Over the past 30 years, consolidation of health care systems in the United States has accelerated through mergers and acquisitions, researchers reported last year in the Journal of the American College of Surgeons. After reviewing 34 years worth of studies (1990 to 2024), researchers found a lack of evidence to support the theory that integration is an effective strategy for improving the value of health care delivery, they wrote.
During a KFF Health Wonk Shop webinar on Feb. 18, Larry Levitt, KFF’s executive vice president for health policy, explained that for decades, hospital systems and insurers have engaged in what he called “an arms race” to raise prices by getting bigger. During the webinar, Consolidation and Integration in Health Care: What It Means for Patients, Payers, and Policy. Levitt added that health insurers have used vertical integration to acquire physician groups and medical practices to raise prices, just as hospitals have done to increase revenue by charging facility fees even when they don’t provide care in an actual facility.
Other benefits may result when health insurers and health care companies pursue vertical integration models that increase efficiency, collect more robust data, align incentives and allow patients more and better access to care, he noted.
After outlining these effects of consolidation, Levitt asked three experts to discuss the consequences of vertical mergers and acquisitions:
- Erin Fuse Brown J.D., a professor of health services, policy and practice at the Brown University School of Public Health.
- Cory S. Capps, Ph.D., a partner at Bates White Economic Consulting.
- Elizabeth Mitchell, president and CEO of the Purchaser Business Group on Health in Oakland, Calif.
Double-digit price increases
“We know that hospital physician integration or consolidation is associated with, in some cases, double-digit price increases both for the hospital services and for the physician services,” Brown said. “In the commercial market, we know that vertical consolidation, though it promises efficiencies, tends to also produce higher levels of spending and higher levels of utilization of higher-intensity services.” Hospitals also capture more referrals from the physician groups they acquire, she added.
Another form of vertical consolidation involves large conglomerates of health insurers, Brown said, citing UnitedHealth Group, the nation’s largest health insurer, as an example. Other large insurance companies are following UHG’s growth model, such as Humana, CVS and Aetna, she said.
UnitedHealth has acquired so many physician groups that it has become the largest employer or investor in physician practices through its subsidiary, Optum Health, Brown explained. Optum also runs its own pharmacy benefit management (PBM) company and controls specialty pharmacies and home health companies, Brown noted. What’s more, UnitedHealthcare operates Change Healthcare, a company that manages a large percentage of the nation’s medical billing and data infrastructure, she added.
A model of efficiency
Capps cited Kaiser Permanente in California as an example of an efficient model of vertical integration. “Kaiser has a fully integrated enclosed model, meaning they have the physicians, they have the hospitals and they sell the [health] insurance,” he said. Also, they contract with PBMs for pharmacy benefits, he added.
“They’ve got about over 40% of Medicare Advantage enrollment in the state, meaning seniors are picking the Kaiser model for a mixture of the benefits that they offer, the care experience, and the price by far more than any other individual insurer offering Medicare Advantage plans,” he said. “Kaiser has built everything rather than acquiring [physician] groups,” he added.
“Occasionally, they will contract with hospitals to fill a gap where they don’t have a footprint,” he said. The model that Kaiser uses in California could be one that policymakers might foster, he added, asking, “Can we get more systems to move in the direction of Kaiser?”
Employers’ high costs
Levitt asked Mitchell what leverage the 40 Purchaser Business Group on Health members have and if they are seeking help from the federal government to limit consolidations.
The whole point of consolidation is to minimize purchaser leverage. So, if you are the only game in town, you set your prices. And there is evidence all over of how that has actually driven up costs.
Elizabeth Mitchell, president and CEO, Purchaser Business Group on Health
Hospital consolidation resulted in price increases of 3% to 65% for employers, Mitchell said, citing a 2022 report from RAND Health Care. “We’re having these massive price increases for the people paying for care [while] there is absolutely no evidence that quality has improved. We know access has diminished. So they’re able to leverage higher prices without the benefits.
“Everybody wants integrated care, of course,” she added. “That is not what is happening. We are having integrated business models, but the care is not improving. Employers who may have been negotiating with a smaller system or a regional health plan, now that they’re all consolidated, the receptivity to employer interests has diminished in a corresponding way.”
“If you look at the health system, it’s not affordable and quality isn’t great,” she continued. “So I think it’s time to really revisit this whole idea that consolidation is making anything better, because we’re not seeing it.”
The antitrust question
All three experts discussed the need for more robust enforcement of antitrust laws. Those government agencies responsible for antitrust enforcement have largely failed, Brown said.
“Even when agencies have brought antitrust cases, the agencies have failed to convince the courts that there’s a competitive risk,” she said. “It’s gotten to the point where there’s a sense that conglomerates are exercising market power not just in one market, but in multiple markets.”
As health systems and insurers become larger, they can use their market power anti-competitively not only to harm rivals, but to out-compete in many different areas of the health care supply chain, Brown added.
Mitchell cited three results from a 2024 KFF report on hospital consolidation in metropolitan areas, saying:
- One or two health systems controlled the entire market for inpatient hospital care in 47% of metropolitan areas in 2022.
- In 82% of metropolitan areas, one or two health systems controlled more than 75% of the market.
- Nearly all (97%) of metropolitan statistical areas were “highly concentrated” for inpatient hospital care when researchers analyzed those markets using federal antitrust guidelines.
“We are fully consolidated and [state] attorneys general have been completely asleep at the wheel,” Mitchell commented.
In December 2024, researchers published a study, Is there Too Little Antitrust Enforcement Action in the US Hospital Sector? in the journal American Economic Review: Insights. They showed that from 2002 to 2020, more than 1,000 hospitals were involved in mergers and yet the Federal Trade Commission took enforcement action against only 13 of those transactions.
“We have changed our approach to regulating this,” Mitchell added. “We have to have a competitive market.”
Without competition, consumers, employers and those who pay for health care will want governments to impose price caps in health care, Mitchell said. “That is not where we’re at. But if we continue on this track, that will be where people want to go.”
Resources
- Challenges To Anti-Competitive Hospital Contracting Practices: The New York And Presbyterian Hospital, Health Affairs, March 3, 2026
- Consolidation and Integration in Health Care: What It Means for Patients, Payers, and Policy, KFF Health Wonk Shop video and transcript, Feb. 18, 2026
- Health Care Provider Consolidation, Bipartisan Policy Center, Jan. 29, 2026
- Health Care Consolidation and Rising Costs Happen, but Obamacare Is Not the Key Culprit,
- Julie Appleby, KFF Health news, Dec. 11, 2025
- Recent trends in commercial health insurance market concentration, Peterson-KFF Health System Tracker, Dec. 11, 2025
- As Health Companies Get Bigger, So Do the Bills. It’s Unclear if Trump’s Team Will Intervene, Elisabeth Rosenthal, KFF Health news, Nov. 10, 2025.
- Health Care is Becoming More Consolidated—Including Physicians. What Effect Is It Having?, U.S. Government Accountability Office, Sept. 25, 2025
- Is there Too Little Antitrust Enforcement Action in the US Hospital Sector?, American Economic Review: Insights, December 2024.
- One or Two Health Systems Controlled the Entire Market for Inpatient Hospital Care in Nearly Half of Metropolitan Areas in 2022, KFF, Oct 1, 2024
- Which hospital systems will join Kaiser’s Risant next?, STAT news, Bob Herman, June 3, 2024
- Ten Things to Know About Consolidation in Health Care Provider Markets, KFF, April 19, 2024
- One or Two Health Systems Controlled the Entire Market for Inpatient Hospital Care in Nearly Half of Metropolitan Areas in 2022, KFF, Oct. 1, 2024
- Environmental Scan on Consolidation Trends and Impacts in Health Care Markets, RAND Health Care, Sept. 30, 2022
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