When hospital systems buy health insurers

There are several reasons hospitals might want to be in the insurance business, or more closely aligned with insurers. By acting in cooperation, a unified organization might be able to better design incentives for higher-quality care. Or, by combining similar functions like human resources or tech support, the organization might cut costs. A joint provider-insurer may also be better able to adapt to — and make more money from — new Medicare payment models in the Affordable Care Act. Eventually, an organization that combines the functions of health care provision and health care insurance might have a leg up in the market, putting competitors at a disadvantage or driving them out. With less competition, of course, an organization would be in a good position to raise premiums.

Wary of threats to competition and the effects on consumers and patients, health economists and antitrust regulators are watching these market dynamics with a concerned eye.

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