Question

how do third party payers influence healthcare reimbursement in healthcare organizations.

Answer 1

A third-party payer is, to put it simply, anyone who pays for medical services other than the patient himself. There are several types of third-party payers for healthcare services in the U.S. The most commonly seen ones are private insurance companies, like Blue Cross, and government insurance, like Medicare for the elderly or Medicaid for those with lower incomes.

All of these third-party payers will cover a portion of what the patient owes for his medical services, and each type of payer has its own set of conditions that must be met by the clinician or facility providing the services in order for it to get paid. These sets of conditions used to be much simpler than they are now, but because the presence of third-party payers has driven up costs of medical services, these conditions are changing to allow care to become more cost-effective.

In the U.S., we have the most expensive healthcare system in the world. We are also the only country in which healthcare organizations and providers can bill whatever they want for their services, so prices aren't regulated and can vary greatly from provider to provider. To get the third-party payers to pay for these services, an amazing amount of work is required. According to the Institute of Medicine, as of 2010, $361 billion was spent each year on these administrative tasks in the U.S. This is almost triple what was spent on cancer treatment and double the spending on heart disease.

To the patient, the system isn't transparent. The patient seeks medical services when he needs them, the provider charges his fee, and the insurance company pays. But what the provider charged and what the insurance company pays, the patient might never really know or think about. So the patient doesn't seek his care at the lowest possible cost or the greatest value, as he might if he were buying a refrigerator. There's no supply-and-demand at play, and the costs just spiral upward.