The last decade has witnessed a number of changes that are bringing about a transformation of the economics and politics of hospital care in the United States. By the beginning of the 1980s the cost of hospital care had escalated to such an extent that both the public and private sectors were driven to initiate cost containment measures. From the hospital's perspective, the Diagnostic Related Groups (DRG) prospective payment system creates two challenges: the need to increase efficiency and the need to reduce service utilization. In the past, the traditional hospital was a community-based, not-for-profit, freestanding facility which for the most part developed in clinical and managerial isolation from other hospitals. Hospitals are establishing affiliations, developing shared services, contract-managing other facilities, and purchasing other hospitals to form multihospital chains. Until recently, hospitals concentrated primarily on providing inpatient care, care which is expensive, relatively inconvenient to obtain, and time-consuming to receive.