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There is growing bipartisan agreement among policymakers that existing laws have failed to prevent the rise of large, vertically integrated health care conglomerates, contributing to reduced competition and higher costs. At the federal level, lawmakers have sought testimony from insurance executives, providers, and employers on the effects of this trend. While vertical integration could theoretically improve efficiency and care coordination, research suggests it has often enabled profit extraction through self-dealing and higher prices, ultimately increasing health care spending.
In this blog, we define vertical integration and examine its effects on three key stakeholders: consumers, employers, and clinicians. We then highlight three federal bills aimed at strengthening and expanding antitrust enforcement.
Background
There are two primary types of integration. Vertical integration typically refers to common ownership of entities at different stages of a supply chain. In the health care industry, this would include hospitals acquiring independent physician offices, as well as corporations owning entities with different functions. For example, CVS Health owns Aetna (insurer), CVS Caremark (pharmacy benefit manager), and Oak Street Health (primary care provider group). By contrast, horizontal integration occurs when organizations consolidate with others operating at the same stage of the supply chain, such as hospital systems merging with other hospitals or insurers merging with other insurers. Horizontal consolidation is outside the scope of this blog.
The discussion below focuses on vertical integration through ownership. However, contractual relationships can create similar dynamics, such as when health systems influence contracting or pricing decisions of structurally independent providers through clinically integrated networks, or third party administrators (TPAs) require their clients to use particular point solution vendors with which the TPA has financial agreements.
Impact of Vertical Integration on Consumers, Providers and Employers
Consumer Impact
Vertical integration contributes to rising health care costs for consumers. Prices for the same services are typically higher in hospital outpatient departments than when delivered in independent physician offices or ambulatory surgery centers. As hospitals acquire previously independent practices and convert them into hospital outpatient departments, the same services often have new facility fees, which contribute to higher premiums and out-of-pocket spending.
Consumers are increasingly exposed to the cost of care. Over the past decade, the average annual deductible for employer-sponsored insurance (ESI) has risen by 54%. In 2025, one in three workers with single coverage faced deductibles exceeding $2,000. Additionally, 67% of consumers with ESI are in plans with coinsurance, meaning they pay a percentage of allowed charges after meeting their deductible. As a result, increases in the cost of care can translate into significant out-of-pocket costs for consumers.
Evidence on quality of care is more mixed. One study found that vertical integration between hospitals and physicians had limited or no consistent impact on common quality measures. Similarly, a systematic review comparing vertically integrated hospital systems to non-integrated systems found modest improvements in certain quality metrics but no significant relationship between vertical integration and mortality outcomes.
Employer Impact
Vertical integration can increase the cost of providing ESI. Economic evidence suggests that workers bear most of these costs, primarily through lower compensation than they would otherwise receive. Employers provide insurance to almost half of Americans and rely on these benefits to attract and retain the workers they need. As of 2025, 67% of workers with ESI were enrolled in self-funded plans, meaning employers pay claims using their own funds rather than purchasing insurance. To administer these plans, employers rely on TPAs to build provider networks, negotiate prices, and process claims. However, vertical integration among TPAs and providers is driving up health care costs, making health benefit spending harder for employers to control. These pressures constrain employers’ ability to offer the mix of wages and benefits needed to attract and retain talent.
On the TPA side, consolidation has reduced choice and increased opacity. A small number of companies—HCSC, Elevance, Cigna, CVS Health, and UnitedHealth Group—accounted for 71% of the self-funded market TPA business in 2021. These firms also own pharmacy benefit managers, pharmacies, and provider groups, which can create conflicts of interest, particularly when TPAs steer business to affiliated entities or reimburse them at higher rates. These arrangements are often hidden in confidential contracts, giving employers limited visibility into TPAs’ potential self-dealing. On the provider side, consolidation has increased market power, enabling large health systems to command higher prices. This leverage is reinforced through anticompetitive contracting terms that restrict employers’ ability to design cost-effective networks.
In response to vertical consolidation among providers and TPAs, some employers are pursuing direct contracting or policy solutions such as site-neutral payment reforms to increase transparency and manage costs. However, direct contracting is resource intensive and likely unfeasible for most employers.
Clinician Impact
Physicians are increasingly integrating with hospitals and corporate entities such as insurers or private equity groups. In 2019, hospitals and corporate entities employed 62% of physicians; by 2024, this share had risen to nearly 80%. This shift reflects growing pressures on independent practices—including regulatory burdens, low reimbursement, and complex insurer policies—as well as the administrative and financial support that larger entities can provide. Hospitals and insurers often have greater capital and negotiating power, allowing them to charge higher prices and absorb administrative tasks.
When hospitals or insurers own physician practices, clinical priorities can shift toward the owner’s financial interests. For example, hospital-employed physicians are more likely to refer patients to hospital outpatient departments. Evidence from Medicare Advantage suggests that insurer-owned practices may also incentivize coding practices that increase government payments to the provider and return profits to the parent insurer. While vertical integration may reduce administrative burden on clinicians, it can also limit clinical autonomy and contribute to burnout.
Additionally, vertical integration can create significant competitive hurdles for independent physicians. A recent study illustrates this dynamic by examining UnitedHealthcare, which is both the country’s largest insurer and the largest employer of physicians. The study found that UnitedHealthcare pays physicians who work for its own physician network more than it pays independent physician practices for the same services. These payment differences were greatest in markets where UnitedHealth controlled a large share of the insurance market. This differential reimbursement can put independent practices at a financial disadvantage, pressuring them to consolidate and further strengthening the market power of vertically integrated entities.
Together, these dynamics reinforce the market power of integrated entities while influencing how care is delivered.
Federal Legislative Approaches
Lawmakers have introduced three antitrust bills in this Congress aimed at reducing vertical integration and market concentration.
The Break Up Big Medicine Act, introduced by Senators Warren and Hawley, targets structural vertical integration directly. It would prohibit common ownership between several entities with financial conflicts of interest, including providers and insurers or pharmacy benefit managers, as well as between providers and drug or device wholesalers. The bill would ban vertical integration among these entities regardless of conduct and require structural separation for firms that are already vertically integrated.
The Patients Over Profits Act, introduced by Representatives Hoyle, Ryan, and Jayapal along with Senators Merkley and Warren, would ban common ownership between insurers or their subsidiaries and certain physicians or outpatient providers (excluding hospitals). Insurers or their subsidiaries who already own these providers would also be required to structurally separate. Additionally, the bill would prevent the Centers for Medicare & Medicaid Services from contracting with insurers under Medicare Advantage if they also own these outpatient providers.
The Competition and Antitrust Law Enforcement Reform Act, introduced by Senator Klobuchar, focuses on strengthening merger enforcement by evaluating proposed deals based on their risk of harming competition. For mergers that pose significant risks to competition, the bill would shift the burden in merger review to companies by requiring them to demonstrate that proposed transactions are unlikely to materially reduce competition or create monopoly or monopsony power. Monopsony power—where a single dominant buyer has outsized power to set prices or terms for sellers—can manifest as insurers imposing low reimbursement rates on providers or hospitals depressing staff wages. The bill would also increase funding for antitrust agencies and expand their enforcement tools to prevent anticompetitive consolidation.
Looking Forward
Over the past decade, evidence of higher prices and constrained competition suggest that many of the expected efficiency gains from vertical integration have been more theoretical than real. Instead, the dominant effects have been rising costs for consumers and employers and reduced competitive pressure among providers. Evidence has shown that integration has been used to enhance revenue rather than improve efficiency or lower costs to consumers.
Even if the federal antitrust bills do not pass this session, momentum is building toward more intensive scrutiny of vertically integrated entities and the financial relationships that link insurers, providers, and health care intermediaries. Effective policy responses would require stronger enforcement and clearer constraints on integration among entities with inherent financial conflicts of interest to better align incentives across insurers, providers, employers, and consumers.
