An excerpt from America’s Wrong Turn: US Health Care in the Neoliberal Era.

Let’s consider U.S. corporate consolidation and antitrust policy in the context of health and medical care sectors. Concentration, mergers, and acquisitions are vital parts of corporate strategy among all forms of health and medical firms, a phenomenon at every stage and level across our dizzyingly complex system. In this section, we examine insurers, hospitals, physicians, pharmaceuticals, and their combinations because they all have such outsized impact on system costs. For starters: “America’s health care crisis is brought to you by monopoly,” says Open Markets policy director Phil Longman.

A few terms need definition. The Herfindahl-Hirschman Index (HHI) is the standard measure of any industry’s concentration, calculated by the sum of each firm’s squared market share. A market with an HHI less than 1,500 is considered competitive, while 1,500 to 2,500 is moderately concentrated, and 2,500 or greater is highly concentrated. Just remember 1,500 and 2,500 and you’re in good shape. Horizontal integration involves the acquisition of businesses at the same value-chain level, such as all acute-care hospitals or nursing homes in a given region. Vertical integration happens when firms expand upstream or downstream at different production stages, such as an insurance company that owns medical care practices, a pharmacy benefit manager, a health data assembler, etc. Cross-market integration results when two providers operating in different geographic markets choose to consolidate, such as acute care hospitals in Montana and Colorado. Traditional antitrust enforcement only addressed horizontal integration and now pays increasing attention to vertical and cross-market kinds as they both proliferate. In today’s world, many large companies involve two or all three integration forms simultaneously.

In June 2019, the Open Markets Institute issued America’s Concentration Crisis, with detailed data on consolidation across “a broad range of healthcare-related markets, from syringes to medical patient financing.” Here are data on several medical industries using 2017 overall sector revenues and market shares of the two largest companies within each:

• Dialysis centers: $24.4 billion in revenue, 92 percent market share.
• IV solutions: $1.5 billion in revenue, 75 percent market share.
• Syringe manufacturers: $3.8 billion in revenue, 69 percent market share.
• Orthopedic product manufacturing: $10.6 billion in revenue, 47 percent market share.

Beyond these examples, corporate concentration and consolidation are evident in nearly every part of U.S. medical care including pharmacy benefit managers, home health care and hospice care providers, medical device distributors, clinical and diagnostic labs, behavioral health and substance use treatment providers, to name only a few.

Let’s take in the big view: The U.S. health and medical care marketplace, collectively and by sector, is heavily concentrated, consolidated, monopolized, and/or oligopolized. This reality has gathered momentum for decades and touches nearly every geographic region in the nation. It is more than disturbing and may just be the biggest impediment to national health and medical care reform that we face.

U.S. data show that nearly fully 90 percent of hospital markets and 65 percent of physician specialist markets were highly concentrated in 2019. In health insurance markets, based on Department of Justice/Federal Trade Commission (DOJ/FTC) horizontal merger guidelines, up to 74 percent of such markets were highly concentrated (HHI>2500) in 2020; the average market was highly concentrated with a 3,473 HHI. Other findings show that in 92 percent of Metropolitan Statistical Area markets (MSAs), at least one insurer had a commercial market share of 30 percent or greater, and in 48 percent of markets, a single insurer’s share was at least 50 percent. This is excessive concentration.

In 2012, researchers Martin Gaynor and Robert Town estimated that hospital sector HHIs in metropolitan areas with populations under 3 million grew from an average of 2,340 in 1987 to 3,261 in 2006. In 2017, hospital market researcher Brent Fulton found that the average HHI across 382 hospital markets covering 86 percent of the U.S. population rose from 5,500 in 2010 to 5,800 in 2016. The U.S. Medicare Payment Advisory Commission (MedPAC) considers a market “super-concentrated” when one hospital accounts for at least 50 percent of discharges, and estimates that the share of super-concentrated hospital markets increased from 47 to 57 percent from 2003 to 2016. “Nearly every metropolitan area has its own giant health care systems; we call them megaproviders,” noted Dranove and Burns in their 2021 book Big Med. However one looks at the data, concentration levels are excessively high nearly everywhere in U.S. medical and health care systems, and the levels keep increasing.

We also now witness a small set of vertically integrated mega-corporations with unprecedented impact and power in American medical care. The two leading examples of this were numbers 5 and 6 on the 2023 list of Fortune magazine’s 100 highest ranked companies: UnitedHealth Group (UHG) and CVS. From a claims processing operation in Hennepin County, Minnesota, in 1974, UHG now owns two major subsidiaries, UnitedHealth and Optum; the latter includes OptumHealth (physicians and care-delivery networks), OptumRX (the nation’s third largest pharmacy-benefits manager), OptumInsight (data analytics, technology, operations services), and Change Healthcare (a medical-claims clearinghouse). In 2023, UnitedHealth Group reported net income of over $23 billion.

CVS Health began in 1963 as a retail goods and pharmacy chain. It now includes the health insurance giant Aetna (purchased in 2018), the largest pharmacy benefit manager called CVS Caremark, and medical-care practice through its MinuteClinic and other chains. CVS Health reported 2023 profits at $8.3 billion. In 2024, it experienced destabilization in several of its units though it continues to be the second largest U.S. health care company.

The emergence of huge and powerful vertically integrated health and medical care companies has signaled a new force in the U.S. system with unprecedented pools of money for all purposes including consolidation and concentration, as well as lobbying and political action. The opportunities for gaming and manipulation among the component parts create new degrees of policy concern. For example, an Affordable Care Act (ACA) policy that requires insurance companies to spend at least 80 to 85 percent of revenues on patient care has been undermined and manipulated by United’s ownership of physician and clinical practice groups.

John E. McDonough is a public health professor.