HHS to Fire Biased Independent Dispute Arbitration Firms

 by Devon Herrick

The No Surprises Act (NSA) took effect in January 2022. The law was a compromise between out-of-network physician practices that balance billed patients (i.e., surprise medical bills) when doctors and insurers could not agree on fees. When the bill was being debated, Congress naively thought that an independent dispute resolution process could nudge doctors and health plans to agree upon fees while protecting patients from surprise medical bills. 

The law was poorly designed and suffered considerable unintended consequences. Congress expected it to be used infrequently. At the time regulators estimated 17,000 arbitration cases would take place annually. Yet, between 2022 and 2025, there were 3.4 million arbitration cases filed by providers. The volume of cases is rising rapidly. Indeed, there were 1.2 million cases filed in the first six months of 2025, according to an analysis published in the journal, Health Affairs Forefront.

The way the process was supposed to work was when there was a fee dispute between an out-of-network doctor, say an anesthesiologist, and a health plan, the doctor could request baseball-style arbitration. Each side would make their best offer, and the arbitrator would decide which offer was more reasonable based on the guidance that Congress intended. The arbitrator could not set a fee; it had to accept either doctor’s or health plan’s offer. Analysis by the New York Times found arbitrators are siding with doctors 90% of the time, likely because doctors are a reliable source of income. The New York Times reported on some extreme cases where the arbitration entity got it very wrong:

Dr. Norman Rowe, a plastic surgeon with offices in New York and Florida, advertises on his website that breast reduction surgery usually costs between $15,000 and $25,000.

But these days, his practice sometimes earns $440,000 for the procedure.

Breast reduction surgery is not usually covered by insurance, so most patients pay out of pocket. Thus, Dr. Rowe offers a reasonable price to patients who are paying for their own surgery. Then why would an arbitration board award doctors $440,000 in a fee dispute with an insurer? More from NYT:

Some practices are using the law to obtain high payments for routine medical care, including gynecologists who have won fees 600 times higher than usual rates for placing intrauterine contraceptive devices, or I.U.D.s. 

A neurosurgery practice outside of Philadelphia went to arbitration after the health plan Highmark offered its standard payment of $2,660 for a diagnostic procedure to measure blood flow to the brain. An arbitrator awarded it $333,000 instead. A New Jersey anesthesiologist was awarded $14,560 in 2025 for an X-ray-guided steroid injection.

Health policy experts have been surprised to see such lopsided results that favor doctors. Some argue that because the arbitrators are paid per case, they may have an incentive to render decisions that keep doctors coming back.

The New York Times observed that physicians tend to win cases regardless of whether they request huge payments or more reasonable fees. If the arbitrator is truly independent, industry standard fees offers/requests should win more often. Ruling in favor of physicians most of the time would not be a concern if the health plan and physician offers were relatively close but the arbitrator believed the higher fee is more appropriate. What is more concerning are fee awards five, ten, twenty even hundreds of times in-network fees. The NSA law runs the risk of encouraging more physician practices to drop network contracts to take advantage of the broken system.

HHS has finally taken notice and notified some of the more egregious arbitration firms that their contracts will not be renewed. The contract terms last five years. It makes one wonder why contracts were written for such lengthy periods without provisions to review or cancel contracts when a firm’s decision appears biased or wrong. So far HHS has announced plans to not renew just two of the seventeen arbitration firms. Congress has also taken notice. Representative Frank Pallone (D-NJ) has introduced legislation to abolish the arbitration system entirely. The Trump Administration also appears willing to tackle the problem. The only question is what took them so long?

Read more at: 
NYT: A $440,000 Breast Reduction: How Doctors Cashed in on the No Surprises Act and Arbitration
NYT: Trump Administration Moves to Oust Arbitrators as Doctor Payouts Soar

https://www.goodmanhealthblog.org/hhs-to-fire-biased-independent-dispute-arbitration-firms/