A breast reduction surgery that once cost tens of thousands of dollars is now, in some cases, generating payments of more than $400,000.
That is one of the more striking outcomes of a federal arbitration system created under the No Surprises Act, a 2020 law designed to protect patients from unexpected medical bills. Instead of charging patients directly, out-of-network physicians can now take payment disputes to an independent arbitrator, who chooses between competing offers from the doctor and the insurer.
The system has grown far beyond what lawmakers had expected. Doctors filed more than 1.2 million arbitration cases in the first half of last year alone, and they are winning the vast majority of them, often securing payments far higher than typical insurance rates, according to an April 22 report in The New York Times.
Insurers say the process is driving up costs and premiums, and some have begun to challenge its use in court. Health policy experts have raised concerns about a system they say lacks meaningful oversight.
Insurers, meanwhile, have argued that arbitration awards can be “eyebrow-raisingly high” and may contribute to rising healthcare costs.
But for Jimmy Chow, MD, an orthopedic surgeon at Phoenix-based Summit Hip & Knee Institute, who has spent years working within both hospital systems and the arbitration process itself, the controversy points to something deeper.
“The core problem is lack of oversight,” Dr. Chow said.
A system built on competing realities
From his perspective, the current debate over arbitration misses the larger issue: how healthcare is financed and who ultimately controls pricing power.
Government programs like Medicare and Medicaid operate under strict budget constraints, covering an aging population with limited taxpayer dollars. Private insurers, by contrast, collect premiums from a generally younger, healthier population, functioning more like subscription-based businesses.
That dynamic, Dr. Chow argues, has created a system that appears constrained on the surface but is structurally positioned for growth.
“We’re trained to think in terms of cost containment, when in reality we’re operating in a system of abundance,” Dr. Chow said.
In practice, that often means insurers peg their payments to Medicare rates, even as those rates decline. Physicians, in turn, face increasing pressure to accept lower reimbursements or navigate a more complex and adversarial system.
Why arbitration has surged
The arbitration process was meant to serve as a backstop, a way to resolve disputes without involving patients. But it has quickly become something more consequential.
For most physicians, however, it is not an easy option. Pursuing arbitration requires time, resources and a willingness to wait months for a decision. Many providers choose not to participate at all, accepting lower payments or seeking the relative stability of employed positions instead.
“The vast majority of providers have already lost before they even start,” Dr. Chow said.
Those who do enter the system tend to be a smaller, more specialized group, often supported by organizations that focus exclusively on arbitration. That dynamic, he said, helps explain why provider win rates appear so high.
“I don’t think the win rates are high because it’s easy,” he said. “It’s because most providers never even enter the process, and those who do are often the ones with the resources and experience to pursue it.”
Leverage, not just payment
To Dr. Chow, arbitration is not simply about recovering higher payments. It is a form of leverage.
Insurers, he said, can limit access to their networks or offer reimbursement rates that many physicians find unsustainable. Without a mechanism to challenge those decisions, providers have little negotiating power.
“There has to be a mechanism that makes it painful enough for payers to come back to the table,” he said. In that sense, arbitration becomes less about individual cases and more about shaping broader contract negotiations.
At the same time, the system carries clear risks. Some high-profile cases have drawn attention for unusually large awards, and critics argue that certain providers may be using arbitration opportunistically.
Dr. Chow does not dismiss those concerns. “There are people who will use this opportunistically,” he said. But he sees those cases as outliers in a system that, in his view, has long favored insurers.
The effects extend beyond payment disputes. Physicians attempting to join insurance networks often face closed panels or rates they consider untenable. For patients, that can translate into fewer choices and longer delays in care.
“This hurts everybody,” Dr. Chow said.
Hospitals, device manufacturers and other parts of the healthcare system, he added, are also feeling the pressure as reimbursement constraints ripple outward.
Even so, Dr. Chow does not view arbitration as a permanent solution.
“This is not going to last forever,” he said. Policymakers have already proposed changes to the system, and insurers continue to challenge its structure through litigation. Over time, the rules governing arbitration are likely to evolve. For now, he sees the current moment as a narrow window, an opportunity for providers to push for more sustainable payment models before the system shifts again.
A system worth trying to fix
Whether those efforts will lead to meaningful reform remains uncertain.
“I’m not sure we’re going to get this right,” Dr. Chow said. Still, he believes the alternative, doing nothing, is not an option. “We’ve been given a tool to try,” he said. “It’s not perfect, but it’s one of the only mechanisms available right now to push for change.”
In a healthcare system shaped by competing incentives and uneven power dynamics, that tool may be imperfect. But for some physicians, it is one of the few mechanisms available to challenge a system they believe is out of balance.
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