Vertical Integration and Consolidation Make Your Healthcare More Expensive

I recently posted on LinkedIn about the flywheel of escalating costs in healthcare. It's a cycle where insurers, providers, and administrative complexity feed off each other, driving prices higher for everyone. One item on my list was vertical integration. I want to dig into that one here because many people don't realize how much of their healthcare is controlled by a single company, and how that impacts what you pay.

What is vertical integration?

Vertical integration means one company owns multiple parts of the healthcare supply chain. Your health insurer might also own the doctors you see, the pharmacy you use, and the company (called a pharmacy benefit manager, or PBM) that decides which drugs are covered and how much you pay for them.

This isn't hypothetical. It's how the largest companies in healthcare operate right now.

Who owns what?

Here are the major players:

UnitedHealth Group is both the largest health insurer in the country and one of the largest employers of physicians through its subsidiary, Optum. Optum employs or is affiliated with roughly 90,000 physicians, approximately 10% of all doctors in the U.S. UnitedHealth also owns OptumRx (a PBM), urgent care clinics, surgery centers, and home health services.

CVS Health owns Aetna (insurance), CVS Caremark (one of the largest PBMs), MinuteClinic and HealthHUB locations, and of course its retail pharmacies.

Cigna owns Express Scripts (a PBM) and Accredo, one of the largest specialty pharmacies in the country.

Elevance Health (formerly Anthem) owns CarelonRx pharmacy and recently acquired Paragon Healthcare, which operates specialty pharmacies and infusion centers.

Three PBMs (CVS Caremark, Express Scripts, and OptumRx) process nearly 80% of all prescriptions in the United States.

When you put it all together, a handful of companies have enormous influence over who provides your care, what drugs you can access, and how much you pay.

Why should this matter to you?

The stated goal of vertical integration is efficiency. By owning multiple parts of the system, these companies say they can coordinate care better, reduce waste, and lower costs. In some cases, that may be true.

But a growing body of research suggests the opposite is happening in important areas.

A 2025 study published in Health Affairs found that UnitedHealthcare pays its own Optum doctors 17% more than it pays outside doctors for the same procedures. In markets where UnitedHealthcare has at least 25% market share, that gap jumps to 61%.

Think about what this means. The insurer's job is to negotiate fair prices on your behalf. But when it owns the doctors, it has a financial incentive to pay them more, not less. Those higher payments get built into the premiums you and your employer pay.

This also creates an uneven playing field. When a large insurer pays its own doctors significantly more than independent practices, it becomes harder for those independent doctors to compete. Over time, that means fewer choices for patients and less competition in the market.

A separate 2026 Health Affairs study looked at what happened after Optum acquired ambulatory surgery centers (ASCs). Prices at those centers rose 11%, driven by higher professional fees for Optum-employed physicians. Across just 24 surgery centers and seven common procedures, that added an estimated $10.1 million in annual spending, with the full impact potentially exceeding $67 million per year.

In January 2025, the FTC released a report finding that the three largest PBMs (CVS Caremark, Express Scripts, and OptumRx) marked up specialty generic drugs by hundreds and sometimes thousands of percent at their own affiliated pharmacies. These are drugs for conditions like cancer and HIV. The total revenue generated above the estimated cost of those drugs exceeded $7.3 billion from 2017 to 2022. PBM-affiliated pharmacies captured 68% of specialty drug dispensing revenue in 2023, up from 54% in 2016.

Over half of America's doctors are now employed by large health systems rather than physician-owned practices. A Harvard Kennedy School study found that vertical integration in medicine is leading to higher costs and, in some cases, worse health outcomes. When doctors become employees of large systems, research suggests it can change how they approach patient care, with financial incentives influencing clinical decisions.

For patients, this often means fewer independent providers to choose from, less price competition, and a system where the same company that insures you also decides your treatment options.

So what does this mean for the flywheel?

My LinkedIn post last week was prompted by a health insurer pointing fingers at providers for rising costs. The implication was: "we're trying, but look at what we're dealing with."

These examples tell a different story. One of the core roles of health insurance is to contain medical costs on behalf of the people it covers. But when the insurer owns the doctors, the pharmacies, and the drug benefit manager, the usual checks on cost don't work the same way. Instead of containing costs, vertical integration in many cases is contributing to the spinning flywheel of rising prices.

This isn't about blaming any single company. The incentives in the system allow it, and in many cases encourage it. But as someone who works with patients every day navigating insurance and billing, I think it's important that people understand the structure of the system they're in so you can ask better questions and advocate more effectively for yourself.