Examination for certification or licensure of health professionals (credentialing) in the United States is almost exclusively of the multiple choice format. The certification examination for entry into the practice of the profession of nurse-midwifery has, however, used a modified essay format throughout its twenty-year history. The examination has recently undergone a revision in the method for score interpretation and for pass/fail decision-making. The revised method, described in this paper, has important implications for all health professional credentialing agencies which use modified essay, oral or practical methods of competency assessment. This paper describes criterion-referenced scoring, the process of constructing the essay items, the methods for assuring validity and reliability for the examination, and the manner of standard setting. In addition, two alternative methods for increasing the validity of the pass/fail decision are evaluated, and the rationale for decision-making about marginal candidates is described.