The Pros and Cons of Outsourcing Credentialing for Healthcare Providers

The credentialing process is one of great import to private practices’ and hospitals’ employed physician networks (EPNs). Too often, credentialing is either performed haphazardly or is an afterthought to the signing of a physician’s or advanced practice professional’s (APP; i.e., nurse practitioner or physician assistant) contract. Truthfully, the two processes (the employment of a practitioner and credentialing) should synchronize so that the practitioner “participates” in most, if not all, of the system’s payer contracts at the time that he or she begins seeing patients. Unfortunately, the coordination seldom happens.

Given the importance of credentialing physicians vis-à-vis reimbursement to the enterprise, it is a wonder that the credentialing process remains a stepchild in the operational function of the business. When providers see patients, and they are not credentialed, the enterprise runs the risk of either appealing denied claims (because the provider would be “out of network”) or holding claims and submitting them once the provider is credentialed. For instance, with Medicare, providers can capture charges retrospectively for up to one (1) year before “timely filing” barriers are reached. This inefficiency builds unnecessary burden into the operations of the system’s revenue cycle.

Credentialing is a detail-oriented endeavor requiring months to reach fruition, even when the process progresses smoothly. Healthcare entities should evaluate their credentialing process, procedures, and people to ensure that practitioners are added to insurance panels efficiently. Included in that evaluation should be the consideration of the positives and negatives of outsourcing credentialing.

The predicate to outsourcing, of course, requires that the company or person whom you engage in an outsourced model is fundamentally exceptional at credentialing and has an attention to detail that surpasses speed.

Pros: The Case for Outsourcing

Stop Gap

Outsourcing can be deployed effectively as a stop gap measure when there is a break in employment of credentialing staff (e.g., termination of a staff member, medical or other leave, etc.). Outsourcing as a stop gap provides a semblance of continuity to ensure that the process of enrolling physicians and APPs continues unabated. With quality “replacement” staff, healthcare enterprises can continue credentialing providers and expediting the protocol to confirm that there is no breach in the continuum.

The departure of a staff member, regardless of his or her skills in credentialing (e.g., strong vs. weak), without a suitable backup can present major challenges to onboarding and getting physicians paneled, which can ultimately negatively impact revenue.

Economies of Scale

Farming credentialing to a business/vendor that has the human capital bandwidth and structured processes and procedures to credential can be a reason to outsource. Companies that specialize, or have a service line with a specialty in credentialing, should bring to the table efficiency in process and structure because of their experience due to volume or their specialization in the multitude of steps that comprise the credentialing continuum.

Reduced Staffing Costs

The reduction of staffing costs may be a permanent or temporary solution. Outsourcing credentialing may make financial sense when the carrying cost of employees exceeds the cost to outsource. For instance, in the example below Hospital X has three employees who handle credentialing for its EPN. Table 3.1 Identifies the employee costs of the in-house credentialing function.

Table 3.1. Hospital X—Current Employee Costs of the Credentialing Department

Table 3.1


It costs Hospital X nearly $100,000 to manage the credentialing of the physicians and APPs in the enterprise. However, Schmoe Credentialing Corp has indicated that they could perform the credentialing for $75,000 per year, as Table 3.2 illustrates.

Table 3.2. External Credentialing Company Cost

Table 3.2

The obvious result is that Hospital X can save money by farming out their credentialing. According to Schmoe Credentialing, Hospital X can also gain efficiencies, accuracy, and speed (see Table 3.3).

Table 3.3. Hospital X—Savings by Outsourcing External Credentialing Services

Table 3.3

While Hospital X might save upwards of $24,000 per year by outsourcing, they may also elect to supplement (if necessary) their staff using Schmoe’s Credentialing processes, or they may keep a lower-cost employee and contract much of the credentialing work to Schmoe Credentialing, thereby saving on overhead. As Figure 3.1 illustrates, when Hospital X’s total employment costs pass $75,000, outsourcing becomes a more attractive financial option based on Schmoe’s pricing.

Figure 3.1

Figure 3.1

Adjunct to Current Staff

As referenced above, outsourcing may be a viable and ongoing option adjunctive to current staffing. If there is an influx of providers who require credentialing, and insufficient staff to handle the workload, outsourcing to the right partner may help systems through the volume of new providers awaiting credentialing. When the immediate demand has waned, or the process is brought to the point where the paperwork is submitted to payers, and the waiting game ensues, the system might elect to scale back resources (and costs) to manage the remainder of the process in house.

Reduced Management Burden

Outsourcing should, theoretically, reduce managerial headaches and burdens. Outsourcing places the hiring/firing, raises, time off, and other management of staff burdens squarely on the outsourced vendor. For the enterprise, this relief purchases a level of freedom since they no longer have built-in and ever-increasing costs of carrying a staff member(s). However, outsourcing could negatively impact an enterprise if the contractor’s staff is substandard, contentious, or not adequately screened or managed by the vendor.


Cons: The Case against Outsourcing

Expense Exceeds Staffing Costs

The cost of credentialing, both indirect and direct, should be measured with frequency (e.g., annually). Health systems that use third-party vendors for their credentialing may take an out-of-sight, out-of-mind approach to this important process. What can happen if the relationship is not managed carefully is that systems fail to see, as time passes, that they are paying more for credentialing services than they would pay if they had hired and managed their staff. That is, there could be cost creep as time passes in the relationship.

Although increases in cost may not occur frequently, there is the real prospect that systems that have outsourced the credentialing function may overlook its management of the costs, given the myriad more expensive programs that demand oversight.

The converse, though, might be that a health system is willing to pay a premium, however that is measured, to ensure continuity and the benefit of a sound credentialing program that is already in place and delivering solid results.

Also, it bears noting that transitioning credentialing to an outside firm, even if in a hybrid model, may create a lapse in the process unless there is a certain amount of overlap, with both the outsourcing firm and the employees working at the same time. But the transition may leave staff less willing to assist if they believe that their jobs and livelihoods are in jeopardy.

Loss of Control

Outsourcing the credentialing function removes a certain level of control from the health system. System executives are essentially divesting themselves of a very important cog in the provider onboarding and reimbursement processes by outsourcing. Outsourcing companies should provide updates as to credentialing status, constantly offering the health system’s C-Suite input as to the status of providers in progress.

Due Diligence of Vendors

If a decision is posited to outsource or partner with a credentialing vendor, due diligence must be deployed in the vetting process to ensure that the new partner has a strong history of obtaining results and has rigorous processes and procedures in place that guarantee results. Due diligence requires background research, reference calls with current clients, review of fees in comparison to those of competitors, review of the partnership contract, and a candid discussion regarding any terminated relationships the vendor has had. Thorough vetting is essential because parsing out the credentialing process means effectively subcontracting a component in the revenue cycle process.

Vendor due diligence mandates discussion regarding background checks of vendor staff, tenure of the staff, specializing, reporting to the system, and process. It also requires, of course, that the partner company or person whom the enterprise engages is fundamentally exceptional at credentialing, demonstrating proven results.

If vetting is not thoroughly performed, and contracts are signed, health systems will not know until the vendor is engaged that the project was oversold, over promised, and under delivered. At that point, it may be too late.

Concerning the expense of staffing, there is the prospect that if no major errors occur when the vendor is engaged (or they are not reported), the relationship between the system and the vendor will continue with little oversight from the system. Again, the process may be considered by the health system to be “automatic,” and so they abrogate the responsibility of managing and measuring the value and return of the credentialing vendor.

Complexity of Process

Credentialing, in theory, is straightforward. However, in practice it involves many variables and requires patience, diligence, and careful attention to detail. Without structure, the credentialing process can become an overwhelming behemoth of tasks, chores, and follow-up.

Partner vendors must have good, documented steps; checks and balances; timelines; and follow-up deployed. The checkpoints become more important in relation to the larger number of providers to be credentialed, because ostensibly the providers will be in different stages of credentialing.

If a vendor is engaged, there will be a large amount of data and files handed over to the vendor to use on behalf of the enterprise. Depending on how the credentialing staff of the enterprise manage the data and processes, this handoff can be cumbersome and problematic to the efficient credentialing of providers.


Suffice it to say, credentialing is an important and often undervalued component in a health system’s onboarding of providers, and it is a baseline piece of the revenue cycle. Whether credentialing for the hospital or employed model, the process historically has been the abused member of the family.

Systems should strengthen the credentialing process either through outsourcing or bolstering internal resources. Evaluation of the best approach, whether pure outsourcing, employing staff, or creating a hybrid approach, requires analysis and diligence by senior management. The end goal should be a solution that manages costs, strengthens core processes and procedures, and ensures continuity of the onboarding process.

While one methodology might appeal to a system, there are any number of approaches to conquering the problem of credentialing. Credentialing may not be a zero-sum proposition. Healthcare enterprises might opt for a hybrid approach to credentialing by supplementing current staff when inundated and flexing back down when the urgency and demand have subsided.

The key in whatever approach is deployed is to ensure accuracy and continuity of process and procedures. Whatever the case, enterprises should evaluate the pros and cons to outsourcing credentialing to ensure they are getting the most efficient and cost-effective process possible to confirm that providers are paneled with their payers.




Excerpted from: Knight - The Handbook for Credentialing Healthcare Providers





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