You've done everything right. Chosen an in-network hospital, verified your surgeon accepts your insurance, and received pre-authorization for your procedure. Then the bill arrives: $4,200 from an anesthesiologist you never selected and didn't know was out-of-network. Welcome to the persistent problem of surprise medical billing.

The No Surprises Act, enacted in 2022, was supposed to fix this. And in many ways, it has reduced the most egregious cases of balance billing—those unexpected charges from out-of-network providers that patients had no ability to choose. Yet surprise bills haven't disappeared. They've evolved, finding new pathways through regulatory gaps and exploiting the fragmented architecture of American healthcare payment.

Understanding why these bills persist requires examining the economic incentives that create them, the structural features of healthcare that enable them, and the inherent limitations of policy solutions operating within a system that was never designed for transparency. The problem isn't just bad actors—it's a system where surprise billing is a predictable outcome of rational behavior.

The fundamental problem begins with a structural mismatch in American healthcare: patients choose hospitals, but hospitals choose the physicians who work inside them. When you're wheeled into an in-network emergency room, you have no control over whether the radiologist reading your scan, the pathologist analyzing your tissue, or the anesthesiologist managing your pain participates in your insurance network. These physicians often operate as independent contractors rather than hospital employees, free to negotiate—or decline—contracts with any insurer.

This arrangement creates what economists call an involuntary transaction. Unlike most services where you can walk away from a price you find unacceptable, emergency and ancillary medical services offer no opportunity for comparison shopping. The anesthesiologist arrives when you're already prepped for surgery. The emergency physician treats you when you're in crisis. This eliminates the competitive pressure that normally disciplines pricing in markets.

Private equity firms recognized this dynamic and invested heavily in emergency medicine and anesthesiology staffing companies throughout the 2010s. By consolidating physician groups and withdrawing from insurance networks, these firms could charge substantially higher rates. Research from Yale found that private equity acquisition of physician practices was associated with significant increases in out-of-network billing rates. The strategy was straightforward: in situations where patients cannot choose their provider, the provider holds pricing power.

The No Surprises Act addressed the most direct form of this problem by prohibiting balance billing for emergency services and requiring insurers and providers to resolve payment disputes through arbitration. However, the law primarily protects patients from receiving the bills—it doesn't eliminate the underlying incentive to charge inflated rates. Instead, it shifts the dispute to a payment resolution process whose outcomes continue to influence how much everyone pays through premiums.

Takeaway

Surprise bills arise not from individual bad behavior but from a structural reality: patients cannot choose many of the providers who treat them, eliminating the market pressure that normally constrains prices.

As direct surprise billing from out-of-network providers has faced greater scrutiny, a different category of unexpected charges has grown: facility fees. These are separate charges billed by hospitals or healthcare facilities for the overhead costs of providing a location for care—even when the actual medical service would be identical in a physician's office. The same procedure that costs $150 in an independent clinic might generate a $150 professional fee plus a $400 facility fee when performed in a hospital outpatient department.

The economics driving facility fee proliferation stem from how Medicare pays hospitals versus independent physicians. Hospital outpatient departments receive higher Medicare reimbursement than freestanding physician offices for equivalent services, a payment differential originally intended to compensate for hospitals' greater regulatory burden and emergency standby capacity. This differential created an arbitrage opportunity: hospitals began acquiring independent physician practices and converting them to hospital outpatient departments, often without relocating the practice or changing its services.

For patients, these conversions produce genuine surprise. The same doctor, in the same building, performing the same procedure, suddenly generates a facility fee that didn't exist before the practice was acquired. These fees typically aren't disclosed until after service, and they apply even when the 'facility' is an ordinary office building that happens to be owned by a hospital system. Medicare patients have faced facility fees for telehealth visits conducted entirely from their own homes.

Policy responses have been fragmented. Some states now require disclosure of facility fees before service, and Medicare has implemented site-neutral payments for certain services, reducing the reimbursement differential that incentivizes these arrangements. Yet hospital systems argue that facility fees support essential infrastructure, including emergency services and uncompensated care. The policy challenge lies in distinguishing legitimate cost recovery from regulatory arbitrage that primarily transfers wealth from patients to institutional providers.

Takeaway

When a physician practice is acquired by a hospital system, patients often face new facility fees for unchanged services—a form of surprise billing that operates entirely within network but outside patient expectations.

The No Surprises Act represented the most significant federal intervention into medical billing in decades, yet its implementation reveals the inherent difficulty of regulating a system with thousands of payers, millions of providers, and fifty different state regulatory frameworks. The law's central mechanism—Independent Dispute Resolution (IDR) for payment disagreements—has been overwhelmed by volume. In its first year, the IDR system received over 330,000 disputes, roughly ten times the projected number, creating backlogs that delayed resolution and increased administrative costs.

The dispute process itself became contested terrain. The law instructed arbitrators to consider the qualifying payment amount—essentially the median in-network rate—as a primary factor in determining fair payment. Provider groups, particularly those backed by private equity, challenged this guidance in court, arguing it unfairly advantaged insurers. Courts partially agreed, striking down regulations that emphasized median rates, leaving arbitrators with less clear guidance and outcomes that varied substantially by case.

Beyond the IDR process, significant gaps remain in the law's coverage. Ground ambulance services were excluded from the No Surprises Act due to the complexity of their ownership structures and state-level regulation. Patients transported by out-of-network ground ambulances—often the only option in emergencies—still face balance bills averaging over $450. Air ambulance providers, while covered by the law, have found other revenue strategies, including aggressive debt collection practices that the law didn't address.

State laws provide additional protection in some jurisdictions but create a patchwork where patient protections depend heavily on geography and employment. Self-insured employer plans, covering the majority of workers with employer-sponsored insurance, are regulated under federal ERISA law rather than state insurance law. This means state surprise billing protections often don't apply to the workers who might need them most. Reform efforts continue, but each solution reveals new complexity in a system where billing practices adapt faster than regulations can anticipate.

Takeaway

The No Surprises Act reduced many surprise bills but couldn't eliminate the underlying incentives that create them; reform in fragmented systems often displaces problems rather than solving them entirely.

Surprise medical bills persist because they emerge from structural features of American healthcare, not merely from regulatory gaps that new laws can close. The fragmented relationship between patients, providers, facilities, and payers creates information asymmetries and involuntary transactions that no single policy can fully address.

Progress has been real. The No Surprises Act has prevented millions of Americans from receiving balance bills they would have faced under prior rules. Yet the economic forces that created surprise billing—market power in emergency services, payment differentials between settings, and the opacity of healthcare pricing—continue to find expression in new forms.

Understanding this dynamic matters for patients, policymakers, and anyone seeking to navigate or reform American healthcare. Surprise bills are symptoms of deeper structural issues. Addressing them permanently requires not just better regulations but fundamental changes to how healthcare services are organized, priced, and paid for.