Vertical Integration in the Colombian Health Sector

Abstract

Vertical integration in the health sector refers to the government structure designed to coordinate and control attention services in the different states of the value chain, and to facilitate the collaboration and communication between the suppliers. In Colombia, the vertical integration allows insurers (EPS) to provide health services directly through their own centers of attention (IPS). This situation has motivated the EPS to create their own IPS and other modalities of vertical integration or control. This article offers a model of double marginalization for only one EPS and one IPS, and concludes that when the insurance company practices vertical control toward the lender, the benefits are larger than in a scheme of independent firms; also, the final price of the integrated scheme is smaller.

Note: Downloadable document is in Spanish.

Keywords: health economics, industrial organization, vertical integration, health care insurance, profits, prices

JEL Classification: I11, L22