The $265 Billion Migration — Why Hospitals Are Becoming Irrelevant

Hamza Asumah, MD, MBA, MPH

The hospital as we know it is dying. Not immediately. Not completely. But inevitably.

And the smart money is already moving to where care is actually going: everywhere else.

The Great Unbundling

For over a century, the hospital was the undisputed center of healthcare gravity. Surgery? Hospital. Serious infection? Hospital. Complex care? Hospital.

That monopoly is over.

Today, 60% of procedures that once required hospital admission are performed in outpatient settings, according to the Kaiser Family Foundation. Joint replacements. Cataract surgeries. Cardiac catheterizations. Even some cancer treatments.

What changed? Technology improved—anesthesia became safer, surgical techniques became less invasive, recovery protocols accelerated. Patients can now go home the same day instead of staying 3-4 nights in a hospital bed.

But the bigger force is pure economics.

The Math That’s Killing Hospitals

Hospitals are extraordinarily expensive to operate. Fixed costs are massive: buildings, beds, 24/7 staffing, food service, janitorial, security, emergency departments. The overhead is crushing.

Outpatient surgical centers are lean. Smaller footprint. Fewer staff. No overnight stays. No emergency department unpredictability. They can focus on high-volume, high-margin procedures without the cost burden of complex inpatient care.

The margin differential is stunning: outpatient surgical centers achieve 20-30% higher margins than hospitals performing the same procedures.

Payers love this. If they can pay for a knee replacement at an outpatient center instead of a hospital, they save 30-40% on total cost. So they’re actively steering patients to outpatient settings through lower copays, better access, and financial incentives.

It’s a win for everyone—except traditional hospitals.

The Hospital-at-Home Revolution

But here’s where it gets truly disruptive: care isn’t just moving to outpatient centers. It’s moving all the way to patients’ homes.

Hospital-at-home programs deliver acute-level care in your bedroom instead of a hospital room. A care team brings IV medications, monitoring equipment, labs, even portable imaging. A nurse visits 1-2 times daily. A physician checks in virtually. You recover in your own bed.

This isn’t for everything—you can’t perform open-heart surgery at home. But pneumonia, heart failure exacerbations, cellulitis, post-surgical recovery? Absolutely.

And the outcomes are remarkable:

• Patients report higher satisfaction
• Better sleep in familiar environments
• Lower risk of hospital-acquired infections
• Reduced readmission rates
• 30-40% lower cost than traditional hospitalization

McKinsey projects that $265 billion worth of hospital services will migrate to home-based care by 2028. That’s not a forecast—that’s already in motion.

The Mayo Clinic’s hospital-at-home program costs 38% less than traditional inpatient care with equal or superior clinical outcomes. When economics and quality align, change accelerates rapidly.

The Real Estate Reckoning

This migration creates a massive real estate problem for traditional hospitals.

Hospital buildings are designed for inpatient care: large patient towers, centralized nursing stations, shared diagnostic facilities. These assets become liabilities when care volume shifts outward.

You can’t easily convert a 500-bed hospital tower into something else. The fixed costs remain while revenue evaporates.

Meanwhile, healthcare real estate demand is exploding for:

• Distributed outpatient surgery centers
• Urgent care clinics
• Diagnostic imaging centers
• Micro-hospitals (8-15 beds for short-stay observation)
• Infusion centers and recovery facilities

Developers and REITs are responding. But traditional hospital systems clinging to the old model face declining asset values and stranded capital.

The Winners and Losers

This isn’t uniform disruption. There will be clear winners and losers.

Winners:

• Health systems that decentralize early—building distributed networks of outpatient facilities, launching hospital-at-home programs, and shifting fixed costs to variable costs
• Private equity-backed surgery center chains capturing high-margin procedural volume
• Virtual care platforms enabling hospital-level monitoring at home
• Retailers like Amazon and CVS building distributed care networks in convenient locations

Losers:

• Hospital systems that cling to the traditional inpatient model
• Organizations with massive debt on aging inpatient infrastructure
• Rural hospitals already struggling with low volume—they’ll face accelerated closure risk

The Inevitable Future

Let’s be clear: hospitals won’t disappear. There will always be a need for trauma centers, complex surgeries, intensive care units, and emergency departments.

But the hospital’s role is shrinking from “center of all healthcare” to “specialized facility for the most complex cases.”

The economic center of healthcare is moving outward—to surgery centers, clinics, and homes. The margins are better. The patient experience is better. The cost structure is sustainable.

Health systems that recognize this early and restructure accordingly will own the next profit curve. Those that don’t will be stuck with expensive, underutilized buildings and unsustainable economics.

The question isn’t whether this will happen. The question is whether you’ll lead the migration or be displaced by it.