The money spent on the ships* could not be double-spent on hospitals. The workers whose manual labour was dedicated to those later ships could not be simultaneously dedicated to more hospitals. The crew of a battleship cannot be simultaneously working in a hospital, the maintenance teams repairing it cannot be simultaneously repairing a hospital.

Every resource-management game demonstrates this principle, even if they're all gross simplifications.

* Wikipedia says Kaiser's ships were cargo and transport, not battleships, which means they had the potential to be a net positive on the economy. This is better than a battleship, because domestic military gear can't be a net positive: the point is to keep matériel and personnel around to deter enemies, and only use them for training and when enemies aren't deterred.