Healthcare consolidation issues

As consolidation sweeps across the health care industry, employers are increasingly finding themselves with fewer choices, less leverage, and rising costs, according to experts speaking during a recent national policy webinar. During the Kaiser Family Foundation (KFF) webinar, Consolidation and Integration in Health Care: What It Means for Patients, Payers, and Policy, panelists said decades of mergers among insurers, hospitals, physician practices, and pharmacy benefit managers (PBMs) have shifted power away from purchasers—especially self insured employers that bear the full financial risk of health care spending.

Moderator Larry Levitt, executive vice president for health policy at KFF, framed the issue as an escalation of long-running consolidation trends. “For decades, hospital systems and insurers have each gotten bigger in a sort of arms race to gain pricing leverage,” Levitt said. He noted that newer forms of vertical integration—such as insurers acquiring physician practices and PBMs—have made it harder to track where health care dollars go, while often paving the way for higher prices through facility fees and complex drug supply chains.

Rising costs, shrinking leverage. For employers, particularly those that self insure, consolidation has translated directly into higher prices and diminished negotiating power, said Elizabeth Mitchell, president and CEO of the Purchaser Business Group on Health.

“The whole point of consolidation is to minimize purchaser leverage,” Mitchell said. Citing a RAND analysis, she pointed to hospital consolidation being associated with price increases ranging from 3 percent to 60 percent, with “absolutely no evidence that quality has improved” and clear signs that access has worsened. “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,” she said.

Mitchell added that large, vertically integrated insurers are increasingly restricting employers’ ability to use common cost control tools. She said health plans often deny employers access to claims data, audit rights, tiered networks or direct contracting, leaving purchasers “very hard pressed to find an alternative” in markets dominated by a handful of large players.

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Continuing consolidation. Other panelists argued that consolidation is being driven in part by structural changes in payment models. Erin Fuse Brown, a professor at Brown University School of Public Health, said providers are being pushed to take on financial risk through value-based care arrangements, accountable care organizations, and capitated payments.

“When you ask providers, especially clinicians and independent practices, to assume almost like a risk bearing insurance function, then the natural partner for that is a deep pocketed organization,” Fuse Brown said. She noted that insurers have accelerated vertical integration to gain the scale, technology, and capital needed to manage risk in Medicare Advantage and other value based models.

Mitchell pushed back on the premise that value based care is delivering on its promises. “I don’t think value based care really exists,” she said. “I have heard about it for 20 years… but we don’t see the outcomes.” From the employer perspective, she said, integration has largely benefited business models, not patient care.

Full consolidation. Several speakers said the degree of consolidation has already reached a critical point. Mitchell cited data showing that in 82 percent of metropolitan areas, health systems control at least 75 percent of the market, while federal regulators have challenged only a small fraction of mergers over the past two decades.

“We are fully consolidated,” she said, arguing that both federal and state regulators have failed to curb anti-competitive behavior. If consolidation continues unchecked, she warned, employers may increasingly support policy interventions such as price caps or price setting.

That pressure is especially acute for self insured employers, Mitchell emphasized. “Self insured employers bear 100 percent of the risk,” she said. “This is what the people paying for care are up against.”

Transparency and policy response. Panelists pointed to recent bipartisan action on PBMs and hospital price transparency as incremental but important steps. Mitchell said requirements that PBMs pass through rebates and disclose pricing could “make a dent,” while stronger enforcement of hospital and insurer transparency rules could help employers identify fairly priced, high-quality providers.

After the Consolidated Appropriations Act of 2021, she noted, self insured employers are now required to ensure they are paying fair prices—a task she described as nearly impossible in a highly consolidated and opaque market.

Looking ahead, Mitchell said transparency into ownership, prices, and outcomes should be considered “table stakes” for a functioning market. She added that even executives at Fortune 50 and Fortune 100 companies have expressed growing support for federal intervention if consolidation driven cost increases continue. “At some point, this becomes unsustainable for employers,” she said. “Someone has to weigh in and control pricing.”

SOURCE: KFF webinar, Health Workshop: Consolidation and Integration in Health Care: What It Means for Patients, Payers, and Policy, Feb. 18, 2026.

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