And private equity is making it even worse
A few years ago, Congress tried to address America’s healthcare crisis by passing the No Surprises Act. This was well-intended legislation designed to end the scourge of “surprise” medical billing. Prior to this law, patients who unknowingly received care from an out-of-network physician would often be stuck with crippling bills through no fault of their own. The No Surprises Act solved that problem, but unfortunately, as government intervention often does, it created a brand new one in the process that further exacerbated healthcare costs.
Instead of sending surprise bills to families, insurers and out-of-network providers now resolve disagreements through the Independent Dispute Resolution (IDR) process, in which a third-party arbitrator chooses one side’s proposed payment. This was supposed to be a rarely used resolution enforcement mechanism, but it is now being exploited by sophisticated financial actors as part of a lucrative business model. Rather than serving as an occasional referee between insurers and providers, the IDR system has now exploded into a multibillion-dollar industry that rewards volume, encourages gaming, and ultimately leaves employers and families (not to mention taxpayers) paying the bill.
New reporting from the Wall Street Journalfound that nearly $15 billion was paid out through the IDR system in 2025. The New York Timesfound that providers filed 1.2 million arbitration cases in just the first half of 2025, even though regulators originally projected roughly 17,000 disputes annually. Providers prevailed in roughly 88% of cases, with arbitrators collecting nearly $885 million in fees between 2022 and 2024 alone. In 2025, these arbitrators raked in a whopping $1.3 billion in fees.
Even more troubling are the individual examples. The Times documented a plastic surgeon who advertised breast reductions costing between $15,000 and $25,000 but successfully obtained arbitration awards reaching $440,000 for a single procedure. According to the investigation, the physician filed more than 6,000 arbitration claims and won more than 85 percent of them. A different investigation found that surgical assistants were exploiting the law to outearn surgeons, sometimes earning up to 25 times what a doctor makes. In 2025, providers were paid more than six times than they would have made from typical in-network payment rates.
Obviously, this is not what Congress intended, and it’s not what Americans deserve.
The IDR system has become another example of regulatory capture, where those with the best lawyers, consultants, and financial backing benefit while ordinary Americans pay higher premiums. Over my career, I have personally seen how sophisticated financial actors exploit complex systems to extract maximum profit while providing little to no societal value. In this instance, the private equity industry deserves particular scrutiny.
Research has shown how private equity-backed physician staffing firms helped fuel the original surprise billing problem, then successfully lobbied for the arbitration framework that ultimately became part of the No Surprises Act. Today, many of those same firms dominate arbitration filings, while private equity investors also have interests in companies that administer portions of the arbitration process itself. Normal folks might call that a “conflict of interest.” Or, corruption. Or, fraud. But it’s all legal.
The business model has become increasingly sophisticated. Rather than simply treating patients, an entire ecosystem of middlemen has emerged to maximize arbitration revenue.
A recent STAT investigation found that HaloMD, a company that specializes in filing arbitration claims on behalf of providers, became the single largest filer of arbitration disputes during the first half of 2025. The piece also detailed the life of luxury, complete with mansions and private jets, that one can attain through exploiting this system.
One study estimates the IDR process has already generated approximately $5 billion in additional costs through administrative expenses, arbitration fees, internal compliance costs, and higher provider payments. Those costs do not disappear. They eventually show up as higher insurance premiums for employers, workers and families.
President Trump has apparently had enough of this broken system and is now directing his administration to act. The Centers for Medicare & Medicaid Services (CMS), an agency led by Dr. Mehmet Oz, recently lamented that “the system is being gamed to get higher prices,” and explained that the agency “is actively working to clean it up.”
Unfortunately, some lawmakers in Congress seem to not quite understand the scope of the problem and are poised to move in exactly the wrong direction. New legislation called the No Surprises Act Enforcement Act would primarily increase penalties for payment delays after arbitration decisions. While timely payment matters, that proposal largely ignores the much larger structural problem: an arbitration system already overwhelmed by excessive filings, questionable eligibility determinations, and escalating awards. Even the Congressional Budget Office is sounding the alarm over the law, warning that “arbitration outcomes could lead to higher prices over time.”
Congress should resist the temptation to treat symptoms while ignoring the disease. Real reform should focus on restoring the IDR process to its original purpose: resolving legitimate, infrequent disputes, not serving as another stream of revenue for private equity. The Administration should consider tapping agencies like the Federal Trade Commission, where I previously worked, to study whether this broken system is creating market distortions that are actively harming consumers and leading to higher prices for everyone.
The intent behind the No Surprises Act was good: patients absolutely deserve protection from surprise bills. They also deserve protection from a massive government-created loophole that is not-so-quietly driving up the cost of healthcare. Washington promised to eliminate surprises. Instead, it created a new industry built around exploiting the rules. Congress should champion reforms that protect consumers, reward honest competition, and stop special interests from turning taxpayer-designed protections into private profit centers for the rich and powerful.
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