What Is a Payer in Healthcare?

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by Tiffany M.
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If you are just learning about the healthcare industry, you might find that there is a lot of specific jargon and processes can be lost in translation due to the medical vocabulary used. One of these terms includes payers, or payors, and providers. In a simplified definition, a payer is a company that pays for a medical service while a provider is a company that administers a medical service on their own. To learn more about their differences and how this relates to your healthcare, continue reading below.


  • What is a Payer – The person or organization that pays for a patient’s medical treatment
  • What is a Provider – The doctor, hospital, or other healthcare provider who provides medical treatment for patients
  • The Difference Between a Payer and Provider – one pays for healthcare, the other provides healthcare (respectively)
  • The Difference Between Public and Private Payers – Public payers are usually the government, private payers are usually private health insurance companies
  • How Do Payers Affect Your Healthcare – They largely determine what coverage you get, what medical services you are allowed to receive, and how much you will have to pay for your healthcare

The Difference Between Payers and Providers

In short, the difference between payers and providers is mostly seen on the administrative sides of health insurance companies. It relates mostly to the difference between what hospitals do and what doctors do. In this example, the hospital management can be seen as the payers while the doctors can be seen as the providers. A doctor-run clinic would be seen as solely a provider since they do not have another party controlling their management, which is what a payer typically does.

The payer side is the administrative side that relates to enrolling members, offering health plans and provider networks, verifying claims, dealing with appeals, and other managerial aspects that are related to Medicaid or Medicare. A payer pays or contracts a medical provider for their services. An example of a payer would be any organization or identity that negotiates and sets rates for provider services. 

The provider side is the contractual side that deals with payers to actually contract medical personnel. The providers are the identity that manage patients and provide medical services, work with payers to offer pre-authorized medical services, and interact with clearing houses to send claims to payers and manage their billing. The providers provide the medical service to you directly. An example of a provider would be the majority of hospital staff, doctors, or medical staff that you would typically encounter.

Private Payers vs. Public Payers

Now that you are familiar with payers, it is important to note that there are two different types of payers you may encounter – a private payer and a public payer.

Private Payers

Private payers are private insurance companies and provider networks, such as HMOs and PPOs. An HMO is a health maintenance organization that gives you access to doctors and hospitals within its network. A PPO is a preferred provider organization that also provides a network of doctors and hospitals but is less stringent on whether or not the provider you choose is within their network. These two types of insurance are seen as private payers since they are not done under government plans, such as Medicare or Medicaid. 

Public Payers

Public payers refer to healthcare given by federal or state governments. Since a public entity, the government, is sourcing and contracting providers to offer in their network, this makes programs such as Medicare and Medicaid public payer programs. Another example of public payers you may be familiar with is Veteran Affairs Health Care. 

How Does This Affect Me?

Although the type of payer your insurance uses does not affect you directly, it can affect costs related to your health insurance. Typically, public payers set contracts that offer the most financial benefit while private payers can set contracts that may be on the costly side but with other benefits. It is important to determine your needs and budget when deciding what insurance is the best option for you. 


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