Planning for Sustainability: Pursuing Third Party Funding
Learn about the advantages (i.e., serving a larger range of people) and disadvantages (i.e., increased record-keeping responsibility) to pursuing third-party payment.
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WHAT ARE THIRD PARTY PAYMENTS?
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WHAT ARE THE ADVANTAGES OF PURSUING THIRD PARTY PAYMENT?
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WHAT ARE THE DISADVANTAGES OF PURSUING THIRD PARTY PAYMENT?
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WHO IS ELIGIBLE FOR THIRD PARTY PAYMENT?
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HOW DO YOU PREPARE YOUR ORGANIZATION TO BECOME AN APPROVED PROVIDER?
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COMMUNICATING AND MAINTAINING RELATIONSHIPS WITH THIRD PARTY PAYER
It's crunch time at the Healthy Community Center (HCC). Babies, accompanied by their parents, are waiting for their free vaccinations. Two older children are racing around the waiting room, playing "Star Wars" to kill time until they can go in to be tested -- without charge to their families -- for dyslexia as part of a CORE evaluation process. An older man watches as his wife gets her daily free blood pressure check; his turn comes next. In a back office, next door to the no-fee Parenting Skills class, several adolescents attend an Al-A-Teen meeting. Upstairs, free and sliding fee scale individual and group psychotherapy sessions fill every available space.
Very few community members who come to the Center pay full price for the care they get. How can the Center afford to serve all these people? Through third party payments, of course; HCC couldn't survive without them.
WHAT ARE THIRD PARTY PAYMENTS?
Chapter 46 of the Tool Box is all about finding ways to keep your organization or initiative going over the long term. One way to accomplish this is by becoming eligible to collect payment for your services from "third parties" -- someone other than either your own organization (through its grants, fundraising, etc.) or the person receiving services.
Under a third party payment arrangement, your organization provides services -- most often medical, rehabilitative, educational, or psychological -- to an individual, and is paid by an insurance company, an Health Maintenance Organization, Medicare or Medicaid, a school system, a state agency, or some other entity that needs or will pay for services for that individual. The rate for these services is often, though not always, pre-set by the payer (or at least negotiated by the payer beforehand), and is usually based on an estimate of a fair and average rate for a particular professional working the amount of time the service normally takes.
WHAT ARE THE ADVANTAGES OF PURSUING THIRD PARTY PAYMENT?
THERE ARE A NUMBER OF REASONS WHY AN ORGANIZATION MIGHT BENEFIT FROM BEING ABLE TO COLLECT PAYMENTS FROM THIRD PARTIES FOR ITS SERVICES.
- An improved ability to provide services: By paying for those who couldn't afford it themselves, third party payments make it possible for an organization to serve low-income people without having to either lose money by using a sliding fee scale and absorbing the difference between what the service costs and what they can pay, or charge them more than they can afford.
- More likelihood that those in need will seek services: If people know their insurance or some other source will pay, they are more likely to seek what they need; so you're more likely to be able to work with those who need your services most. Third party payments give you access to the huge pool of potential participants who will only use services that their insurance will pay for.
- An increase in the organization's control of its finances: If everything is in order beforehand (both your paperwork and whatever bureaucracy is necessary on the other end), you know exactly how much the organization will receive for each unit of service (an hour, a treatment, a test... whatever it is you provide), and you can be assured of receiving that payment. That improves your cash flow and gives you more control of your finances.
- An opportunity to add staff and improve the facility: An opportunity to become an approved provider for third party payment may be an opportunity to improve your organization by adding new, credentialed staff people and by upgrading your facility and procedures.
- Increased credibility: Being a third party provider can increase your credibility with the community and with funders and other organizations.
WHAT ARE THE DISADVANTAGES OF PURSUING THIRD PARTY PAYMENT?
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