The subject of this case is the the Nagoya City East Medical Center’s East City Hospital, made up of a network of five municipal hospitals in Nagoya. All five hospitals were founded as independent hospitals for local residents; however, the hospitals faced a crisis – they could not keep up with the latest medical developments, could not provide adequate structural maintenance, and contented to accumulate large deficits. In order to effectively provide adequate levels of medical service for the population, the city of Nagoya carried out a plan to join the five hospitals into a network and divide specialized functions among them. In 2008, East City Hospital and Moriyama Municipal Hospital were grouped together to form the East Medical Center. The Center’s chief and departmental heads, working within an organization that was unaccustomed to thinking about profits and management, increased the hospital’s quality- and cost-effectiveness by working out a plan to quickly put the hospital back in the black.