Unexpected medical bills can cause stress, debt, and lead people to avoid future care. The federal No Surprises Act, passed in 2020 to protect patients and reduce costs, helps keep these surprise bills from hitting patients’ wallets. But some private equity-backed provider groups are gaming the system and ultimately driving healthcare costs higher.
How it’s supposed to work
Under the No Surprises Act, patients are protected from unexpected out-of-network charges when they receive emergency care or unknowingly receive care from an out-of-network provider at an in-network facility.
After care is provided, the health plan and the out-of-network provider have 30 days to negotiate payment. If they cannot agree, either side can initiate the independent dispute resolution (IDR) process. Each side submits a proposed payment amount to a third-party arbitrator, who considers an array of factors before choosing one offer.
The goal was to encourage fair negotiations, resolve disputes quickly, and control costs while keeping patients out of the middle.
Exploiting a backstop
In reality, what was intended to be a last resort has turned into a business model for some providers and vendors.
Over the past two decades, private equity firms have purchased physician practices across the country, especially those where surprise billing was common, such as emergency medicine, anesthesiology, and radiology. These firms intentionally kept the practices out of health plans’ networks so they could demand higher payments.
When the No Surprises Act stopped these groups from billing patients directly, some shifted their strategy and started manipulating the IDR process to pursue higher revenues.
The process was designed to resolve occasional disputes between organizations acting in good faith. However, it’s now being taken advantage of by private equity-backed practices submitting tens of thousands of cases at a time.
The scale of impact
This is not how IDR was meant to work and the results have been dramatic.
- Federal regulators expected about 17,000 IDR cases per year. Instead, more than 2.5 million cases were filed in 2025.
- The IDR process added at least $5 billion to overall healthcare costs in the first two years.
- Providers file 99% of IDR cases, win 88% of disputes, and are regularly reimbursed three to nine times the average in-network rates.
- In the first half of 2025, 56% of all disputes were started by four parties: three are private equity-backed and one is an AI-powered middleman created specifically for the IDR process.
What needs to change
While these surprise bills aren’t being sent to patients directly, the excess costs still make their way to employers and families through higher premiums, deductibles, and out-of-pocket expenses.
A final rule issued in June 2026 by the Centers for Medicare & Medicaid services (CMS) simplified the process, but it fell short of fixing the flawed incentives driving this waste and abuse. Additional reforms are still needed, including:
- Increasing transparency and accountability by requiring clear explanations for arbitration decisions, sharing the information used to make decisions, and tracking performance metrics with consequences for misuse.
- Preventing ineligible claims from being submitted by checking eligibility before disputes.
- Eliminating conflicts of interest by not allowing IDR entities with financial ties to providers to become or remain certified.
- Stopping provider behaviors that inappropriately drive-up costs for employers and members.
