The Isabel Menzies Lyth hypothesis posits that the organization of the hospital is constructed so as to defend nurses from their psychotic anxieties. Institutional arrangements allow a “rational madness” which is beyond reform, because reform might lead to a deconstruction of the institutions. I argue, alternatively, that the institution has been organized in the interests of its owners and/or managers, the result of which is to exacerbate nurses’ anxieties. Corporate/Taylorist approaches exacerbate fragmentation and encourage primitive defenses. A non-corporate/Taylorist organization would be conducive to less regressive psychological functioning and would stir up less anxiety, albeit at the expense of corporate-managerial control.