How to Start a Medical Practice: Payer Credentialing and Contracting Guide

Launching a private practice requires more than clinical expertise. To build a sustainable business, you must set up a functioning revenue cycle—the process of billing and getting reimbursed by insurance payers. The first and most critical step is obtaining credentialing and a participating provider contract with insurance networks in your service area. Below is a step-by-step guide for physicians and non-physician practitioners preparing to establish their own practice.

Step 1: Prepare for Credentialing

Credentialing is the payer’s process of verifying your education, training, licensure, and professional history. Once approved, you move to contracting, where you sign an agreement that defines reimbursement rates and terms.

Without a signed contract, you cannot bill in-network.
Out-of-network billing is sometimes possible, but reimbursement is uncertain and not available under Medicare or Medicaid.

Preparation Checklist:

• Form a legal entity (LLC, S-Corp, PC) and obtain a Tax ID
• Get professional liability insurance
• Secure a Type 1 NPI (individual) and a Type 2 NPI (practice entity) from NPPES
• Hold an active license in the state of practice, including prescriptive authority if applicable
• Register and maintain a CAQH profile with supporting documents
• Establish a physical practice location
• Identify which networks you plan to join

Step 2: Decide Which Insurers to Contract With

Identify payers most relevant to your market. Talk with colleagues or office managers in your area about which insurers bring the largest patient base. National carriers to consider include:

• Aetna
• Blue Cross Blue Shield
• Cigna
• United Healthcare
• Humana
• Traditional Medicare
• Medicare Advantage Plans (each are separate contracts to request)
• State Medicaid programs
• State Medicaid Managed Medicaid plans (each MCO is a separate participation request)
• Network renters like Multiplan
• Other region specific networks in your area
• Consider any PHO or IPA organizations that may be in your market. You can often get better contracted rates from commercial carriers through one of these organizations.

Step 3: Apply for Credentialing

Credentialing is time-intensive—expect 2–6 hours per payer application plus ongoing follow-up. Many practices outsource this task to credentialing or billing specialists.

Process Checklist:

• Contact payer provider services to request instructions and applications (many are online)
• Complete all fields accurately and include required documentation
• Keep your CAQH profile current and consistent with your application
• Retain copies of submitted applications and contracts
• Follow up regularly until you receive an effective date and contract confirmation
• Respond promptly to payer requests for additional information
• Review final contracts carefully, including reimbursement schedules and filing deadlines

Step 4: Understand Common Issues

• Prior participation does not guarantee transfer. If you were credentialed and contracted under a hospital or group practice, contracts usually do not carry over. Most payers require a new application.
• Individual Contracts Transfer With The Provider. If you are in network with a payer under an individual participating provider contract (which most providers in a small practice are) then your contract is "linked" to a business entity for billing purposes. That 'Link' can be changed by you at any time when you change employers/practices. In that situation you must update your contract to link to your new employer/practice.
• Delays are common. The process can take months, and some networks may not be open to new providers in your area. Rejections can be appealed but are rarely successful. You may reapply every six months (or at whatever frequency a payer network allows).

Step 5: Maintain Your Credentials

Once approved, track and maintain your status to avoid interruptions.

Ongoing Checklist:

• Confirm you are listed correctly in the payer’s online directory
• Record provider IDs, effective dates, and re-credentialing cycles
• Store contracts and all credentialing documents in a central location
• Re-attest your CAQH profile at least every 120 days and update whenever documents (licenses, insurance) are renewed
• Keep NPI information current in NPPES
• Respond to all re-credentialing or document requests promptly to avoid termination
• After one year, review payer mix: identify networks providing good patient flow and evaluate reimbursement rates for possible renegotiation or exit from unprofitable neteworks

Step 6: Start Billing In-Network

With contracts active, begin submitting claims. For small practices, outsourcing billing is often cost-effective.

Billing Essentials:

• Verify patient benefits before visits
• Collect copays and coinsurance upfront
• Submit claims within 24 hours of service
• Track payer deadlines for reimbursement and follow up on unpaid claims
• Post payments promptly and bill secondary payers or patients as needed
• Retain all Explanation of Benefits (EOBs)
• Obtain pre-authorizations where required

Summary

Credentialing and contracting are the foundation of a functioning revenue cycle in private practice. Preparation, attention to detail, and persistence are required. With organized systems, or outsourced support, you can establish a payer network that supports your clinical services and business growth.