1. Outpatient Care: Create Economies Of Scale

In the second half of the 20th century, nearly all outpatient medicine was delivered in small, in-person physician offices. That model made sense when physicians treated mostly acute illnesses, spent little time on insurance paperwork and remained personally available by telephone after hours.

Today, medical practice is entirely different.

Instead of treating short-term illnesses, physicians now spend most of their time managing chronic diseases that patients will live with for decades. Instead of writing brief notes and completing simple billing forms, doctors spend up to 20 hours each week on insurance documentation alone (administrative overhead now consumes 20% to 25% of U.S. healthcare spending, or more than $1 trillion annually). And instead of reaching a clinician after hours, most patients now hear recorded messages directing them to the nearest ER (and where they pay 10 times more for problems that could have been treated in a primary care office).

With rising billing complexity, growing documentation burdens and no practical way to share evening or weekend coverage, many physicians have opted to close their small offices. Among the 42% of doctors who remain in private practice, these daily frustrations make it harder to manage chronic disease. As examples, hypertension and diabetes are currently controlled in fewer than half of all U.S. patients. The downstream consequences are tens of thousands of avoidable heart attacks, strokes and kidney failures each year, along with hundreds of billions of dollars in preventable costs.

The answer is economies of scale: physicians joining with colleagues in their community to share staff, technology, office space and after-hours coverage whenever possible. Instead of every office maintaining its own fragmented infrastructure, larger groups of doctors (joining virtually, physically or both) can spread costs efficiently, expand access and lower the per-clinician cost of care.

This shared-practice model makes chronic disease control possible. Home blood pressure cuffs, glucose monitors and wearable devices can collect continuous patient data between visits rather than waiting three or four months for the next office appointment. Generative AI can analyze those data streams and identify when blood pressure remains elevated, blood glucose is uncontrolled or chronic heart failure appears likely to worsen into an acute crisis within the next few days.

In each case, patients can be notified and prompted to contact the physician’s office, allowing doctors to adjust medications quickly.

Alternatively, one or two nurses can monitor patients with chronic disease across the entire medical group, using AI-generated analysis to identify those at greatest risk and intervene before long-term complications occur.

The transition will need to happen gradually. Most physicians remain tied to multi-year leases, so the first step will often be virtual integration rather than immediate physical consolidation. Groups will also need clear agreements about how shared staff will divide responsibilities, from evening coverage to chronic disease monitoring and administrative support.

But the path forward is clear: reduce administrative duplication, centralize chronic disease monitoring and redirect the savings into patient care.

In the outpatient setting, subtraction means giving up dependence on the solo office model in exchange for lower costs, better clinical outcomes and greater physician autonomy when compared to selling a practice to a hospital or healthcare system.

2. Inpatient Care: Segmentation By Severity

For decades, inpatient medicine has operated on two assumptions: that the hospital is always the safest place for sick patients and that everyone entering the emergency department should be treated as an emergency.

At one time, both assumptions made sense. Hospitals offered treatments that patients could not access anywhere else, and most people went to the ER only for true emergencies, usually after speaking with their physician.

Today, remote monitoring, telemedicine and generative AI make it possible to deliver many of those capabilities outside the hospital. And, increasingly, patients go to the ER because they cannot access their doctors, not because the problem is a true emergency.

The answer to both problems is segmentation: sorting patients by clinical severity rather than forcing everyone through the same expensive pathway.

Patients with stroke symptoms, sepsis or chest pain still require the traditional emergency physician-led team. But patients with minor infections, soft-tissue injuries or other low-risk symptoms (typically treated in a clinician’s office) can be safely treated in the ER by a primary care physician supported by a medical assistant.

Creating parallel pathways allows the sickest patients to receive immediate expertise while lower-risk patients get more rapid care. The approach will which reduce waits, clear out crowded waiting rooms and lower costs.

With roughly 155 million ER visits each year, and an estimated 30% manageable through primary care, this redesign alone could save roughly $50 billion annually.

The same principle applies inside the hospital. Because hospital costs account for more than 30% of total healthcare spending, health systems should expand hospital-at-home programs for clinically stable patients who mainly need monitoring. CMS found that patients treated through its Acute Hospital Care at Home initiative had lower mortality than comparable brick-and-mortar inpatients, along with far lower hospital-acquired infection rates and higher patient experience scores.

Using generative AI to provide continuous remote oversight, clinicians in a centralized telemedicine monitoring center would then provide immediate, 24/7 expertise if a problem arose. Applying this model, as many as 20% of current inpatients could safely move into lower-cost home-based care, generating savings that approach $200 million annually.

Adding the pieces together—preventing 10% of heart attacks, strokes and kidney failures, reducing hospital admissions by 20% and redirecting non-emergent ER care—could save half a trillion dollars each year while improving clinical outcomes.

Strategy Isn’t The Hard Part

If U.S. healthcare continues to meet rising demand by adding staff and space, costs will keep rising faster than Americans can afford.

Because hospitals and doctors are reluctant to give up the models of the past. the entities that bear the financial risk (self-funded employers for privately insured patients and CMS for public programs) will need to provide the incentives that accelerate change.

Better outcomes, faster access and greater affordability will not come from preserving outdated models. They will come from replacing what no longer works. As Drucker reminds us, something new requires giving up something old.