medical credentialing.


The Credentialing Process

The credentialing process requires a lot of documentation and an immense amount of accuracy. Oftentimes, payers use the credentialing process to slow down adding your providers to panels. When you submit your credentialing request to the payer, the payer will often start the process of verifying the legitimacy of a provider’s credentials through various databases including CAQH. Once these credentials are verified, the provider is then added to the roster associated with your contract.


Contracting vs Credentialing Providers

It is a common misconception that contracting and credentialing are the same thing when, in reality, these are two distinct and different processes. Credentialing simply verifies the legitimacy of a provider but does not necessarily allow for payment from an insurance payer, as it does not connect your group to a fee schedule. In order to obtain payment from an insurance payer, you must go through the process of obtaining an agreement in the form of a binding contract with an associated fee schedule. This process also includes agreeing to the rates that you will be paid to provide your services. It is not until after this process that you can ‘panel’ or add providers to your agreement. If you have a group agreement you can add additional providers to your group and have them bill under the same fee schedule.


Is it a good idea to outsource credentialing?

With anything, there are pros and cons. The most obvious downside to outsourcing credentialing is that you no longer have direct understanding and control over the process. Some credentialing companies do not provide frequent updates, and this can become frustrating as there is a significant amount of nuance and follow-up required to properly credential even a small practice. Make sure that the company you choose has the experience to credential your practice effectively, has a system in place that makes their work transparent to you, and is HIPPA compliant.

However, the two main benefits of outsourcing are cost savings and speed. There is no need to hire, train, or pay an in-house team when there is already a team out there trained and ready to help. This gives your office managers the time to devote to your practice. Credentialing and contracting services can often perform these services much faster and without as many errors, which will also help your group capture revenue and see your patients faster.


Is it a good idea to outsource contracting & contract negotiation?

Obtaining a contract can be relatively straightforward, depending on your specialty, location, and the payer you are trying to obtain a contract with. Negotiating good reimbursements on the other hand is nearly impossible without utilizing a service that specializes in payer contract negotiations. Finding the right person to even negotiate with, let alone successfully negotiate is nearly impossible as the payers have implemented a system that is very difficult to navigate without knowing the process. That said, it is vitally important to find a negotiation service that charges based on performance, essentially only if they get you better contracts. If they charge hourly or a flat fee regardless of performance then there is no guarantee you will get paid better rates, and you are also out whatever fee they charge.


What is a fee schedule & why is it important?

A Fee Schedule is often included in an agreement with a payer in the contract or it can be a separate attachment that is referenced but not included. The Fee Schedule dictates what your group will receive as reimbursement for your services on a per CPT code basis. Many Fee Schedules are based on a percentage of what Medicare reimburses in your locality. That said, many of the payer contracts are structured in a way that is meant to confuse the providers so that they do not really know what they are getting paid, or the Fee Schedule is never attached to the agreement. The best advice to follow with payer contracting is to never sign a contract unless you fully understand the reimbursement structure, and always track what the timing term is so you can review any amendments and changes in reimbursement over time.


Other Benefits of Outsourcing Your Credentialing & Contracting

Medical provider credentialing is becoming a foundational task. Organizations cannot bill for service unless the provider has been approved by all payers. The credentialing process ensures that the provider meets specific standards set forth by health insurance companies. As a result, credentialing improves patient trust, limits the risk of potential loss, and improves the practice’s reputation. Although credentialing can be time-consuming, the benefits outweigh the risks. Additionally, having a precise credentialing process improves cash flow by decreasing the time it takes to add a new provider to your insurance panels.

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Cameron Wood
Cameron Wood is head of client services at NGA Healthcare, a physician advocate who works with small and mid-sized physician practices to negotiate their reimbursement rates. Cameron is an expert at forging business relationships, branding, and working with these groups to help discover their leverage against insurance payers.

Topic: Medical Billing, Revenue Cycle Management

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