In healthcare, size used to signal strength. Bigger meant more services, more specialists, more veritas. But what if all that bulk is actually a liability?
Hospitals have gorged on acquisitions—buying up physician practices, merging with competitors, and adding layers of complexity. But when you stuff too much into a system, it doesn’t become more resilient—it becomes more brittle. Think of it like a massive Jenga tower: the taller it gets, the more dramatic the fall.
The modern hospital, often rebranded as a health system, is now flogged as everything to everyone—primary care hub, surgical facility, post-acute care provider, community safety net, and even, I kid you not, as a community gym. That’s an impossible business model.
And when things start to crack (as they are with declining reimbursements, rising operating costs, and competition from nimbler alternatives), it’s not just one service line that suffers—the whole structure starts to tremble and often tumbles, putting healthcare delivery at risk.
We saw this in the ‘90s with hospital mergers that looked good on paper but collapsed under their own weight. It’s worse now. Today’s hospitals aren’t just merging—they’re absorbing entire physician workforces, multiplying their exposure and overhead.
At the same time, patient safety, convenience, pricing, and physicians’ ability to participate in ownership, has pushed outpatient surgery into the ASC setting and outpatient imaging into freestanding imaging centers. Pricing and payors are pushing other services out as well, such as diagnostic tests for anyone other than an inpatient.
Those invested in hospital centricity need to come to grip with the reality that the healthcare world doesn’t center around them. The issue has become function, not location.
Note that I’m not saying that hospitals will never have, or rather be, a place for the delivery of healthcare. Some patients will still require centralized care, as in the hospital building. In one form or another, teaching hospitals will continue as training sites for physicians. True charity care hospitals, as opposed to simply non-tax paying ones, will continue to care for the poor.
In the end, the object of a hospital is to care for patients’ well-being, not to care for the financial well-being of the hospital itself.
In addition to the economic risk facing hospitals, physicians need to carefully consider the economic risk of overly tight alignment with hospitals. Physicians flocking to hospital employment need to be aware that there is likely less security there than outside of it. Physician groups contracted to a single hospital, or even to a single hospital system, need to question how secure their business model really is.
So no, bigger isn’t always better. In fact, in the hospital world, it may be the biggest risk of all.
For more on this, click on the image below and obtain a complementary download of the book, The Impending Death of Hospitals.
