February 20, 2025
In the high-cost world of healthcare, insurance and borrowing often hold the financial keys. Insurance to cover professional liability and patient care. Loans to cover the astronomical costs of facilities and equipment.
The margins can be precarious in the early going. It feels like you can never bill enough to make the payments. And one misstep can throw the whole practice into financial upheaval.
That’s where subrogation comes into play. By understanding subrogation from all angles, entrepreneurs, CFOs, and practice managers can mitigate hidden liabilities and fortify the long-term financial resilience of a growing healthcare business.
Subrogation is the legal right of one party to pursue action against a third party. It typically occurs when an insurer who has paid out a claim seeks reimbursement from a guilty third party who causes a loss.
Anyone who has received a questionnaire from their healthcare provider following a claim has likely been part of the subrogation process, even if they didn’t know it. Although you likely threw this questionnaire away, the insurer-or their subrogation vendor-is likely trying to determine if a third party is legally responsible for paying your medical bills. Most likely, workman’s comp.
Successful subrogation can help keep insurance costs down by guaranteeing that the appropriate party foots the bill for expenses. It can also help policyholders recover deductibles and other out-of-pocket expenses.
As stated, subrogation is important for personal injury cases. It can keep health insurance companies from paying bills that should be covered by workman’s comp or any other negligent third party.
With that said, subrogation is far more expansive for healthcare entrepreneurs than matters of personal injury. In the high-cost realm of establishing a medical practice, subrogation can protect the business in innumerable ways. Improper installation of a piece of medical equipment. Faulty workmanship from a contractor during building construction. A fire caused by a negligent patron who ignored the “no smoking” signs in the building.
These are just a few of the examples of how the business side of healthcare is exposed to financial risk. Paying for these damages unnecessarily can bury a nascent practice before it ever has the chance to take off.
Now that you know a little bit about what subrogation is, it is worthwhile to explore how subrogation recovery services work. Here is a hypothetical example of a potential subrogation case in action:
Reputable subrogation firms will operate on a contingency basis. This means they only collect a fee if they subrogate successfully. Having the trained eye of their legal, insurance, and engineering professionals can do wonders for protecting upstart healthcare businesses that do not have the resources or experience to identify and pursue potential subrogation cases in-house.
To further illustrate the practical value of subrogation in healthcare, it is worthwhile to consider a couple more examples.
A private surgical centre experienced a significant equipment failure when a newly installed sterilisation system short-circuited. The issue disrupted scheduled procedures for three days. It resulted in lost income. It caused significant patient dissatisfaction. Investigation revealed the installation team had failed to follow manufacturer specifications. Through subrogation, the practice recovered over $100,000 in damages from the contractor’s liability insurance.
In another case, a small rehabilitation clinic suffered water damage due to faulty plumbing installed during a recent renovation. The insurance payout covered most of the repair but not the extended downtime and lost billing hours. A subrogation firm identified the contractor’s liability and recovered the remainder, restoring financial balance.
In both examples, the healthcare provider might have otherwise absorbed the loss or written it off as a cost of doing business. Instead, subrogation provided a financial bridge between recovery and resolution.
A financially savvy healthcare business will not consider a subrogation company after an incident has occurred. They will preemptively retain their services as part of a comprehensive financial protection plan. Partnering with an experienced subrogation provider early will enable a faster, more efficient response when an incident arises. By including a subrogation professional with your standard insurance coverages and proactive risk management strategies (timely reports, documentation, service records, etc.) you position your practice to minimise the back-end losses that often sabotage the profitability of nascent healthcare businesses.
Financial margins can be slim for young healthcare businesses. One unexpected misstep can throw the financial infrastructure out of whack. By partnering with a premier subrogation service, you can protect your practice from hidden liabilities and improve long-term financial resilience. For more of the latest trends in business and finance, explore the content at Robin Waite for additional thought-provoking resources!
Subrogation is a legal process whereby an insurer that has paid a claim seeks reimbursement from the third party responsible for the loss.
It prevents practices from footing the bill for damages caused by negligent contractors, faulty equipment or other third‑party events.
Most operate on contingency, taking a percentage of recovered funds only if the claim is successful, so there’s no upfront cost.
Yes, beyond repair costs, successful claims can also recover income lost during downtime or closure.
Ideally, you retain their services as part of your risk‑management plan, so they can act swiftly when an incident occurs.
