Today, consolidation in the hospital industry is recognized by some as a problem, a source of higher prices. One hundred years ago hospitals had the opposite consolidation problem, not enough of it. Ethnic and religious heterogeneity in 19th century America, among other factors, led to a multitude of hospitals, in part to serve patients of different ethnicities and religions, but also to benefit physicians. Jewish, Catholic, and black doctors ran their own institutions, segregated at the expense of efficient levels of capacity.
From page 176 of Paul Starr’s The Social Transformation of American Medicine:
That there were too many small hospitals in American was a complaint already being heard soon after 1900, and it became a steady part of criticism of the hospital system. “If many hospitals in each city could pool their interests,” wrote a hospital superintendent in 1911, “the result would be greater efficiency and greater economy–and yet nothing is more unlikely than that independent, privately controlled hospitals will pool interests.” Especially after the Depression began in 1929, private hospitals faced serious underutilization. A medical school professor in 1937, noting the large number of hospitals in debt running at 50 percent capacity, suggested that their financial troubles could be alleviated if some hospitals closed, raising the occupancy rates of the rest to 75 or 80 percent. “The trouble, of course, is that the hospitals are sectarian, or partially endowed, or are run for the individual benefit of some surgeon or staff.”