The Market Forces Quietly Adding Thousands to Patient Bills

After a failed round of in vitro fertilization this year, Anne Hug’s fertility doctor said she had a single polyp in her uterus that should be removed to improve the chance of pregnancy. Hug, a professor of radiology, learned that the American College of Obstetricians and Gynecologists says the procedure can be done in a doctor’s office with local numbing.

Her doctor referred her to a physician at the same hospital, which is part of a large Ohio health system. That doctor’s plan was to do the procedure in a hospital operating room, with anesthesia administered by an anesthesiologist.

Hug balked at the $18,000 estimate.

So she found an obstetrician who said he would do it in the doctor’s office. And she took the required two-week course of a hormone in preparation.

But the day before the polyp removal, the doctor’s office called to say, sorry, but he had to do it in a freestanding surgery center owned by the same system. The health system had bought the OB-GYN practice in 2025, so it called the shots. The next day, Hug recalled, “I’m in a venue I didn’t need or use, with surgical techs and OR nurses running around.”

Though she was scheduled for anesthesia or sedation, she wanted none of it. The doctor numbed the cervix and removed the polyp in a few minutes, with “a few seconds of cramping,” she said. Hug remembers watching pictures of the polyp removal and “talking to the OR crew about snorkeling.”

The estimate for the in-office procedure was around $3,000. The bill when she was forced at the last minute to switch to the surgery center was around $6,000. She now wonders, “How is it legal for these hospitals to force patients to have procedures done in a hospital when professional organizations recommend differently?”

Hug’s experience is a classic example of the predicted outcome of “vertical integration” in the healthcare system, when one company owns or controls multiple parts of a supply chain and can therefore direct patients to more expensive treatment options.

KFF Health News agreed not to publish some identifying details about Hug and her healthcare providers, to protect her patient privacy and ongoing relationship with the hospital system.

In any case, such healthcare integration is occurring at a breakneck pace all across the nation, with endless permutations: Hospitals are buying doctors’ practices and surgery and imaging centers. Insurers are buying doctors’ practices and specialty pharmacies and sometimes merging with pharmacy chains. Hospitals are buying or creating insurers. Private equity firms are behind many of the deals, buying practices, reorganizing operations, paring costs, then selling at a profit in a few years to a hospital or insurer higher up the healthcare food chain.

And while the stated purpose is generally greater efficiency, studies have shown that for patients the net result has been higher prices and no benefit, or worse health outcomes. That’s in part because the purchases have been driven by financial efficiency, not more seamless and attentive care, said Soroush Saghafian, an associate professor at Harvard University’s Belfer Center for Science and International Affairs. What’s more, these transactions occur in a gray zone of competition law, and regulators’ tools to examine or stop them are plodding and not up to the task.

“Antitrust laws aren’t fit for purpose at this point, and the agencies that enforce them are under-resourced,” said Zack Cooper, an associate professor of public health and economics at Yale University who has sounded the alarm about the trend. The tools at the agencies’ disposal are limited — warning letters, lawsuits, and consent decrees modifying the terms of a merger to restore competition — and often slow to get results. Meanwhile, the dealmaking is galloping ahead.

Patients like Hug are often directed to a higher-priced location for procedures. They are effectively required to buy from their insurers’ specialty or retail pharmacy, which may not stock the drug the doctor prescribes or provide it at the lowest price.

The Federal Trade Commission and the Justice Department together police mergers in healthcare to protect competition and patient choice. Generally, the FTC oversees hospitals and doctors, while the Justice Department scrutinizes insurers, though their territories overlap and there are gaps. Middlemen like pharmacy benefit managers fall somewhere in between, though in recent years the FTC has taken the lead in this arena. But federal regulators are playing a tough game of catch-up.

Industry Shift

Over the past decade, the number of doctors working for hospitals rather than in private practice has more than doubled. Today 82% of physicians are employed by hospitals, other corporate entities (like insurers), or private equity firms. For example, UnitedHealth Group’s then-CEO said in 2024 that it employed around 10,000 primary care physicians. That did not include UnitedHealth’s 80,000 “affiliated” physicians.

Many of these vertical transactions are too small for the regulatory agencies to spot. Under the 1976 Hart-Scott-Rodino Act, mergers valued over a certain dollar threshold set annually — this year it’s $133.9 million — must be reported for antitrust scrutiny. Many hospital mergers or insurer mergers exceed the threshold. But mergers involving doctors’ practices often do not, leading to consolidation and monopoly by slow accretion.

Cooper and his group, the Health Care Affordability Lab, studied hospital acquisitions of physician practices and found that over 99% of the more than 275 deals examined fell below the reporting threshold. “I’m really struggling with this,” Cooper said. “What you’re talking about is sort of like death by a thousand paper cuts.”

The FTC has brought eight actions or suits against healthcare mergers and acquisitions in President Donald Trump’s second term. “The FTC has made healthcare competition one of our top priorities,” said Daniel Guarnera, director of the FTC’s Bureau of Competition. Nonetheless, he said the agency relied on complaints and news reports to learn about smaller mergers.

The Justice Department has brought only two cases, both challenging hospital-insurer contracts rather than mergers. It has also settled a suit brought by the Biden administration that sought to block UnitedHealth’s $3.3 billion acquisition of Amedisys, a home healthcare agency. The 2025 settlement required the divestiture of 164 home health and hospice locations across 19 states.

After KFF Health News requested an interview, the department’s press office replied in an unsigned email: “You’ve emailed the Department of Justice. Please reach out to FTC’s media team to set up an interview.” Further requests went unanswered.

Guarnera, at the FTC, noted that the agencies’ task is to enforce regulations, limiting the challenges they can bring.

“Some of the market distortion is caused by regulations that have anticompetitive effects,” he said.

For example, countless health policy experts have proposed regulations mandating “site-neutral payment,” a system in which providers would get the same amount for a procedure no matter where it was performed. That would prevent predicaments like Hug’s, in which a vertically integrated system effectively backs doctors into directing patients to a more expensive venue for treatment.

Within the government, the FTC has advocated for new pro-competitive regulations, suggestions that are now under review by the White House’s Office of Management and Budget. They are not public, and Guarnera wouldn’t say whether site-neutral payment is included. Meanwhile, the Trump administration in July proposed instituting site-neutral payments for some services for Medicare beneficiaries.

The economic theory adjudicating the pros and cons of vertical integration is “nuanced,” Cooper said.

It is far easier to assess the effects of horizontal integration — when a hospital merges with a hospital or an insurer with an insurer — on patient care and cost. If two hospitals merge and become the only care provider in town, that leaves patients with less choice and can make it easier for the new monopoly to skimp on care and raise prices. There is no way “to walk with your feet” to another hospital system for care, Cooper said.

But with vertical integration, for example, a hospital merger with an insurer and doctors’ practices could in theory diminish friction, compared with a disaggregated system in which every bill is haggled over by different sectors trying to maximize their piece of the pie. Some successful and popular hospital-insurer combinations, such as Kaiser Permanente, are vertically integrated. So merely taking a “sledgehammer” to such mergers could backfire, Cooper said.

But with money on the table and business interests governing healthcare, studies have shown that cons of vertical integration — opportunities for gaming away those beneficial arrangements and raising revenue — prevail.

When Harvard researchers sought to assess the effect of hospital purchases of gastroenterology physician groups on colonoscopy care, the negative impact was clear. “It changed the way they did business,” said Saghafian, the paper’s main author.

All told, quality went down and prices as well as complication rates rose. “What improves is ‘operational throughput,’” or the efficiency with which the system could move patients through colonoscopies fastest with the least staff involvement, Saghafian said. “That’s a financial metric.”

‘It Feels Like Double-Dipping’

While health economists are studying the impacts to help regulators figure out when to act, the horse is out of the barn. All the biggest health insurers have already merged with pharmacy benefit managers, specialty and commercial pharmacies, as well as new lines of businesses that insurers require members to use to manage copay assistance from pharmaceutical companies. For example:

CVS acquired Aetna in 2018, meaning Aetna subscribers are directed to the CVS Specialty pharmacy through Caremark, its pharmacy benefit manager.

Cigna owns Accredo (a specialty pharmacy), Express Scripts (a pharmacy benefit manager), and EviCore (which does preauthorization for prescription requests).

UnitedHealth includes Optum Rx (a pharmacy benefit manager), Optum Specialty Pharmacy, and Optum Infusion Pharmacy.

So when patients change insurers, their steady access to longtime drugs at a predictable price can go out the door.

In Florida, Ari H.’s family uses three high-priced specialty drugs for chronic conditions. All three had long been subsidized by patient assistance programs from their manufacturers. KFF Health News agreed to only partially identify him, because he works for a government contractor where policy has become political and he fears retaliation.

Signing up for a $3,000-deductible plan with a new insurer, Aetna, put a new strain on his family’s finances. On his new plan, he was signed up for all Aetna’s pharmacy-related products, too. He could not choose to order elsewhere. Most importantly, his old insurance counted the copay assistance money toward his deductible, but his new insurer did not, scooping up his patient assistance money from pharmaceutical firms.

“I pay substantial premiums, and I pay my deductible and my out-of-pocket maximum — that’s all paid by me,” Ari H. said. “But now all the copay assistance goes back to them. It feels like double-dipping.”

Ethan Slavin, an Aetna spokesperson, said the company “is committed to helping members choose and use health plans that best meet their health, financial, and lifestyle needs.” He added that the insurer offers “supports that may lower out-of-pocket expenses.”

Ari H. is right, said Mark Cuban, the billionaire investor who in 2022 launched the Cost Plus Drugs site, which sells mostly generic drugs to cash-paying patients at a discount — often for less than what they would pay using insurance. “It’s crazy stuff,” he said of vertical integration. “The right pocket gives to the left pocket.”

In July the FTC reached a settlement in a suit against Caremark, requiring it to be more transparent and give patients and pharmacies more choice. It had previously reached such an agreement with Express Scripts and is working on one with Optum.

Academics like Cooper are trying to help clarify “which of these vertical deals are bad.” A clearer economic theory, he said, might help regulators make the patient experience just “a little less worse.”

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.This article first appeared on KFF Health News and is republished here under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.