The full-service, general hospital—still the mainstay of US acute-care delivery—is under attack. Immense clinical complexity; the advent of performance transparency for evaluating quality, service, and costs; and growing competitive intensity are challenging the notion that any hospital can excel across a broad spectrum of clinical service lines.¹

Consider a US hospital of average size, with roughly 160 staffed beds and a mean daily patient census of about 100. On any given day, it might admit only a handful of patients with similar conditions. Contrast this with the current crop of sophisticated, focused, multispecialty institutes for heart, cancer, or neurological care: they treat up to several hundred patients each day. “Pure play” specialty hospitals and outpatient centers with low-cost structures, limited complexity, and focused, high-quality service are also emerging. Competitors like these are raising the performance bar for general acute-care hospitals and, in some cases, posing serious questions about their sustainability.

While traditional general hospitals are unlikely to disappear anytime soon, a new approach—a commitment to clinical service lines as an organizing paradigm, much as many corporations organize themselves by business unit—is becoming a necessity for many such organizations.² Specializing in a few service lines allows hospitals to...