How does "third-party billing" work in healthcare?

In healthcare, third-party billing refers to the process by which a healthcare provider submits claims to a patient's insurance company rather than billing the patient directly for the services rendered. This system functions on the premise that the insurance company, as a third-party payer, will cover all or part of the healthcare costs, streamlining the payment process for both patients and providers.

When a patient receives medical services, the healthcare provider collects necessary information about the patient's insurance coverage and then files a claim with the insurance company. This claim includes details about the services provided, relevant diagnosis codes, and often the expected reimbursement amount. Once the insurance company processes the claim, they determine the extent of coverage they will provide and communicate this with the healthcare provider, which ultimately affects what the patient may owe after insurance payment.

This method is designed to reduce the burden of upfront payment on patients, making healthcare access more manageable. It contrasts with models where patients pay providers directly, which can complicate and delay the process of receiving reimbursement. By utilizing third-party billing, healthcare providers benefit from a more efficient payment model, and patients can receive necessary care without immediate concern about the full cost of services.