“Vertical Integration between Hospitals and Insurers”

The increasing consolidation in the healthcare and insurance market has become a top concern for policymakers and researchers. We study the equilibrium effects of vertical integration between insurers and hospitals. First, we develop an equilibrium model of competition and bargaining between insurers and hospitals. Second, we estimate the model using suitable claims data from Chile, where we observe significant vertical integration between private insurers and hospitals. Using our structural estimates, we find a lower bound of efficiency losses caused by broken vertical relationships that makes prohibiting vertical integration beneficial to consumers.