The idea of creating public organisations to improve the efficiency of the relatively backward governmental department management system emerged after the Asian Financial Crisis of 1997.

[2] After the enactment of the 8th National Social and Economic Development Plan devised by prime minister Chavalit Yongchayudh's cabinet, the MOPH reached out to the Asian Development Bank (ADB) to help revolutionize the operations of hospitals in the country and it was suggested that hospitals should be converted into public organisations to allow greater freedom of management as opposed to the traditional top-down approach.

[3][4] In 1998, a research project partly funded by the ADB encouraged a shift of hospital operations towards public organisations, coining the term "autonomous hospitals" to avoid being considered as corporations.

[5] Seven hospitals were listed by the MOPH to be potential candidates for this shift: Out of the seven hospitals, Banphaeo was considered the most prepared in terms of local community support and willingness to change.

It has since expanded to a capacity of 323 beds and also operates a number of smaller clinics in the Bangkok Metropolitan Region.