Major organizational changes. During the 1980s, companies learned that bigger is not necessarily better and that vertical integration doesn't guarantee that you can do everything well simultaneously. Focus, we've discovered, is critical. An example is the Shouldice Hospital in Canada, which performs hernia operations exclusively. Its operations are substantially cheaper and higher quality than those in a traditional hospital because it focuses its skills and resources on just one condition.
Hospitals already have lower occupancy due to advances in technology.
Hospitals like to showcase the latest technology to attract patients. There's just too much of it as a result. Now, if that same equipment were used in a focused factory, only equipment relevant to that disease would be purchased, and it would be used efficiently. Indeed, activist American consumers even rebel against perfectly rational HMO tactics like reducing hospital lengths of stay. Your employer will give you the money it now spends on buying your health insurance.