Evidence from Market Trends and Empirical Data
Introduction
Healthcare consolidation has become a defining trend in recent years, with providers increasingly merging with larger health system platforms to achieve scale, efficiency, and market leverage. One question that arises from this trend is whether such mergers lead to increased reimbursement rates or the payments made by insurers to providers for services rendered. This article explores the dynamics behind provider consolidation, its impact on reimbursement rates, and the implications for stakeholders across the healthcare ecosystem.
Market Dynamics and Negotiating Power
When smaller providers join larger platforms, their negotiating power with payers is often enhanced, which can lead to higher prices. These higher prices are enabled by increased market share and bargaining power, which give providers stronger leverage during negotiations with private insurers. [1] This phenomenon is particularly evident in markets with limited competition, where dominant systems can dictate terms more effectively. A review by the Kaiser Family Foundation (KFF) concluded that both horizontal and vertical consolidation increase commercial prices by enhancing providers’ bargaining power. [2]
Beyond negotiating leverage, vertical integration can also lead to site-of-service billing changes. Once acquired by a hospital system, formerly independent practices often bill visits as hospital outpatient department (HOPD) services and add facility fees, and these billing options are not available to independent practices. A study in The Journal of Health Economics identifies these site-of-service shifts as the source of nearly half of the price increases after acquisition. [3]
Evidence from Existing Literature
A substantial body of empirical work shows that hospital integration and hospital acquisition of physician practices consistently increase commercial reimbursement rates. A 2020 study in the American Journal of Managed Care found that hospital mergers result in 6-18% price increases, depending on market concentration.[1] Research from the National Bureau of Economic Research similarly shows that physician group consolidation strengthens providers’ bargaining leverage, leading to higher commercial insurance payments.[4]
More targeted studies on hospital–physician vertical integration reinforce these findings: Capps, Dranove, and Ody (2018) document roughly a 14% price increase after hospitals acquire physician practices, with almost half driven by the shift to billing services as hospital outpatient visits with facility fees. Baker, Bundorf, and Kessler (2014) likewise find that hospital-owned practices are associated with meaningfully higher commercial prices and spending. Government reviews, including the Government Accountability Office’s 2024-2025 synthesis,[5] conclude that hospital-led physician consolidation is consistently associated with higher commercial prices, with little evidence of corresponding improvements in quality.
Our Empirical Findings
We have collected comprehensive publicly available healthcare price transparency data to test these empirical findings and have determined that larger practices do, in fact, receive higher reimbursement rates on average. This conclusion is based on analysis of billions of published price transparency records from major health insurance companies. The dataset represents negotiated prices for all healthcare providers with contractual rate agreements with these payers and is matched with practice-size information from CarePrecise, covering more than 26,000 healthcare providers across the U.S. In total, this integration produced tens of millions of price observations, reflecting multiple payers and procedure codes for each provider.
Our analyses of this combined dataset reveals substantial variation in negotiated rates among providers in general and shows that larger practice sizes are associated with higher average payments. A straightforward Pearson correlation test identifies a statistically significant positive relationship between practice size (measured by the number of physicians) and negotiated prices overall. Evaluating this relationship within individual specialties yields similar patterns.
Regression analyses conducted across specialties indicate a consistent positive association between practice size and reimbursement levels for nearly all specialties, with only a few exceptions that are not statistically significant. In general, as the number of physicians in a provider group increases, the prices they negotiate with payers also tend to rise.
Implications for Stakeholders
For providers, a smaller practice joining a larger platform could result in higher reimbursement rates. However, for payers and employers, these rate increases often translate into higher premiums for employers and their employees and an increase in overall healthcare costs. Policymakers face the challenge of balancing the benefits of consolidation (such as integrated care and operational efficiencies) against the risk of reduced competition, escalating prices, and rising healthcare costs. Regulatory scrutiny, including antitrust enforcement, has intensified in response to these concerns, signaling a need for careful oversight.
Conclusion
The evidence suggests that reimbursement rates generally increase when providers merge with larger platforms, driven by enhanced negotiating power and market influence. While this trend can yield benefits for providers, it poses cost implications for payers, employers, and patients. As consolidation continues to reshape the healthcare landscape, stakeholders must navigate the complex interplay between efficiency, access, and affordability.
References
[1] Health Affairs (2018). Provider Consolidation and Its Impact on Prices.American Journal of Managed Care (2020). Hospital Mergers and Price Effects.
[2] Kaiser Family Foundation. (2020). What we know about provider consolidation.
[3] Capps, C., Dranove, D., & Ody, C. (2018). The effect of hospital acquisitions of physician practices on prices and spending. Journal of Health Economics, 59, 139–152.
[4] National Bureau of Economic Research (2019). Physician Group Consolidation and Payment Rates.
[5] Government Accountability Office. (2025). Physician Practice Consolidation: Recent Trends and Effects on Prices, Spending, and Quality.
© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
