A network flow approach to optimizing hospital bed capacity decisions

The delivery of cost-effective and quality hospital-based health care remains an important and ongoing challenge for the American health care industry. Despite numerous advances in medical procedures and technologies, a growing array of outpatient health care options, limits on inpatient reimbursements, and almost two decades of hospital contraction and consolidation, annual inpatient admissions in the United States are currently at levels not seen since the early 1980s. This combination of increased demand and diminished resources makes planning for hospital bed capacity a difficult problem for health care decision makers. We examine this problem by developing a network flow model that incorporates facility performance and budget constraints to determine optimal hospital bed capacity over a finite planning horizon. Under modest assumptions, we demonstrate that for realistic sized capacity planning problems, our network formulation is not computationally intensive, and allows us to obtain optimal bed capacity plans quickly.