Patients tend to choose doctors who are in their health plan network. Not every doctor is affiliated with a network, but most primary care providers (PCP) are. Refusing to affiliate with health plan networks makes it harder for PCPs to grow a practice, because patients dislike paying out of pocket.
Not all doctors are chosen by their patients like PCPs are. Some physician specialties are chosen for patients by other doctors or even hospitals. Examples include anesthesiologists, radiologists, pathologists, emergency room physicians and assistant surgeons. Patients lack the ability to choose or refuse these physicians’ services. Physicians who patients do not choose (and cannot refuse) do not have to affiliate with networks since network affiliation does not increase their patient volume.
Health plans deliver a steady stream of customers to those physicians who benefit from network affiliation, but it comes at a price. That price is accepting negotiated fees that are lower than many physicians prefer to charge. In years past, physician specialties that patients do not choose had the option to decline network affiliation and charge whatever they wanted. Balances in excess of what health plans would pay could be billed to the patient. This practice is called balance billing. It is often known by another name, surprise medical bills, since patients have no control over them and are often surprised when they receive a bill for service they thought were covered by health plans.
The No Surprises Act became law in late 2020 and eliminated surprise medical bills. When patients receive care from an out-of-network physician who charges more than the health plan pays, the actual fee must be negotiated between doctor and health plan. If they cannot agree on a fee, it goes before an independent dispute resolution (IDR) arbitration process. The dispute resolution arbitrator decides how much the doctor receives and how much the health plan must pay (the patient cannot be charged the balance).
The IDR process is cumbersome. The prices charged for physicians’ services are determined by a game of cat & mouse. Doctors attempt to extract as much as possible, while insurers try to pay as little as possible. This is not a competitive process, however, because the patient has already used the service. It is too late to walk away and decline the service, depriving the provider of their business. Thus, true bargaining power is gone and prices are determined after-the-fact.
A new report in the journal, Health Affairs Forefront, found that arbitrators vary significantly in their decision making. Dispute resolution arbitrators appear to have biases. One would expect that doctors and health plans would migrate to mutually agreeable prices over time to avoid disputes. One would also expect that arbitrators would try to nudge doctors and health plans towards mutually agreeable prices by consistent awards. Such an arrangement would likely lead to fewer disputes with a similar proportion of awards favoring providers and a similar proportion favoring health plans, but that has not been the case. More from Health Affairs:
Four IDR entities favored providers in more than 90 percent of cases resolved in the first half of 2024, while one IDR entity favored providers in only one-third of cases.
For one IDR entity in one year, the share of disputes ruled in favor of providers was as high as 99 percent.
Conversely, the lowest share across years and IDR entities was 19 percent, an 80 percentage-point difference.
The authors of the Health Affairs report alluded to the idea that stakeholders can game the system, veto some arbitrators and choose others.
Our analysis indicates that IDR entities vary significantly in their decision-making practices despite expectations that decisions would be consistent across entities. Our stakeholder discussions suggest that parties may strategically veto particular IDR entities. Our analysis sheds some light on variations already known to provider and payer stakeholders engaging in IDR. More transparency in the PUFs would improve our understanding of the IDR process.
Wide variation between arbitrators has led to an increase in the number of disputed fees. Better education among arbitrators, greater transparency and consistency are all needed. In an ideal outcome, arbitrators would figure out the market prices for services and award consistent fees. Over time the caseload for disputes would fall as stakeholders learn what to expect in terms of prices. That is easier said than done, however.
For a comprehensive explanation of the dispute resolution process, see No Surprises Act Arbitrators Vary Significantly In Their Decision Making Patterns | Health Affairs