The benchmark is the whole game

A new federal rule just made the fight over out-of-network pay cheaper to enter. It left the number that decides who wins exactly where it was.

A man in his early forties came through the emergency department on a Tuesday with abdominal pain he had talked himself out of for weeks. He had always assumed he was healthy, so he treated the discomfort as something that would pass. By the time it brought him in, a CT scan read in minutes by a radiologist he would never meet showed a colon mass large enough to be near-obstructing, and what began as a bad night became an emergency operation. By the time he reached me, he was asleep before we had finished saying his name. I kept him stable while the surgeon worked, and the mass that was removed went down the hall to a pathologist, who would put the real name to his disease while he was still recovering.

He chose none of us. He did not pick the emergency physician who evaluated him, the radiologist who read his scan, the anesthesiologist who carried him through the operation, or the pathologist who confirmed his diagnosis. In most of medicine the choosing is half the relationship: you select your surgeon, you read about the practice, you ask a friend who delivered her babies. The specialties that gather around the sickest and most sudden moments are the exception, and that single fact sits underneath one of the quieter fights in American healthcare.

The No Surprises Act got something important right. It decided that a patient who never chose the out-of-network clinician should not be handed the bill for that accident of scheduling, and that was the correct call. In the same motion, the law took away those clinicians’ ability to bill the patient for the balance and replaced it with a single federal arbitration process, independent dispute resolution, as the only road left to argue that the insurer’s payment was too low. So the surprise bill the patient used to receive became a dispute the clinician now files against the plan. The patient is protected. The argument over what the care was worth did not disappear; it moved to a different room.

Most coverage reads that process as a billing squabble, a story about paperwork and arbitrators and fees. I’d argue it is something larger and simpler: a proxy war over who captures the margin on that asleep patient’s care. And the way to tell who is winning is to stop watching the arbitration and watch the benchmark, the single number the rules let one side calculate.

Earlier this month, on June 4, the Departments of Health and Human Services, Labor, and Treasury finalized the long-awaited rule governing how the dispute process works, and the improvements are real. The administrative fee to bring a dispute fell from $115 to $15. Providers can now batch as many as fifty related claims into a single case. Insurers will have to use standard codes to signal, up front, whether a claim is even eligible for the process. The societies that speak for anesthesiology, emergency medicine, and radiology welcomed the rule, and they were right to. When a single radiology claim is worth a modest sum, a $115 fee made it irrational to challenge a payment everyone knew was too low, because the dispute cost more than it could recover. At $15, the arithmetic changes, and a small practice can afford to show up. That is a genuine step toward a process a community group can actually use, and it deserves to be called what it is.

But a process can be cheaper to enter and still rest on a foundation that decides the outcome before anyone walks in. The new rule does not touch the qualifying payment amount, the QPA, the benchmark the arbitrator leans on when deciding what a service was worth. And the benchmark is the whole game. An analysis from Americans for Fair Health Care, a provider-aligned coalition, compared the reported QPAs against insurers’ own published median in-network rates, so the comparison rests on the insurers’ own numbers rather than the coalition’s. In roughly two-thirds of disputes the reported QPA came in below the insurer’s own median contracted rate for the same service in the same region, averaging about a third of the real rate. A median that sits below the real median sounds like a contradiction until you see how the number is built. Tens of thousands of disputes carried a QPA under twenty dollars. Some carried a QPA of zero. Hold that next to the figure insurers cite most often, that providers win the large majority of disputes, and the win rate stops sounding like abuse and starts sounding like arithmetic. When the benchmark is set at a third of the market, an award at three times the benchmark is a correction, not a windfall.

The mechanism that pushes the benchmark down has a name a careful reader will want: ghost rates, the practice of folding into the median the contracted rates for services that were never actually performed, alongside rates borrowed from adjacent specialties that never did the work. It works the way a salary survey would if you padded it with people who were never paid for jobs they never held: drop in enough zeros and near-zeros, and the median sinks toward them. Whether that practice is lawful is the question now before the full Fifth Circuit. A three-judge panel first let the methodology stand; the full court then agreed to rehear the case, which set that panel decision aside, and it has not yet issued its own ruling. While the court takes its time, the Departments have allowed the existing benchmark methodology to remain in force through this fall. So the plumbing of the dispute got cheaper and clearer in June, and the number the dispute turns on stayed exactly where it was, contested and unresolved. That is not an accident of timing. It is the part of the fight that actually moves the money, and it is the part still unsettled.

Follow the money one step further and the proxy war stops reading as a metaphor. A Health Affairs analysis last fall described a mechanism that, if it operates at any scale, ought to change how we read the entire dispute: many plans, or the third-party vendors they hire, take a percentage of the spread between a provider’s billed charge and what the plan ultimately pays. Billed charges are set by the provider rather than by any market, so the number itself is soft, but the incentive it creates is not: the wider that spread, the larger the plan’s own cut. An out-of-network claim produces the widest spread there is, so the program pays the plan more to push anesthesia, radiology, and emergency medicine out of its network than to keep them in it. Put plainly, the more a plan pays a clinician, the smaller its own internal bonus. Seen that way, network contraction is not always the unfortunate byproduct of hard bargaining. In some cases it is the design, and the dispute that follows looks less like a breakdown than like the system working as intended.

I want to be careful here, because this is the point where the argument is easiest to overstate. The mechanism is documented; the scale is not. We do not yet have clean, specialty-level data on how many out-of-network terminations were deliberate rather than incidental, and an honest case names that gap instead of papering over it. Based on what we do know, though, the direction of the incentive is not in question, and it turns the insurer’s central complaint on its head. A party that is paid to widen the very gap these disputes exist to close is not a bystander to the volume. It is closer to the source of it.

The honest objection, the one a well-prepared opponent leads with and the one I’d challenge us to sit with rather than wave off, is that a small number of private-equity-backed arbitration firms file an outsized share of these disputes. Three filers account for something close to half the volume, and one of them has won at award levels that, on their face, look like a machine built to extract. Insurers point at those firms and ask Congress to treat the entire process as abuse. The conflation is their strongest move, and it deserves a real answer. Two things are true at the same time. A firm winning at nine times the QPA is, before it is anything else, evidence that the QPA is broken, because when the benchmark is a third of market, large multiples are the expected result rather than proof of gaming. And the concentration itself exposes an access problem the new rule only begins to address: the parties who can work this system at scale are the ones who can fund a standing dispute operation. The independent anesthesiologist in a community hospital, the clinician the law was nominally written to protect, was until this month’s fee cut largely priced out of the process built in her name. The point is not that every high-volume filer is virtuous. It is that the volume problem, the benchmark problem, and the network problem all share one author.

There is one argument I will not set aside. Self-insured employers, not insurer shareholders, ultimately pay the awards that come out of this process, and a system that moves large sums from employer health plans to aggregators raises a real distributional question that the corruption of the benchmark does not answer. Both can be wrong at once. A piece written honestly from the provider side has to hold that, and I do.

Which brings me back to the man who came through the emergency department on a Tuesday, asleep before he could have weighed in on any of it. The new rule lowered the cost of entering the fight on his behalf, and that matters. It did not make the fight fair, because the number that decides it is still calculated by one of the two parties to it, under a methodology the courts have not finished examining. A cheaper seat at a tilted table is progress. It is not the same thing as a level table, and naming that difference out loud is work any clinician close to it can do, and work the people in leadership exist to carry forward. In practice, that begins with a small, concrete ask: to see how the benchmark was built before the argument turns to what any one award should be. It is the hospitalist who can no longer find an in-network specialist to accept the consult, and the primary care physician left holding what the narrowed network pushes back onto her, who feel these decisions in their own work long before they reach a policy paper. The question worth answering is not whether providers win too often. It is who was allowed to set the number, and why the people closest to the patient had the smallest hand in it.