What Is the Difference Between Credentialing and Contracting?

Understanding what is the difference between credentialing and contracting is essential for healthcare administration. These two processes often confuse, but once you grasp the basics, it’s clear why they must happen together. In this guide, I’ll break down credentialing and contracting, how they work, and why you need to align them for a smoother workflow. Let’s dive in!

Key Takeaways:

Credentialing ensures individual healthcare providers meet qualifications and payer standards.
Contracting creates agreements between healthcare businesses and insurance companies.
Both processes must progress together to avoid claim denials or delays.
Effective dates link credentialing and contracting to payer systems, enabling smooth operations.
Tools like tracking spreadsheets and templates can simplify these processes.

What Is Credentialing?

Credentialing typically refers to verifying an individual healthcare provider’s qualifications. Insurance companies use this process to determine whether a provider is trustworthy, well-trained, and safe to include in their network. Think of it as a detailed background check that ensures providers meet specific standards for caring for patients covered by a particular payer.

Credentialing often involves vetting education, licenses, certifications, training, and past work experience.
The process also ensures compliance with healthcare’s ultimate rule: Do No Harm (even if only doctors technically take the Hippocratic Oath).

So, when you hear “credentialing,” you can assume it usually pertains to individual providers. It’s rare for credentialing to apply to a group or facility unless it involves certifications from organizations like JCAHO or CMS.

What Is Contracting?

On the flip side, contracting deals with businesses or groups. This is where a healthcare organization establishes a formal agreement with insurance companies, whether it’s a sole proprietor, group practice, or facility. The contract outlines the terms under which the business entity will provide services to the insurance company’s members.

Contracting involves enrolling the business entity (using Tax IDs, NPI-2 numbers, etc.) with the payer.
A contract is typically established for the business, not for individual providers.

The important link: Once credentialing is complete and a contract is in place, they must be tied together. Insurance companies link individual providers to the business under the contract, creating a streamlined process for billing, payments, and claims.

Group Contracts and Reimbursement in Healthcare Billing

Why Credentialing and Contracting Must Happen Together

Here’s the trickiest part: Credentialing and contracting must work in parallel tracks and eventually converge. If either step is delayed, it can result in denied claims or delayed payments.

To illustrate:

The claim will be denied if a provider is credentialed but not linked to the business because the insurance company can’t recognize the connection.
Similarly, if the business has a contract but providers are not credentialed, they won’t be able to treat patients under that insurance plan.

This is why organization is key. Tracking documents and having a clear process can save you so much frustration. (Spoiler: I’ve created some tools and templates to help you with this, which I’ll discuss below!)

Effective Dates: Connecting Credentialing and Contracting

A critical aspect of this process is the effective dates. Here’s how they work:

Type	What It Means
Credentialing Date	The date an individual provider is officially approved to treat patients under a payer’s plan.
Contract Effective Date	The date the business entity’s contract with the payer becomes valid.
Provider/Group Linking Date	The date the provider is linked to the business under the contract.

To avoid confusion, you need to ensure:

Credentialing is complete for individual providers.
Contracting is finalized for the business.
The insurance company links the provider to the business in their system.

When all these pieces are in place, claims will process smoothly.

Common Pitfalls: What to Avoid

If you’re handling credentialing and contracting, don’t make these mistakes:

Starting one process too late. Both credentialing and contracting need to begin early and run concurrently.
Assuming insurance companies are the same. Every payer has its policies and requirements—some might even make you start credentialing from scratch, while others allow reassignment from one group to another.
Ignoring effective dates. Never let a provider see patients under a new business until their effective dates are confirmed and tied together in the payer’s system.

Tools to Simplify Credentialing and Contracting

A simple tracking document to help manage credentialing and contracting timelines.
A Word document template for gathering necessary provider information.

Both tools will help you stay organized and avoid the chaos of managing these processes.

Navigating Exceptions and Challenges in Credentialing and Contracting

Now that you’ve understood the differences between credentialing and contracting, let’s dive into some of the exceptions, challenges, and nuances that can arise when working with various insurance companies. If you thought the process was straightforward, well… let’s just say the healthcare world likes to keep things interesting.

This section is about helping you navigate the quirks of insurance companies, handle tricky situations, and stay ahead of the game. Buckle up—this is where things get real.

The Many Faces of Insurance Companies: No Two Are Alike

One of the most frustrating aspects of credentialing and contracting is that insurance companies don’t follow the same rules. Every payer has policies, requirements, and timelines, leaving even the most seasoned credentialing specialists scratching their heads.

For example:

Nationwide Payers like Aetna, Cigna, UnitedHealthcare, and Blue Cross Blue Shield have broad processes but often differ state-by-state. Did you know that Blue Cross Blue Shield operates locally in each state? That’s right—the process in Texas might look completely different from New York.
Regional Plans and Union Plans often have their unique quirks. These smaller payers might require additional documentation or certifications.
Government Programs like Medicare and Medicaid are federally governed but administered by the state, which adds a whole other layer of complexity. TRICARE, for instance, has regions (TriWest, TriEast) with distinct policies depending on your location.

The key takeaway here? Always double-check the specific payer’s requirements.

Facility vs. Provider Credentialing: Clearing Up the Confusion

While credentialing is typically for individual providers, there are times when a facility or group may need to be credentialed as well. This type of credentialing is far less common, but it does happen.

For instance:

Facility Credentialing might be required if your group needs certifications from entities like JCAHO (The Joint Commission) or CMS. These certifications verify the facility meets safety, quality, and compliance standards.
On the other hand, provider credentialing is all about confirming an individual’s education, training, and licensure.

The bottom line? Know what type of credentialing the payer is asking for. If they’re requesting facility credentialing, it likely means there’s some special certification involved.

Challenges in Provider Transitions: Moving Providers Between Groups

If you’re bringing a provider into a new group, things can get tricky depending on their current credentialing status with various payers. Let’s break this down:

Reassigning Providers:
If the provider is already credentialed with a payer under a different group or business, the insurance company may be able to reassign them to the new group. This can save time because you won’t need to start the credentialing process from scratch.
- Some insurance companies make this easy. They’ll reassign the provider, tie them to the new group, and voilà—you’re done.
- Others, however, might say, “Oh, new group? Start over.” In this case, the provider must complete an entirely new credentialing application.
Timing Is Everything:
Some insurance companies will check to see if the provider is due for re-credentialing soon (usually every three years). If so, they may combine the re-credentialing process with the transition to the new group to save time.
- But again, not all payers operate this way. Some have hard rules about restarting the process, regardless of timing.

The only way to know? Ask. Contact the payer and clarify their policies for transitioning providers between groups.

Effective Dates: Why You Must Triple-Check

Remember in Part 1 when we talked about effective dates? These are crucial, and getting them wrong can be a disaster. Here’s a quick recap with a few extra tips:

Type of Date	What You Need to Know
Credentialing Effective Date	The date the provider is approved to see patients under the payer’s network.
Contract Effective Date	The date the business’s contract with the payer becomes active.
Provider/Group Linking Date	The date the provider is officially tied to the business under the contract in the payer’s system.

Pro tip: Always confirm these dates with the insurance company before scheduling patients. Many claims are denied because the provider was credentialed but not linked to the group. And trust me, nothing frustrates providers more than seeing patients and then finding out their claims were denied because of a missed connection in the system.

My Credentialing and Contracting Course

If this process feels overwhelming, don’t worry—I’ve designed a course to make it as simple as possible. It’s hosted on the Thinkific platform and broken into three levels:

Beginner: Perfect for those just starting in credentialing and contracting.
Intermediate: Focused on refining your process and handling common issues.
Advanced: Designed for experienced professionals who want to master more complex scenarios.

Each section is self-paced, and you can start wherever it makes sense. There’s even a preview video for each section to help you decide which level best suits your needs.

Credentialing & Contracting Course

Advanced Troubleshooting for Credentialing and Contracting

Now that you’ve nailed down the basics and understand the differences between credentialing and contracting let’s tackle the advanced side. This section dives into troubleshooting the most common (and frustrating) roadblocks you’ll face. These tips will save you hours of headaches and help you move through credentialing and contracting like a pro.

Common Insurance Company “Gotchas”

Ah, insurance companies. They’re the necessary evil of credentialing and contracting; dealing with them can feel like navigating a bureaucratic minefield. Here are some of the most common issues you’ll encounter and how to solve them:

1. “Lost” Applications

Insurance companies losing applications is practically a rite of passage in healthcare administration. You submit all your documents, follow the instructions to a T, and then—poof—it’s as if your application never existed.

Solution:

Always request a confirmation email or reference number when you apply.
Follow up with the payer every 2 weeks to ensure your application progresses.
Keep a digital paper trail of everything—emails, faxes, and even screenshots of online submissions.

2. Delays with Group Contracts

Some payers drag their feet when processing group contracts, especially if they don’t have enough incentive to move quickly. This can leave you in limbo for weeks—or even months.

Solution:

Build relationships with provider representatives at the payer. These reps can sometimes nudge things along.
Emphasize urgency by providing patient schedules or contracts with referring providers that depend on credentialing.
If delays persist, escalate the issue with a formal complaint or request to speak with a supervisor.

3. Inconsistent Policies

We’ve already mentioned how different insurance companies follow their own rules, but sometimes, they make up policies on the spot. For example, one representative may say reassigning a provider is easy, while another says it’s impossible.

Solution:

Ask for documentation of the payer’s policies and processes. Having something in writing makes it easier to hold them accountable.
Be persistent. Call back and speak with another representative if you’re getting conflicting information.

4. Effective Date Discrepancies

One of the sneakiest problems is when the effective date of credentialing or contracting doesn’t align with what you expected. This can cause massive delays in billing and claim approvals.

Solution:

Confirm effective dates in writing before scheduling any patients.
Double-check that providers are linked to the group contract in the payer’s system—this is a common source of claim denial.
Use your tracking documents to stay ahead of effective date timelines.

Mistakes That Can Cost You Time and Money

Even the best credentialing specialists make mistakes—this is a complicated process. But avoiding these common pitfalls can save you time, money, and frustration:

Submitting Incomplete Applications
Even one missing document can cause delays. Always triple-check that you’ve included everything the payer requires.
Not Starting Early Enough
Credentialing and contracting take time—sometimes months. Starting too late can leave providers sitting on their hands when they could be seeing patients.
Overlooking Recredentialing Deadlines
Payers require providers to be credentialed every 3 years (give or take). If you miss the deadline, you might have to start from scratch.
Assuming Providers Are Ready to Bill
Just because a provider is credentialed doesn’t mean they’re linked to the group contract. Always confirm this before billing for services.

How to Handle Denied Claims Related to Credentialing

Even if you follow every step perfectly, you’ll probably encounter denied claims—it’s just part of the process. The good news? Most credentialing-related claim denials are fixable. Here’s how:

Understand the Denial Code
Every denial comes with a code explaining why the claim wasn’t approved. Look for codes related to credentialing or contracting (e.g., “Provider not credentialed” or “Provider not linked to group”).
Check the Payer’s System
Log into the insurance company’s provider portal to confirm the provider’s status. Are they credentialed? Are they linked to the group? If not, you’ll need to follow up with the payer.
Resubmit Claims Once Fixed
Once the issue is resolved, resubmit the denied claims. Most payers have a specific process for this, so follow their instructions carefully.

FAQ

What is credentialing in healthcare?

Credentialing verifies an individual healthcare provider’s qualifications, including education, licenses, and certifications. Insurance companies use it to ensure providers meet standards of care and can safely treat their beneficiaries.

What is contracting in healthcare?

Contracting establishes formal agreements between healthcare businesses (e.g., sole proprietors or group practices) and insurance companies. It outlines the terms under which the business will provide services to the insurance company’s members.

How are credentialing and contracting different?

Credentialing focuses on individual providers’ qualifications while contracting deals with the business entity’s agreement with payers. Both are necessary for a healthcare organization to operate effectively.

You’ll also find detailed examples, troubleshooting tips, and advanced strategies to handle even the toughest scenarios.

Why must credentialing and contracting happen together?

Credentialing and contracting must progress simultaneously to avoid delays. Providers must be credentialed and linked to the business contract in the payer’s system for claims to process smoothly.

What are the effective dates for credentialing and contracting?

Effective dates determine when credentialing, business contracts, and provider-to-business linking become valid. Claims can only be processed after all these dates are confirmed.

What are common mistakes in credentialing and contracting?

Starting processes too late, submitting incomplete applications, or overlooking re-credentialing deadlines can delay operations and lead to claim denials.

How can I stay organized during credentialing and contracting?

Tracking tools and templates, such as credentialing timelines and provider information forms, can streamline the process and prevent missed deadlines.

What happens if claims are denied due to credentialing issues?

Claims can be resubmitted after fixing credentialing errors, such as linking providers to the business contract in the payer’s system. Always check denial codes for specific reasons.

What challenges arise with provider transitions between groups?

Some payers allow reassigning credentialed providers to new groups, while others may require starting the credentialing process from scratch. Timing and communication with payers are critical.

How can I handle differences in payer policies?

Each insurance company has unique requirements. Always confirm policies in writing and follow up regularly to ensure applications and transitions are processed correctly.

Mastering the Art of Credentialing and Contracting

Credentialing and contracting may seem overwhelming initially, but with the right tools, strategies, and mindset, you can master the process. The key is understanding the differences between credentialing and contracting, starting early, and staying organized every step of the way.

Remember:

Credentialing is all about vetting individual providers.
Contracting is about enrolling the business or group and linking providers to it.
Both processes must move forward together for claims to process smoothly.

If you’re ready to dive deeper, check out my credentialing and contracting course on Thinkific. It’s packed with actionable insights, templates, and resources to make your job easier. You