As national and international attention shifts towards improving health system performance efficiencies must be maximised wherever possible. There will be increasing focus on public and private sector escalating health care costs in South Africa with the proposed introduction of a National Health Insurance (NHI) and other health system strengthening initiatives. The intended benefits of NHI will not materialise unless there are significant improvements in health system performance. While previous initiatives to enhance efficiency have addressed important issues such as health worker motivation, remuneration and referral systems, one underutilised mechanism is to ensure that facilities are of optimum size. A common misperception is that a larger hospital is always more efficient as it reaps economies of scale by having, for example, sufficient numbers of patients to fully utilise a CT scanner or other large equipment. We review the evidence about optimal hospital size and discuss its implications for the planned reconstruction of major hospitals, including the Chris Hani Baragwanath Public-Private Partnership and the rebuilding of King Edward VIII Hospital in Durban.