I think the core of this idea is excellent, but the main problem I see is that most medical care doesn't come from the hospital, but from a doctor's offices.

It does cut many people out of the loop--you no longer have billing people, no insurance company to pay, and probably you should arrange it so you sign a waiver against lawsuites and then the lawyers are out of the loop. The fewer people in the line, the more you save.

Also, we routinely get routed to specialists for about everything we do--our Primary Care Physician mostly just looks at our family and says "Dermatologist" "Othopedist" or whatever.

You'll either have to pay both the hospital and doctor or come up with a way for them to share the monthly check.

I suppose you could do this with car mechanics, home repair, and many other fields. I'd be interested to see if it works. Has this been tried? It almost has to be better than what we have now.

Basically, this would bypass the insurance company and have the hospital act as the insurer. This might save money by cutting out the middle-man, but then again, it might not. Somebody in the hospital will have to manage the system and will thus become a new middle-man. More importantly, if your insurance payment is only going to one hospital, you might lose the advantages of competition. If the money is distributed between many hospitals and doctors, then it will be little different from the current system.