Absolutely, a single hospital for an entire country would not work. But also, small clinics on every street corner would not work because none of them would be able to support more complex/expensive functions like surgical wards, FMRI or biochem labs. The hospital needs to be scaled so that it can support those things, but then it only makes sense for it to serve a larger community because it’s going to need a large staff and a substantial budget - so it needs to be at least locally centralized.

As you said, there’s a critical size.