What Comes First: Credentialing or Contracting?

Healthcare providers entering the world of insurance partnerships face a chicken-and-egg dilemma that can make even seasoned professionals scratch their heads. Should you get credentialed first, or should you secure contracts before diving into the credentialing process? The answer isn’t as straightforward as you might think, and understanding the nuances can save you months of frustration and lost revenue.

The Traditional Approach: Credentialing First

Most healthcare consulting firms and practice management experts recommend starting with credentialing. There’s solid logic behind this approach. Insurance companies typically won’t engage in serious contract negotiations with providers who haven’t already demonstrated they meet basic qualification standards. Think of credentialing as getting your driver’s license, you need it before anyone will let you behind the wheel, regardless of what kind of car you want to drive.

When you pursue credentialing first, you’re essentially building your foundation. The process involves submitting detailed documentation about your education, residency, board certifications, malpractice history, and current licenses. Insurance companies will verify every piece of information, sometimes taking 90 to 180 days to complete their review. Once you’re credentialed, you become an approved provider in their network, which opens doors for contract discussions.

However, the credentialing-first approach isn’t without drawbacks. You might invest significant time and energy getting approved by insurance companies that offer unfavorable contract terms. Some providers find themselves credentialed with networks that don’t align with their practice goals or patient demographics.

The Strategic Alternative: Contracting First

A growing number of healthcare providers are flipping the traditional script and pursuing contract negotiations before formal credentialing. This approach requires more upfront research and relationship building, but it can lead to better outcomes for practices that know what they want.

When you focus on contracting first, you’re essentially saying, “Let’s talk business terms before we go through all the paperwork.” This strategy works particularly well for specialists in high-demand fields, providers with unique qualifications, or practices that want to be selective about their insurance partnerships.

Of course, this approach comes with its own challenges. Insurance companies may be reluctant to discuss specific contract terms with providers who haven’t completed credentialing. You’ll need to invest more time in relationship building and may face longer delays in getting definitive answers about partnership opportunities.

The Hybrid Approach: Running Both Processes Simultaneously

Many experienced practice managers recommend a hybrid strategy that runs credentialing and contracting processes in parallel. This approach requires more sophisticated project management but can significantly reduce your time to market.

Here’s how the parallel approach typically works. You begin by identifying your target insurance companies based on factors like patient demographics, reimbursement rates, and administrative requirements. Then you initiate credentialing applications with your top choices while simultaneously reaching out to their provider relations teams to discuss contract opportunities.

The key to making this work is communication. You need to keep both sides informed about your progress and timelines. If a contract negotiation stalls, you might decide to pause the credentialing process with that company. Conversely, if you discover unfavorable contract terms during negotiations, you can redirect your credentialing efforts toward more promising opportunities.

The downside is increased administrative burden and the need for more sophisticated tracking systems to manage multiple moving parts across different insurance companies.

Factors That Should Influence Your Decision

Your choice between credentialing first, contracting first, or a hybrid approach should depend on several practice-specific factors. Geographic location plays a major role, in markets dominated by one or two large insurance companies, you may have limited negotiating power and should focus on credentialing first. In more competitive markets, you might have more success with contract-focused strategies.

Your healthcare specialty also matters significantly. Primary care physicians often find credentialing-first approaches most effective because insurance companies actively recruit them and offer relatively standardized contracts. Specialists, particularly those in high-demand fields like cardiology or orthopedics, may have more success with contracting-first strategies because they bring unique value that insurance companies want to secure.

Practice size and resources are equally important considerations. Solo practitioners or small groups may lack the administrative bandwidth to manage multiple simultaneous processes and should consider focusing on one approach at a time. Larger practices with dedicated credentialing staff may find hybrid approaches more manageable.

Common Pitfalls to Avoid

Regardless of which approach you choose, several common mistakes can derail your efforts. Many providers underestimate the time required for credentialing and contracting processes, leading to cash flow problems during the transition period. Plan for longer timelines than initial estimates suggest, and maintain adequate working capital to cover expenses during the transition.

Documentation errors represent another frequent stumbling block. Insurance companies have strict requirements for credentialing paperwork, and even minor discrepancies can cause significant delays. Invest in quality control processes and consider working with experienced credentialing specialists for your first few applications.

Don’t overlook the importance of maintaining current licenses and certifications throughout the process. Many providers discover expired credentials during credentialing reviews, causing additional delays and complications. Implement systems to track renewal dates and maintain current documentation for all relevant licenses and certifications.

The Role of Professional Support

Whether you choose credentialing first, contracting first, or a hybrid approach, consider the value of professional support. Credentialing specialists understand insurance company requirements and can help you avoid common pitfalls. Healthcare attorneys can review contract terms and identify potential issues before you commit to partnership agreements.

Practice management consultants can help you develop strategies that align with your specific goals and market conditions. While professional support represents an additional expense, the time saved and revenue protected often justify the investment, particularly for providers new to insurance contracting.

Making Your Decision

The question of whether provider credentialing or contracting comes first doesn’t have a universal answer. Your decision should reflect your practice’s unique circumstances, market conditions, and strategic goals. Take time to research your target insurance companies, understand their requirements and timelines, and develop a plan that maximizes your chances of building profitable partnerships.

This isn’t a one-time decision. Practices grow and market conditions change, you may find that different approaches work better for different situations. Stay flexible, learn from each experience, and refine your strategy based on results.

The key is to approach the process strategically rather than reactively. Whether you start with credentialing, contracting, or both, having a clear plan and realistic expectations will help you navigate the challenges and build the insurance partnerships that support your practice’s long-term growth and stability.