What is Third-Party Liability?
Third-Party Liability revenue is an often-overlooked part of a hospital’s revenue cycle. Although Third-Party Liability (“TPL”) payments represent approximately 3-5% of a hospital’s revenue, they can still amount to millions of dollars lost each year. The most common TPL account occurs when a patient presents to the hospital from a motor vehicle accident that was another party’s fault. This article serves to highlight the importance of Third-Party Liability and why your healthcare system should reevaluate your procedures for collecting TPL payments.
The majority of states have uniform hospital lien laws, meaning a hospital’s right to perfect a lien against TPL proceeds is a statutorily granted and protected right. A hospital lien (sometimes referred to as a “medical lien”) does not attach to an individual, but rather attaches to the settlement proceeds from the resulting auto accident lawsuit or settlement. An improper or invalid hospital lien can be costly for a hospital. Because each state has their own version of the hospital lien statute, it can be hard to keep up with this everchanging field of hospital revenue.
The Benefits of Third-Party Liability Recovery
The benefits of TPL collections are numerous and include increased revenue from all payer types (especially uninsured patients), compliance with payer coordination of benefits requirements, and finding a trusted vendor can eliminate wasted time and improve efficiency. These benefits all boil down to one thing: more revenue for the hospital.
Effective TPL recovery is a proven way to boost any healthcare’s revenue cycle. Pursuing TPL brings in more revenue per account across all payer types. According to the CDC, Americans spend more than 1 million days in the hospital due to motor vehicle accidents totaling more than $18 billon in medical expenses. Furthermore, it is estimated by the Department of Labor that Third Liability payments, via healthcare subrogation, total approximately $1.7-2.5 billion each year. This is money that your hospital is likely missing out on.
According to the US Census, approximately 10% of the population is uninsured, and this number is rising. With Covid-19 leaving many unemployed, this demographic will certainly grow in the near future. Since uninsured patients are less likely to pay, TPL recovery can be the only route for hospitals to receive payment for that particular account. This helps hospitals avoid bad debt while also guaranteeing payment on accounts that are less likely to be reimbursed. As uninsured patients rise, looking for payments from them will be crucial in keeping the revenue cycle healthy.
Following the proper coordination of benefits guidelines is critical in TPL collections. In some cases, your patient’s private or governmental health insurance might be a payer of last resort. This means the hospital must seek compensation through TPL before the first-party insurance will cover the medical bill. Most governmental payers are payors of last resort, so submitting a claim to them when TPL is available will result in a denied claim. In these cases where the patient’s insurance is a payer of last resort, it can be hard to conform to the coordination of benefits rules because they are subject to change. Having a knowledgeable TPL vendor will help keep up to date on these rules concerning coordination of benefits.
Partnering with an experienced TPL vendor can ensure that a hospital is compliant while also providing the added benefit of freeing your employees time to pursue other accounts that they have more experience handling. Most account managers within the revenue cycle are trained to submit accounts for first-party health insurance and the procedure to follow-up on these accounts until they are paid. This is vastly different than pursuing TPL and can result in mismanaged TPL accounts. This wastes the employees time that is better spent on accounts they are familiar with while also increasing the chance of TPL mismanagement. By finding a trusted vendor to handle this small portion of the revenue cycle, you will find that your employees will be more productive since they their time is utilized much more efficiently.
Navigating the Troubled Waters of Third-Party Liability
Navigating TPL and Hospital Liens is difficult. It is advisable that hospitals seek a vendor with the experience and bar licensure within your state to help alleviate that burden from your hospital. A good TPL vendor will boost your revenue cycle by bringing in millions of dollars of lost revenue each year. There are difficulties associated with TPL collections that hospitals find hard to handle on their own. A few factors that make TPL collections difficult are:
- Need for employees with specialized training,
- Labor intensive gathering of info and due diligence follow up of claims,
- Complex compliance requirements, like coordination of benefits,
- Long reimbursement period due to litigation or other extraneous factors,
- Claims of “unreasonable charges,”
- Missing timely filing deadlines, and
- Perfecting and asserting the hospital lien.
This list is not exhaustive and new challenges emerge every day. These hurdles can be impossible to maneuver for a hospital that is ill equipped to take them on. Each obstacle has its own pitfalls and solutions, each having their own standard operating procedure. Failing to comply with any one of these requirements can end up in litigation, which can never end well for a hospital.
TPL claims cannot be handled like regular first-payer insurance claims and need a whole branch of employees with specialized training to be done effectively. Hospitals that attempt to do TPL on their own will likely find that the time and training that it takes is not worth it and find delegating TPL claims to a reliable and trusted vendor to be the best route. Hospitals may find that it is better to delegate this task to a vendor that has the experience to handle such specialized and time-intensive billing work
Terry J. Garrett and Associates has been working with hospitals collecting TPL payments for decades. If you have specific legal questions relating to TPL collections that were not addressed in this article, feel free to reach out to the author Andrew H. Garrett, esq. at Andrew@TJGarrettlaw.com.