Exploring Power Imbalances in Managed Care

This piece by was originally published in First Report Managed Care

The US health care system is undeniably built around the needs of private insurance companies. The market dominance of a few for-profit companies gives them significant control over health coverage for millions of Americans and substantial influence over the policies that govern health care.

Meanwhile, health care providers are battling significant financial headwinds, including inflation, rising labor and drug costs, staffing shortages, and supply chain disruptions. These challenges are exacerbated by the persistent aggressive practices we see from private insurers.

• Contracted rate increases continue to be below inflation, and the payments often fail to cover the cost of providing care.
• Administrative obstacles to contractually owed payments create additional provider costs — staffing, systems, and the time value of money.

There is little regulatory help. The US lacks significant government regulation of insurers’ behavior. Insurance regulations are a patchwork of state and federal laws, and the insurance industry spends hundreds of millions of dollars on lobbying each year.

In a system where private insurers have nearly unchecked power, health care providers and consumers cannot thrive. In this article, I share 3 predictions for this year and beyond as we work to level the playing field.

Site-neutral payments will expand from Medicare into commercial markets

Site-neutral Medicare legislation garners bipartisan support due to eye-popping projected savings and is often described as a common-sense policy. Proponents argue that a service should cost the same regardless of where it happens. However, there are significant flaws in this argument.

A hospital has higher administrative costs than an ambulatory surgery center or a physician’s office, including complexity of operations, larger volume of patients and staff, and the broader range of services offered that contribute to the higher overhead. Hospitals must stay open 24/7 and treat every person who presents in the emergency room. Other facilities have the luxury of closing or not scheduling treatment.

The American Federation of Hospitals says, “This one-size-fits-all payment ignores the fundamental functional and cost structure differences between hospitals and physician offices – among other settings – and threatens the unique, mission-critical services that communities rely on hospitals to provide 24/7/365.”¹

Private payors are poised to follow CMS’s lead on site neutrality, which will be detrimental to hospitals and health systems struggling to stay financially solvent – something many hospital organizations are all too familiar with. Providers will have to protect their operating budget by increasing payment rates for inpatient services to offset the reduction in outpatient revenue, which will reduce affordable access to care.

Provider consolidation will continue, for better or worse

Economic and regulatory market forces incentivize health care providers to consolidate to remain financially viable and competitive. When large health systems and provider groups consolidate, they can leverage economies of scale to negotiate better payment rates with insurers, manage regulatory burdens, streamline operations, provide integrated care, and invest in costly technology.

The American Hospital Association asserts that data “reinforces the conclusion that hospital acquisitions benefit patients by providing access to higher-quality care at a lower cost.”² It also shows reduced expenses per admission and improved key hospital quality measures.

However, mass consolidation has mixed effects on the market when health insurers get involved, including reduced competition, higher health care costs, and less access to care in some areas. This is because private insurers use vertical mergers and acquisitions (M&A) to expand their control over different parts of the health care value chain, which creates far-reaching consequences for the market.

• Monopoly power: When insurers acquire health care providers or pharmacy benefit managers (PBMs), the number of independent players in the market is reduced.
• Price manipulation: A vertically integrated company can steer patients to its own facilities or services or bundle services together in ways that make it harder for consumers to compare prices or choose more affordable choices.
• Limited provider network: Vertically integrated insurers may require consumers to see their own providers or face out-of-network charges, potentially limiting access to higher-quality care or care from preferred providers.
• Impaired patient-provider relationships: Providers within vertically integrated systems might feel incentivized to meet certain metrics or financial targets, potentially at odds with their patients’ best interests.
• Lobbying power: Due to their large size and market control, vertically integrated insurers may have increased influence over public policy and regulatory decisions. This can lead to regulatory capture, where the corporation’s interests outweigh those of the providers they employ and the members they claim to serve.

Regulators should carefully consider these risks to ensure vertical M&A does not harm the broader health care system or consumer interests. However, it does not appear likely that the second Trump administration will turn a closer regulatory eye to hospital acquisitions.

Payors will continue to add to onerous administrative processes, alienating providers and creating anxiety and care delays.

Common tactics insurers use to control the cost of care and create undue administrative burden on health care providers include:

• Denials: Denial rates are skyrocketing, rising over 20% between 2022 and 2023.
• Prior authorizations: Requiring prior authorization from a payor undermines the expertise of medical professionals and can delay care in ways that cause irreparable harm to patients. In its annual prior authorization survey of 1000 practicing physicians, the AMA found that 94% said prior authorizations delay patients’ access to necessary care, and 19% said delays resulted in a serious adverse event and hospitalization.
• Prepayment reviews (PPR): PPR is another opportunity for insurers to only pay for services they deem justifiable and in compliance with their policies. These services have already taken place, so delaying or refusing payment puts additional financial strain on providers.

Also contributing to the administrative burden is the uneven exchange between timely claim filing requirements and timely payments. Payors rigorously enforce timely claims filing while taking a lax approach to prompt payment laws, which require insurers to pay or deny claims within a specific timeframe. Some payors have a reputation for violating prompt payment laws with impunity for years. Regulators have only recently started to review this problem, but their budgets have been eviscerated.

Many providers are nearing the limit of their administrative workload, impacting the quality of care and the financial sustainability of practices. Reform is needed now to ease the administrative burdens without compromising care standards.

What next?

State regulation of health insurance may have been adequate when it was delivered by hundreds of small, regional carriers. However, the consolidation of the industry under just a few national corporations warrants federal oversight.

We advocate for these regulations as a start:

• Limits on narrow networks that steer utilization to insurer-owned providers
• Requirements for removal of dysfunctional administrative practices, including denials, with penalties for non-compliance
• Equitable treatment for providers and payors regarding consolidated market share

Creating meaningful change at the federal level has been historically difficult. However, regulations are clearly needed to protect the integrity of the health care system and prevent abuses. We must move toward greater transparency, competition, and fairness by balancing the interests of consumers, providers, and payors.

References

1. Emerson J. 20 things to know about site-neutral payment policies. Becker’s Hospital Review. Published May 13, 2024. Accessed October 24, 2025.
2. May S, Noether M, Stearns B. Hospital Merger Benefits: An Econometric Analysis Revisited Executive Summary. AHA. Accessed on October 24, 2025.

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