Backward integration is a form of vertical integration that involves the purchase of, or merger with, suppliers up the supply chain. Companies pursue backward integration when it is expected to result in improved efficiency and cost savings.

Backward integration is a step towards, creation of effective supply by entering business of input providers. Strategy employed to expand profits and gain greater control over production of a product whereby a company will purchase or build a business that will increase its own supply capability or lessen its cost of production.  

In case of hospitals there can be number of businesses that can be entered. Following are indicative list of backward integration strategies that hospitals may pursue:

• Drugs and pharmaceuticals – Specific drugs can be manufactured or traded.
• Business of gases required in hospitals – oxygen.
• Pathology labs / diagnostic services. This can be created in-house if not available already. Alternatively, a chain can be started.
• Blood Banks.
• Ambulance services.