This study applies the theory and the conceptual framework of the soft budget constraint (SBC) to the hospital sector. The first part deals solely with hospitals in state ownership, but the study moves later onto the problems of ownership relations as well. The question posed is why the SBC phenomenon is so general in the hospital sector (including specialist outpatient clinics and diagnostic or nursing establishments that operate as separate units). The study contains several references to Hungarian experience, but the subject is of a more general nature. The SBC phenomenon is not confined to the Hungarian hospital sector, nor to the socialist system, nor as a vestige of socialism during post-socialist transformation. Soft budget constraints inevitably develop in the hospital sector, even in capitalist market economies.