The ruling could raise the benchmark used in out-of-network payment disputes, as federal data show providers winning most IDR cases and final awards frequently exceeding insurers’ QPA.
A major federal appeals court ruling has put the calculation behind the No Surprises Act’s payment benchmark under renewed scrutiny, just as the federal arbitration system is handling an unprecedented number of disputes.
On August 12, 2026, the full U.S. Court of Appeals for the Fifth Circuit ruled that parts of the federal methodology used to calculate the Qualifying Payment Amount (QPA) were unlawful. The court sided with healthcare providers on two major issues: the treatment of so-called “ghost rates” and the exclusion of certain bonus, incentive, and risk-sharing payments from QPA calculations.
The decision matters because the QPA plays an important role in the federal Independent Dispute Resolution (IDR) process, where providers and health plans negotiate payment for certain out-of-network services covered by the No Surprises Act.
The ruling comes as the IDR system has grown rapidly. Federal data show that more than 1.4 million disputes were initiated during the second half of 2025, a 16% increase from the first half of the year.
At the same time, providers won approximately 85% of finalized IDR determinations during the latter half of 2025, while the final payment determination exceeded the applicable QPA in roughly 87% of decided cases.
Why the QPA Matters
The QPA is generally based on the median contracted rate for a service in a particular geographic area and is one of the key figures considered during the No Surprises Act dispute-resolution process.
The benchmark was intended to provide a standardized reference point when a provider and health plan cannot agree on an out-of-network payment.
But providers have argued for years that the methodology used by insurers can produce artificially low QPAs.
The Fifth Circuit’s latest ruling directly addresses that concern.
The court concluded that insurers should not be permitted to include contracted rates for services that providers do not actually furnish when calculating the benchmark.
These rates have become known as ghost rates.
What Are Ghost Rates?
Ghost rates are contractual rates associated with services that a provider does not actually perform.
For example, a provider contract may contain a negotiated amount for a medical service even though that provider never delivers that service. If that rate is included in the calculation of the median contracted rate, it can influence the QPA even though it does not represent an actual rate for care being delivered by that provider.
Providers argued that these rates could push the QPA downward.
The Fifth Circuit agreed with that argument, finding that the methodology conflicted with the No Surprises Act’s requirements.
That means federal regulators will now have to address how these rates should be treated in future QPA calculations.
The Court Also Addressed Bonus and Incentive Payments
Ghost rates were not the only issue.
The Fifth Circuit also ruled against the federal government’s approach to excluding certain risk-sharing arrangements, bonuses, penalties and other incentive-based compensation from the QPA calculation.
The court found that excluding those amounts could prevent the benchmark from reflecting the full amount available under provider-insurer contracts.
The decision therefore affects two different parts of the calculation: what rates are included and what compensation is excluded.
Together, those changes could result in higher QPAs under a future methodology.
Providers Are Already Winning Most IDR Cases
The timing of the ruling is significant because the federal IDR system has become a massive part of the No Surprises Act.
During the second half of 2025, disputing parties initiated approximately 1.4 million payment disputes, compared with about 1.2 million during the first half of the year.
That represents a 16% increase in just six months.
Providers also continued to win the majority of finalized determinations.
Approximately 85% of finalized IDR determinations favored out-of-network providers during the second half of 2025.
In about 87% of decided cases, the final payment determination was higher than the insurer’s QPA.
That does not mean providers automatically received 87% more money than the QPA. Rather, it means the final determination was above the applicable QPA in that share of cases.
The distinction is important because the QPA is a benchmark, not necessarily the final amount paid.
The IDR System Has Become a Multibillion-Dollar Process
The rapid increase in disputes has also translated into substantial payment amounts.
Data cited in recent reporting show that total arbitration payouts reached approximately $14.9 billion in 2025, compared with about $4.1 billion in 2024.
The increase reflects both the growing number of disputes and the fact that provider offers frequently exceed the QPA when providers prevail.
In many cases, winning provider offers have been reported at multiples of the QPA, with some awards reaching three or four times the benchmark.
That gap has become a major source of tension between providers and insurers.
Providers argue that QPAs can be artificially depressed and therefore do not accurately reflect market reimbursement.
Insurers, meanwhile, have argued that the IDR process can produce awards substantially above normal in-network rates, increasing costs for employer-sponsored and commercial health plans.
A Small Number of Organizations Account for a Large Share of Disputes
The growth of the IDR system has not been evenly distributed among healthcare providers.
A relatively small number of large medical staffing organizations have accounted for a substantial share of federal disputes.
Data cited in recent reporting indicate that HaloMD, TeamHealth, and SCP Health together accounted for roughly 38% of disputes initiated during the second half of 2025.
The concentration is particularly notable because emergency medicine and other specialties can generate large numbers of out-of-network disputes.
This suggests that the IDR process is not simply being used occasionally by individual physicians. For some large healthcare organizations, arbitration has become a significant part of their reimbursement strategy.
The Federal IDR System Has Expanded Rapidly
The growth becomes even clearer when viewed over the life of the program.
The federal IDR portal launched in April 2022. Since then, millions of disputes have entered the system.
By the end of the 2025 reporting period, the process had evolved from a relatively new consumer-protection mechanism into a large-scale federal payment-resolution system.
The sharpest increase occurred in 2025, when approximately 2.6 million disputes were initiated across the year, including roughly 1.2 million in the first half and 1.4 million in the second half.
That volume has created significant administrative pressure on the agencies and certified IDR entities responsible for resolving cases.
CMS Has Been Changing the IDR System
Federal regulators have responded by expanding the operational capacity of the IDR system.
Two additional certified IDR entities were added, bringing the reported roster from 13 to 15 organizations.
Federal agencies have also changed portal operations, batching requirements, and reporting procedures to improve the processing of disputes.
The newer public-use data provide more transparency into how individual cases move through the system.
One notable change is the inclusion of the certified IDR entity assigned to individual disputes in the newer data.
That gives researchers and policymakers a better way to examine whether different arbitration organizations produce different outcomes.
The New QPA Ruling Does Not Stop the IDR Process
The Fifth Circuit’s decision does not mean that the federal IDR system immediately stops operating.
The court allowed federal agencies to maintain the use of existing QPAs while regulators work on a revised methodology.
That temporary flexibility is important because millions of disputes continue to move through the system.
Without an interim approach, the ruling could have created uncertainty over how health plans and providers should resolve ongoing payment disputes.
Instead, federal agencies have time to determine how QPAs should be recalculated under the court’s decision.
What Could Change for Insurers?
The most direct effect could be a higher QPA for some services.
If ghost rates are removed and qualifying bonus or incentive compensation is incorporated into the calculation, the median contracted rate could increase in certain circumstances.
A higher QPA could then affect negotiations and arbitration because the benchmark is one of the figures considered during the IDR process.
That could increase payments to providers in some disputes.
For insurers, higher reimbursement could increase the cost of out-of-network claims and add pressure to commercial health-plan expenses.
The ultimate effect will depend on the replacement methodology adopted by federal regulators.
What Could Change for Patients?
The No Surprises Act was designed primarily to protect patients from unexpected out-of-network bills.
The federal IDR process generally takes place between providers and health plans rather than directly between patients and insurers.
That means the Fifth Circuit ruling does not automatically create a new bill for patients.
However, higher reimbursement costs can have broader effects on the healthcare system.
Insurers may ultimately face higher claims expenses, while employers and consumers could see those costs reflected in premiums or other forms of health-plan spending.
The size of any such effect is not yet known.
The Bigger Problem Is the Gap Between the QPA and Arbitration Outcomes
The most important takeaway from the latest data may not be the court ruling alone.
It is the growing gap between the benchmark insurers calculate and the amounts that providers receive when they win IDR disputes.
If the final payment exceeds the QPA in approximately 87% of cases, and providers win about 85% of finalized determinations, the data suggest that the QPA is frequently not functioning as the final payment level in arbitration.
That does not by itself prove that insurers are manipulating the benchmark or that providers are being underpaid.
But it does explain why the QPA methodology has become one of the most heavily contested parts of the No Surprises Act.
What Happens Next?
Federal agencies now face the task of developing a revised QPA methodology that complies with the Fifth Circuit’s ruling while keeping the IDR process operational.
The immediate focus will likely be on defining which contracted rates qualify for the calculation and how incentive-based compensation should be incorporated.
The government could also face further litigation depending on how the replacement rules are developed.
For insurers and providers, the outcome could materially change the benchmark used in future payment disputes.
For patients, the immediate protections of the No Surprises Act remain in place.
But the longer-term question is how much the redesigned benchmark will change the amount insurers ultimately pay for out-of-network services.
The Bottom Line
The Fifth Circuit’s ruling comes at a critical moment for the No Surprises Act.
The federal IDR system handled roughly 2.6 million disputes in 2025, while providers won about 85% of finalized determinations in the second half of the year. In approximately 87% of those cases, the final payment exceeded the QPA.
Now, the court has ruled that two important elements of the QPA methodology — the inclusion of ghost rates and the exclusion of certain incentive-based compensation — were unlawful.
The result is likely to be a significant redesign of the benchmark at the center of the federal arbitration system.
The next phase will determine whether a revised QPA produces a more accurate reflection of actual provider-insurer rates—or simply moves the battle over surprise-billing payments into a new phase.
