Toolkit: Health Care Consolidation

Published: 1/29/2026 

The increasing number of mergers, acquisitions, and buyouts in health care raises concerns about the influence of corporate interests on the practice of medicine. ACP has long asserted that lawmakers and regulators must scrutinize all proposed mergers, acquisitions, and buyouts in advance to evaluate their impact on market competition, pricing, and the communities served. ACP has also called for greater research on corporate influence in medicine, regulatory reforms that align financial incentives with high-quality delivery, and enhanced transparency of financial conflicts of interest among health care entities.    

ACP has called for greater research on corporate influence in medicine, regulatory reforms that align financial incentives with high-quality delivery, and enhanced transparency of financial conflicts of interest among health care entities including the long-term services and supports sector. ACP has also developed ethical and professional recommendations regarding physician employment and health care sector business practices. Notably, ACP recommends that "ethics and professionalism must be emphasized and explicitly addressed in the implementation of business practices and employment relationships, including in the face of external motivators for clinicians, such as financial incentives."   

Background

Health care consolidation has steadily increased in the United States over the past three decades. As of 2023, approximately 77% of physicians were employed by hospitals, health systems, or other corporate entities, a sharp rise from 42% in 2012. Hospital systems have grown increasingly concentrated, with single systems responsible for the majority of discharges in many markets and large systems controlling roughly one in five acute care hospital beds nationwide. While proponents argue that consolidation improves efficiency and expands services, evidence suggests that it often leads to higher prices without compensating quality improvements. In fact, a 2022 review conducted by the RAND Corporation found that hospital mergers were associated with a 3 to 65 percent increase in hospital service prices and the majority of studies reviewed found either no change or worse quality of care outcomes post consolidation.

The rise in prices post consolidation can be explained by greater negotiating power by consolidated health care groups against regional insurers which allows greater payment rates to be negotiated which drives up prices that groups can charge to patients and other insurers. In theory, insurers could deny the higher negotiated rates, but if consolidated groups make up a large share of the health care market (e.g., 80% of physicians work for a single health system in a given city) then insurers may not be able to offer their members access to most available health services in their area, causing significant frustration. Laws exist to discourage this kind of behavior but often times it’s not clear if a business has violated the law or enforcement against an infraction is slow and can ultimately prove ineffective. Some argue that the commercial landscape needs to be changed to encourage smaller health care groups to enter the market and compete against larger health care groups for business, but legal, regulatory, and financial obstacles (“barriers to entry”) exist that bar smaller competitors from establishing themselves and competing on quality and efficiency against larger competitors. Some examples of barriers to entry include:

  • Licensure requirements: Valid state medical license(s); DEA registration for drug prescribing.
  • Ancillary services: Compliance with federal laws that heavily scrutinize joint ownership of and physician referrals for ancillary services (e.g., lab tests, imaging).
  • Privacy compliance: Compliance with HIPAA and information handling practices which may require investments in EHRs, staff training, and risk management protocols.
  • Startup costs: Office lease/purchase, exam room furnishing, billing software, malpractice insurance, etc.
  • Insurer negotiation: Less favorable negotiating power relative to larger competitors; may have to accept lower rates until negotiating power improves.
  • Staffing: Wages and benefit packages will need to be competitive to obtain qualified, efficient, and reliable personnel to perform daily office operations.
  • Marketing: Larger competitors will probably have greater visibility in an area for potential consumers, which will need to be accounted for when building new patient panels.

These barriers illustrate how challenging it can be for new or smaller health care groups to survive in a market dominated by larger consolidated systems. Simultaneously, they also show why many physicians are increasingly choosing to work for larger organizations instead of pursuing independent practice, because of the larger costs involved in such an endeavor. A positive reinforcement cycle therefore emerges: physicians choose to practice for larger consolidated groups, smaller or independent groups become less common, consolidated groups gain larger negotiating power, prices and costs for health care services increases, physicians choose to practice for larger consolidated groups. What is being done to counter these practices is the subject of the following sections listed below.

Federal Activity

Authorities at the federal and state levels regulate and monitor health care activity for anticompetitive practices and violations of antitrust laws regularly. At the federal level, the Sherman Act, the Clayton Act, and the Federal Trade Commission Act prohibit practices such as price-fixing, bid-rigging, market-allocation agreements, and monopolization. State antitrust laws often mirror federal statutes but may go further in targeting conduct that threatens local competition. Enforcement is led by the Federal Trade Commission (FTC) and Department of Justice (DOJ) at the federal level, and by Attorneys General at the state level.

Between 2000 and 2020, antitrust agencies challenged only 2–3% of all mergers in the U.S. across all industries, raising concerns about underenforcement and under-resourcing. Many transactions escape scrutiny altogether as they fall below the Hart-Scott-Rodino (HSR) Act’s reporting threshold of $111.4 million. This is especially relevant for health care mergers driven by private equity, which often go unreviewed. A series of small acquisitions, each below the threshold, can cumulatively lead to significant consolidation without triggering review. The result is a growth in unchecked anticompetitive activities. Agencies have, however, taken enforcement actions—such as the DOJ’s 2024 lawsuit to block UnitedHealth Group’s proposed acquisition of Amedisys, which the agency argued would significantly harm competition in the home health care market.

The Trump administration has largely continued the antitrust policies established under previous administrations. In early 2025, it affirmed its intent to maintain the existing merger guidelines, which were developed during the Biden administration to provide a framework for assessing anticompetitive mergers. Preserving these guidelines has helped maintain consistency and stability in enforcement. In March 2025, the FTC filed a complaint to block a private equity firm from acquiring the second-largest medical device coating manufacturer, which had already acquired the largest in 2022. The FTC argued that this action would harm competition by consolidating the two largest competitors in the medical device coating market.

However, recent leadership changes have complicated enforcement. On April 1, the FTC’s General Counsel issued a stay on a lawsuit against the three largest Pharmacy Benefit Managers (PBMs)—Caremark RX, Express Scripts, and OptumRx—following dismissal of the two Democratic commissioners by the President. The motion effectively stopped the progress of the lawsuit and left the future of the case uncertain. As of July 7, the motion to stay the case has not been lifted.

Historically, state antitrust enforcement has taken a backseat to federal action, but state Attorneys General have recently increased case filings before federal agencies targeting pharmaceutical companies for alleged price-fixing. In 2017, four states and the District of Columbia sued multiple drug manufacturers for allegedly conspiring to fix generic drug prices. That case eventually expanded to include 45 states.

State Activity 

States have become increasingly active in countering consolidation, especially amidst a growing number of consumer complaints. Several have focused on PBMs for potentially anticompetitive behavior. In April, Arkansas enacted a first-of-its-kind law prohibiting PBMs from directly or indirectly owning pharmacies, aiming to prevent vertical integration in the local pharmaceutical market that could harm competition. Other states have countered consolidation by expanding regulatory authority over mergers and acquisitions. For example, California is considering lowering its legal threshold for challenging mergers to capture a broader range of deals, and New York is evaluating similar changes, seeking to increase the Attorney General’s power to better monitor conduct in the local markets. States are also passing premerger notification laws requiring health care entities to report transactions even if those transactions typically fall below federal reporting thresholds.  These measures would ensure that smaller transactions receive attention and undergo review for harmful market implications. 

ACP Resources

References