What Is TPL in Medical Billing? (And Why It's Killing Your Cash Flow)
I don't know about you, but the first time I saw "TPL" on a claim denial, I had absolutely no idea what it meant. Third Party... what now?
And honestly? I wish someone had explained this to me years ago, because understanding TPL would have saved me from watching thousands of dollars sit in limbo while insurance companies played hot potato with my claims.
Sound familiar?
If you're running a therapy practice, whether it's PT, OT, or ST, you've probably dealt with this nightmare without even knowing what to call it. One day you submit a clean claim, feeling good about your documentation. The next day? Denied. The reason? Something about "another payer being primary" or "coordination of benefits."
Wait... what? I thought I verified insurance! (Spoiler alert: TPL is sneaky like that.)
So What the Heck Is TPL?
Let me break it down in the simplest way possible.
TPL stands for Third Party Liability. It means that someone other than your patient's primary insurance is actually responsible for paying the bill first.
Here's the thing most therapy practice owners don't realize: in certain situations, your patient's health insurance isn't the first payer. Another entity, like an auto insurance company, workers' comp, or even a homeowner's insurance policy, has to pay before the health plan kicks in.
Common TPL scenarios I see all the time:
Car accidents: Your patient was injured in an auto accident, and the at-fault driver's insurance should pay for their therapy
Slip-and-fall incidents: Someone got hurt at a store or someone's property, and liability insurance needs to cover the treatment
Workers' compensation: The injury happened on the job, so workers' comp is primary
Settlement cases: There's an ongoing legal settlement where another party is liable for medical costs
The problem? These situations don't always announce themselves with flashing neon signs during your intake process.
Why TPL Is Every Therapy Practice Owner's Secret Cash Flow Killer
Here's where things get really frustrating.
By law, and I mean actual federal law, most health insurance plans (especially Medicaid and Medicare) are considered "payers of last resort." That's a fancy way of saying they only pay when there's absolutely no one else responsible for the bill.
So what happens when you accidentally bill the primary health insurance first, not knowing there's a TPL situation?
The claim gets denied. Fast.
Then you're stuck in this loop:
You submit to primary insurance
They deny it and tell you to bill the third party
You track down the third party information (if you can)
You resubmit to the correct payer
You wait... and wait... and wait
Eventually the third party processes it (or denies it for entirely different reasons)
THEN you can finally resubmit to the primary insurance
That entire process? It can take weeks. Sometimes months.
Meanwhile, your cash flow is choking. You've already paid your therapists. The rent is due. Supplies need to be ordered. But that payment? Still nowhere to be found.
I talk to practice owners all the time who have thousands, sometimes tens of thousands, of dollars tied up in TPL claims they didn't even know existed. They just see "denial" after "denial" and assume something is wrong with their documentation.
Nope. It's TPL. And it's exhausting.
The "Coordination of Benefits" Nightmare
Let me paint you a picture of what this actually looks like in real life.
You have a 7-year-old kiddo who needs occupational therapy. Parents bring them in, you verify insurance, everything looks good. Blue Cross Blue Shield shows as active. Great!
You provide services for three months. Submit claims. Everything is processing fine.
Then suddenly, boom. All your claims from the past month get denied with a cryptic message about "coordination of benefits" and "potential third party liability."
You call the insurance company (after being on hold for 45 minutes). They tell you there might be auto insurance involved. Might be? They're not even sure!
Now you're playing detective. You reach back out to the parents. They mention, oh yeah, there was a car accident six months ago. They didn't think it mattered anymore because the other driver's insurance "already settled."
Plot twist: It didn't settle the medical bills. Just the property damage.
So now you have to track down the auto insurance information, find out what was actually covered in the settlement, potentially file a claim months after services were rendered, and then figure out what the primary insurance will actually cover as secondary.
Phew! I'm stressed just typing that out.
Why This Destroys Your Revenue Cycle
Here's the brutal truth: TPL doesn't just delay payments. It actively loses you money.
When claims sit in TPL limbo, several terrible things happen:
Your aging A/R balloons. Claims that should be 30 days old suddenly become 60, 90, even 120+ days old. The older they get, the harder they are to collect.
You write off legitimate revenue. I've seen practices write off claims as "bad debt" simply because dealing with the TPL maze was too complicated. That's money that should have been paid.
Your staff wastes time on endless follow-ups. Every denied claim means phone calls, research, resubmissions. That's hours your billing person (or you) could spend on productive tasks.
Insurers point fingers at each other. The health plan says the auto insurance should pay. The auto insurance says their coverage has limits. Workers' comp says it wasn't a work injury. Meanwhile, you're just trying to get paid for the therapy you already provided.
And here's the kicker: even when you finally get one payer to process the claim, you often have to start all over with the secondary payer. It's like a never-ending game of paperwork ping-pong.
How to Stop TPL From Killing Your Cash Flow
The only real solution I've found? You need someone who actually understands TPL, has the systems to catch it early, and: most importantly: has the persistence to chase down these claims until they're paid.
That's not something most small therapy practices can handle in-house. (Trust me, I learned this the hard way.)
At Extra Mile Billing, this is literally what we do every single day. We've built our entire process around catching TPL situations before they become cash flow killers.
Here's how we approach it differently:
We dig deeper during eligibility checks. We don't just verify that insurance is active. We ask the right questions to uncover potential TPL situations before the first claim ever goes out.
We have the tech to track it. Our systems flag potential third party situations automatically, so claims don't slip through the cracks.
We handle the entire coordination nightmare. When TPL is involved, we manage the communication with all parties: the third party payer, the primary insurance, and yes, even the patient when needed.
We're persistent. (Hence the name, right?) We follow up relentlessly until these claims are paid. We don't give up, we don't write them off, and we don't let insurance companies push us around.
I know it sounds simple, but the reality is that managing TPL requires specialized knowledge, dedicated time, and honestly, a level of stubbornness that most practice owners don't have the bandwidth for.
You're busy treating patients. You shouldn't have to become an expert in liability insurance law just to get paid.
The Bottom Line
TPL is one of those things that most therapy practice owners don't even know they need to worry about: until it's already costing them serious money.
If you're seeing denied claims with vague messages about "coordination of benefits" or "other insurance primary," there's a good chance TPL is lurking in your A/R.
And every day those claims sit unpaid is another day your cash flow suffers.
The good news? Once you have someone in your corner who actually knows how to handle TPL (not just submit and hope for the best), you'll see those payments start coming in. It feels GREAT to finally close out those aging claims and get the money that's rightfully yours.
Want to talk about how we can help untangle your TPL mess? Reach out and let's chat. We've probably seen your exact situation a hundred times before, and we know exactly how to fix it.
Because your therapists are incredible at what they do. You shouldn't be losing money because insurance companies like to play games with who pays first.