Description
- Abstract:
- U.S. health care markets are increasingly characterized by vertical integration. Most notably, insurance companies and hospital systems are restructuring into health care conglomerates. These sprawling entities—like UnitedHealth Group, CVS Health, and vertically integrated hospital systems—now combine payer and provider functions, as well as pharmacy benefits managers (PBMs), pharmacies, data analytics companies, and more. For the nation’s largest insurers, the shift toward vertical integration has been fueled by private equity investment. These developments stem from a decades-long governing framework that has promoted vertical integration as a key to health care cost containment. In health policy, the push for payer-provider integration dates back to the health maintenance organization (HMOs) of the 1970s—a model that policymakers have sought to scale more recently through Medicare Advantage (MA) and value-based payment (VBP). A coinciding shift in antitrust doctrine, led by the Chicago School revolution, significantly relaxed enforcement of vertical integration. Underlying the pro-integration agenda was a theory of efficiency: it would align the economic incentives of insurers and providers and produce cost savings. Combining two points in the supply chain, such as insurers and PBMs, would eliminate excess margins that could be passed to consumers as lower prices. Yet evidence of efficiencies has been notably scarce. Health care spending continues to rise as conglomerates expand, and some research has found that the more insurers vertically integrate, the higher their health expenditures. Studies of specific vectors of integration rarely demonstrate efficiencies. There is robust evidence showing that hospital-physician vertical integration consistently increases prices for services. Numerous studies of insurer-led vertical integration show above-market payments to conglomerates' own pharmacies, and there are some indications that this may be occurring where insurers acquire medical medical practices. Rather, conglomerate firms in today’s multi-layered and highly regulated health care markets can use vertical integration to game regulatory protections, behave anticompetitively, and exercise undue influence over clinical care. This white paper describes the “captive” strategy of integration, in which conglomerates maximize insurance revenue and funnel it to their own affiliated entities—expanding profits without fear of competitive entry.
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Citation
Hayden Rooke-Ley, Anika Shah, Corrie Mook, et al.,
"Health Care Conglomerates: Policy and Legal Options for Addressing Vertical Integration"
(2026).
Center for Advancing Health Policy through Research (CAHPR) Digital Collection.
Brown Digital Repository. Brown University Library.
https://doi.org/10.26300/3asf-mq68
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Center for Advancing Health Policy through Research (CAHPR) Digital Collection
This collection contains research outputs produced by members of the Center for Advancing Health Policy through Research (CAHPR). Collection DOI: https://doi.org/10.26300/mshb-sp27...