Third Party Definition

• A third party is any fiscal intermediary that helps a health care consumer pay for services or treatments. These third party entities are very common in the United States health care system, and there are many different types. Insurance carriers, HMOs, and the government are three primary third parties, and each has a different way of helping patients pay for their medical care.
  
  

Duties

• A third party essentially contracts with the health care provider to process claims from patients and arrange a payment structure so that the provider is paid for the health care given. Whether a third party pays or not depends on the patient's claim and policy with the third party, a separate contract common among all types of health insurance. The third party may also work to provide consultations or similar services.
  
  

Payer Mix

• The payer mix is how patients pay for their health care. The third party payer mix refers specifically to the percentage of third party types of payment that a single health care organization will experience. A hospital, for instance, may receive 50 percent of the third party payments from the government, 20 percent from HMOs, and 30 percent from insurance policies. This is a simplified example, but all third party payer mixes have these elements. Payer mixes are typically projected by health care organizations.
  
  

Use for Medical Institutions

• Medical institutions forecast third party payer mixes so that they can accurately predict their profits for the coming term. Each third party pays a different type of fee, often a discounted fee, depending on the provider, the patient, and the third party organization. By adding up these different fees and applicable discounts, hospitals can project their expected earnings.
  
  

Considerations

• Forecasted third party payer mixes are not always accurate, and can cause hospitals to lose money if they budget based on incorrect information. As a planning tool it is useful but not completely reliable. As an analysis tool it shows much more information on what kind of patients visit an organization and what third parties they use.