Why Vendor Credentialing is a Compliance Must-Have for Health Systems

The healthcare industry is sustained by rules and regulations that hospitals must comply with. These hospitals must also maintain relationships only with vendors and suppliers who are compliant with these regulations. 

Just as with provider credentialing, healthcare facilities must evaluate their suppliers and vendors, such as medical sales reps, technicians involved with machinery, and waste management companies. 

Without this evaluation, unqualified vendors can infiltrate the healthcare administration, compromise patient care, and cause compliance issues for hospitals.

What is Vendor Credentialing? 

Vendor credentialing is the process of vetting third-party vendors, suppliers, and contractors by ensuring that they have the required qualifications and certifications to interact with healthcare facilities. This process is vital because it hinders the access of unqualified individuals to the healthcare system. As such, data privacy, financial integrity, and patient safety are upheld throughout the process of administering care.

Around 68% of healthcare entities experienced a supply chain attack in 2024. Of those, 82% reported disruptions in patient care. While vendors don’t directly administer care, they are a major part of the healthcare system. As such, avoidable friction can occur when these vendors fail to live up to compliance standards.

The Compliance Risks of Poor Vendor Credentialing 

Hospital vendor credentialing is a laborious task. And rightly so, because the least error can have devastating consequences for patients and healthcare facilities. These consequences include:

Failure to Meet Regulatory Requirements

Vendor access is governed by a mix of federal and state regulations, such as:

• Health Insurance Portability and Accountability Act (HIPAA): Responsible for enacting strict laws that protect patient data and electronic health records from cybersecurity attacks.
• Occupational Safety and Health Administration (OSHA): Enforces standards and provides training and assistance to ensure workplace safety.
• The Joint Commission: Responsible for the accreditation of healthcare facilities. It ensures that hospitals document their vendors and providers involved in healthcare.

Some states also have specific compliance laws. Poor hospital vendor credentialing can lead to contracting of uncertified individuals, faulting regulatory requirements, and put healthcare facilities at risk of penalties.

Security and Patient Safety Concerns 

Similar to other types of credentialing, vendors are certified only when they have successfully passed through the various stages involved in the process, such as:

• Verification of business credentials
• Background check (criminal records and fraud history)
• Certification validation and
• Compliance checks.

Healthcare facilities that hire vendors who have boycotted the process incur long-term liabilities. These suppliers may install faulty machines, provide substandard medication, or compromise data privacy. Consequently, patients are exposed to medical and cyber risks, and these hospitals may face significant compliance repercussions.

Financial and Legal Implications 

According to this study by Globalscape, the average cost of non-compliance is $14.82 million, and this cost has risen by more than 45% in 10 years. 

Non-compliant vendors are a time bomb, inflicting harm to themselves and healthcare facilities that interact with them. Hospitals may also suffer reputational damage, lawsuits from affected patients, and loss of patient trust.

On the flip side, the same study revealed the average cost of compliance to be $5.7 million, so if you’re ever in doubt as to whether vendor credentialing is worth the hassle, consider the financial and reputational risks of non-compliance. The numbers speak for themselves—staying compliant isn’t just a legal obligation; it’s a smart business decision.

Key Components of an Effective Vendor Credentialing Program 

Healthcare facilities don’t often set out to hire unverified vendors. Sometimes, it’s a result of an ineffective vendor credentialing program, which allows unqualified individuals to slip through the cracks. It can also be due to a lack of clarity on assigned duties and poor workflow in the admin department. 

The key components of an effective vendor credentialing program include:

Establishing Standardized Credentialing Policies 

Establishing standardized credentialing policies is essential for maintaining consistency, transparency, and compliance across all vendor interactions. Start by defining clear guidelines for vendor approvals, including required documentation, background checks, training certifications, and compliance with relevant regulations. 

Outline who is responsible for primary source verification, reviewing and approving credentials, and setting timelines for renewals or re-verification. A well-documented policy ensures that all vendors are held to the same standards, reduces confusion, and protects the healthcare facility from legal and operational risks. Standardization makes onboarding smoother and helps build trust with both internal teams and external partners.

Admin teams should also have shared dashboards where these guidelines and operating procedures are detailed, as well as asynchronous communication to help members clarify when in doubt.

Implementing Digital Credentialing Solutions 

While the credentialing process relies heavily on human expertise, it can benefit from digital credentialing solutions like CAQH, where vendors can submit documents and have them reviewed in real-time. Artificial intelligence and machine learning streamline the vendor credentialing process by flagging inconsistencies, providing updates on the status of the documents, tracking expiration dates, and sending reminders for re-verification.

This reduces the burden on the administrative team, gives less room for errors, and increases the overall processing time. Digital credentialing solutions also provide you with organized vendor and provider data, which comes in handy during re-verification or audits.

Ongoing Monitoring and Compliance Audits 

Compliance isn’t a one-off activity. It requires periodic monitoring and audits to ensure that vendor licenses and certifications remain valid and updated. 

This can also include training sessions for vendors to ensure they remain grounded in the dynamic world of patient privacy and security, machinery installation, and waste disposal. 

Hospital credentialing solutions also play out here as they update you on the state of vendor licenses, certificates, and re-verification timelines.

Strengthening Compliance Through Vendor Credentialing 

Compliance in healthcare is a lot like driving—you’re not just responsible for your actions, but also for staying alert to others on the road. A vendor’s carelessness can set you back by thousands of dollars and cost you a reputation that’s taken years to build. So, you need to lock in on your credentialing process to prevent such. 

Begin with your admin team, ensure they receive regular training and have clear guidelines on the credentialing process per industry standards. Set up a dedicated workflow that dictates how each vendor document will be submitted, verified, and approved. After onboarding, provide orientation programs to acquaint vendors with hospital policies, regulations, and culture. Finally, ensure to conduct compliance monitoring for vendors periodically to keep things in check.

If you think vendor management in healthcare is a lot, you’re not wrong. Verifying credentials across various vendors and even providers, sometimes simultaneously, is time-consuming and can lead to errors. That’s where Verisys comes in.

With a dedicated team of experts armed with automated solutions, Verisys takes charge of your credentialing process while you focus on patient care and hospital administration. Beyond the credentialing process, we offer ongoing monitoring and notify you of exclusions, sanctions, and licensure changes so you’re not taken by surprise. Request a demo today.

Sources

Static, The true cost of compliance

https://static.fortra.com/globalscape/pdfs/guides/gs-true-cost-of-compliance-data-protection-regulations-gd.pdf

Ispartnersllc, Healthcare Compliance Trends and Statistics

https://www.ispartnersllc.com/blog/healthcare-compliance-trends/