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Supply & Demand

Does U.S. Hospital Capacity Need To Be Expanded?

Abstract

 
Some industry experts believe that U.S. hospital capacity—especially emergency and inpatient services—is being stretched to its limits. Using data from the Community Tracking Study, this paper examines constrained hospital services, contributing factors, and hospitals’ responses. Most hospitals studied had emergency capacity problems, but problems in other service areas were limited to only a few hospitals. Hospitals have added or converted capacity, improved capacity management, dealt with nursing shortages, and worked with public officials to reduce emergency department diversions. Although additional capacity might be needed in some markets, better management of existing resources could be a more effective solution.

These issues have generated discussion in public and private policy circles largely because of impending demographic changes as the baby-boom generation enters retirement and needs more health care. Should the United States now be considering increased investment in hospital capacity? The Health Care Advisory Board recently suggested that based on a moderate-growth scenario, hospital in-patient days will rise 3.5 percent each year through 2010, which implies the need to increase inpatient bed capacity by 40 percent.⁴ Also, a 2003 study of the Chicago health market, commissioned by its local hospital association, suggested that 4,500 more beds (approximately a 20 percent increase) would be needed there by 2020.⁵ Before such drastic moves are made—representing a clear departure from two decades of efforts to encourage reductions in costly and underused hospital capacity—there is a need to study what types of capacity constraints exist, what might be causing these problems, and some alternative responses.⁶

This paper provides new insights into these areas based on Round Four of the Community Tracking Study (CTS), conducted by the Center for Studying Health System Change. The CTS study sites encompass diverse U.S. markets and hospitals, and because the Round Four site visits were conducted in 2002 and 2003, they offer timely new insights on a contemporary health care problem. Although in a perfect world we could quantitatively measure hospital capacity and its use in several service lines to assess potential capacity problems, the reality is that existing national data sources provide only general, institutionwide information and are at least two years old.

We begin with a discussion of historical trends in U.S. community hospital capacity and use. We then describe the study design and data collected through Round Four of the CTS and present the study findings from both quantitative and qualitative data collection. We conclude with a discussion of potential hospital and community responses to address capacity problems along with implications for public policy.

Trends In Community Hospital Capacity And Use

Top Trends In Community Hospital... Study Approach Study Findings Discussion And Concluding... Editor's Notes NOTES

 
A long, historical view on hospital capacity and its use provides an important context for this study (Exhibit 1). Data on the number of community hospitals and staffed hospital beds show general trends on available inpatient capacity.⁷ Data on inpatient admissions and days, average length-of-stay, and outpatient visits provide information on hospital service use; data on occupancy rates provide a crude but widely used measure of the extent to which inpatient capacity is used.⁸

Hospital use. In relation to hospital use, between 1975 and 1980 admissions rose about 11 percent, and average length-of-stay was stable. This likely influenced the hospital bed expansion observed in this period. After 1980, though, inpatient admissions declined 14.4 percent, as did average length of hospital stay (14.5 percent).

Several factors were instrumental to these changes, including advances in medical technology that expanded the types of procedures that could be provided in an outpatient setting. Further, the introduction of the Medicare prospective payment system (PPS) also contributed, given its payment incentives that encouraged reductions in inpatient lengths-of-stay and a shift of some care to outpatient settings.⁹ Finally, managed care was a strong force between 1980 and 1995, and health maintenance organizations (HMOs) in particular focused on utilization management to reduce unnecessary hospitalizations and hospital days.¹⁰

Some of these trends took an interesting turn after 1995 (Exhibit 1). Most notably, hospital admissions rose 9.4 percent from 1995 to 2001. Despite a decline in average length-of-stay of 0.8 days over this period, average hospital occupancy rates rose to 64.4 percent in 2001. Meanwhile, the growth in outpatient visits continued unabated, rising about 30 percent between 1995 and 2001.

Changing operational environment. These data reveal many things about hospitals’ changing environment. As numbers of hospitals and staffed beds declined through 2000, hospitals experienced increased admissions, albeit with patients who had shorter hospital stays. In addition, because of recent improvements in coding and measurement systems, hospital representatives often report that their in-patients are sicker now than in the past. As such, a quicker "churning" of sicker in-patients may be present. Hospitals now need to manage transitions into, around, and out of the hospital better than they did before. The continued growth in out-patient care could create coordination problems that spill over into inpatient care if certain hospital technologies and departments serve both inpatients and out-patients. In addition, our interviews revealed that available inpatient beds often can be filled or nearly filled during the week but then become largely empty on weekends. Given that occupancy rates are calculated based on 365 days, they could understate capacity problems faced by hospitals Monday through Friday.

Study Approach

Top Trends In Community Hospital... Study Approach Study Findings Discussion And Concluding... Editor's Notes NOTES

 
Conceptual framework. Our conceptual framework for examining hospital capacity draws on basic economic theory. From an economics perspective, we can view the supply of a service as being constrained vis-à-vis consumer demand if a shortage of that service exists at the observed market price.¹¹ This basic framework suggests that one can assess capacity problems by considering why supply and demand for hospital services might not be in balance. Of course, occasional imbalances of supply and demand can arise as markets adjust, but persistent excess supply or excess demand raises policy concerns. Further, an economics framework suggests that we should consider how markets for inputs to production (labor and capital) could be contributing to potential problems meeting consumer demand. Finally, given that hospital markets are characterized by a small number of firms, there are likely to be marketwide ripple effects as individual hospitals make operational decisions, for example, to close beds or eliminate certain services. Thus, one needs to consider not only demand and supply contributors but also market phenomena that might have led to persistent mismatches of hospital service supply and consumer demand.

Data source. Data for our analysis come from the CTS Round Four site visits undertaken September 2002 through May 2003. The CTS is a longitudinal study that tracks changes in the health care systems of sixty randomly selected, nationally representative U.S. communities, defining these based on the geographic boundaries of metropolitan statistical areas (MSAs).¹² For the past six years, researchers have intensively studied twelve of these sixty MSAs through surveys, semistructured interviews, and secondary data sources. The CTS categorizes these twelve MSAs as large (Boston, Miami, Orange County, and Phoenix); moderate-size (Cleveland, Indianapolis, northern New Jersey, and Seattle); or small (Greenville, South Carolina; Lansing, Michigan; Little Rock, Arkansas; and Syracuse, New York) based on their population size. Typically, fifty to ninety interviews are conducted with major stakeholders in each market, including health plans, hospitals, physician organizations, employers, state and local governments, and consumer groups. Hospital interviews focus on hospital systems, given their growing prevalence in markets and also the ability of system representatives to speak about their multiple hospital affiliates. In each round of the CTS, researchers propose specific topics for focused study. Hospital capacity was selected for Round Four, given concerns raised in Round Three about the increasing incidence of ED diversions and about changing leverage between hospitals and health plans as hospital service use expanded.¹³

An interview protocol was developed to assess the types of capacity problems that existed, whether they were hospital-specific or marketwide, the factors contributing to these problems, the likely persistence of these factors over the next five to ten years, and hospitals’ and communities’ responses to capacity problems. These questions were asked of hospital system chief executive officers (CEOs), nursing executives, vice-presidents or directors of patient services, and chief medical officers. In addition, medical directors of physician organizations and network executives of health plans were queried, to gain a nonhospital perspective.

Two on-site surveys were developed so that comparable quantitative data could be collected across the CTS markets on the types of hospital capacity constraints and contributing factors. These surveys were administered to nursing executives or vice-presidents/directors of patient services or both, given their day-to-day role in overseeing care delivery. Thirty-one surveys were completed on types of hospital capacity constraints and twenty-nine on contributing factors for the twelve CTS sites. Certainly, these are small numbers, but it is important to note that there are typically only two to four health systems in each CTS market.¹⁴ Given the small numbers, this paper draws linkages between the qualitative interview data that encompassed both hospital and nonhospital stakeholders, and the survey data that were obtained from selected hospital representatives.¹⁵

Comparative analysis. Our analysis contrasts the experiences of large, moderate-size, and small MSAs because the nature of their capacity problems, contributing factors, and responses likely differ across markets based on their size. Exhibit 2 reports comparative data on these markets. Substantial and fairly consistent reductions in staffed hospital beds per 1,000 population occurred in large MSAs between 1996 and 2001, ranging from about 13 percent to 17 percent. These large reductions likely reflect the effects of managed care. In large MSAs, HMO market share for 2000 averaged 39.1 percent versus 25.8 percent in moderate-size MSAs and 20.5 percent in small MSAs (data not shown).¹⁶ With the exception of northern New Jersey, moderate-size MSAs had smaller reductions in beds. The northern New Jersey market had the highest ratio of staffed beds to population in 1996; thus, its relatively large reduction brought it more in line with the other moderate-size MSAs. Small MSAs generally had a more intermediate level of bed reductions, with the exception of hospitals in Syracuse, which experienced major bed and service reductions in January 1997 in response to the end of hospital rate setting.

Study Findings

Top Trends In Community Hospital... Study Approach Study Findings Discussion And Concluding... Editor's Notes NOTES

 
Capacity constraints. Looking first to the interview data, most hospital and nonhospital respondents in the twelve CTS sites noted concerns about ED overcrowding and diversion when asked about hospital capacity constraints. In some markets (Boston, Syracuse, and Lansing) respondents suggested that these problems had declined compared with two years ago because of actions taken by hospitals and the community. In other markets the problem has persisted (Phoenix) or was increasing (northern New Jersey and Orange County). Some hospital respondents identified other areas of capacity concern, including intensive care beds, telemetry and observation beds, general medical/surgical floor beds, and psychiatric beds. However, nonhospital respondents generally felt that hospitals in their community were "more empty than full," implying that hospitals were not experiencing capacity problems. These respondents did recognize that some hospitals, especially tertiary hospitals, had occasional capacity problems outside the ED—in particular, at renowned heart and cancer programs in their communities.

The first on-site capacity constraint survey provided some quantitative perspectives that relate to the observations noted above and allow quantitative comparisons of problems across service lines and communities. As noted above, these data are based on small numbers of observations and thus must be viewed as illustrative rather than definitive. The survey examined nineteen hospital service areas and asked about the frequency of capacity problems in each one, using a scale of 1 (never) to 4 (more than 30 percent of the time). It also inquired about capacity problems’ severity of impact on hospital operations, using a scale of 1 (not a problem) to 4 (major problem). Respondents typically focused on the flagship hospital within their system or the system hospital whose capacity was most constrained, and they were asked whether this hospital’s problems were common throughout their market.

Emergency departments. ED services had the highest average frequency of capacity constraints (from 2.5 in small MSAs to 3.1 in large MSAs) and the highest average severity-of-impact scores, ranging from 3.0 to 3.8 (Exhibit 3). Respondents indicated that these high severity scores resulted because ED overcrowding creates substantial stress on hospital staff, patients, and patients’ families. Generally, patients who cannot be placed in an inpatient bed were described as in a "holding pattern" or a "state of limbo" because definitive care planning and treatment could not begin and because busy ED staff had to prioritize patients with more pressing and immediate needs. Hospital respondents generally felt that ED capacity problems were a marketwide phenomenon, with some institutions more affected than others. Institutions most affected included teaching hospitals, those located in areas of population growth, and those in the inner city, where the uninsured might rely on the ED for primary care.

General medical/surgical beds. In large MSAs, average scores for frequency of capacity constraints and severity of impact were also high for general medical/surgical beds. This is interesting given the data in Exhibit 2, which indicate that these large MSAs had the biggest bed declines during 1996–2001, which might have left hospitals in these markets with less operating flexibility during periods of peak demand. Hospital respondents noted that some hospitals in their markets routinely had occupancy rates of 80–95 percent of capacity during 2002–2003. This was not the case for all hospitals in their MSAs.¹⁷ Mostly urban teaching and suburban hospitals in areas of high population growth had these problems.

Psychiatric care. Although the frequency of psychiatric capacity problems was low relative to ED services, the severity of these problems’ impact was high in large MSA markets (Exhibit 3). Respondents indicated that the number of psychiatric emergency cases is rising and that these patients create substantial disruption in EDs, especially if they are homicidal or suicidal. These patients typically require one-on-one staff care and sometimes the oversight of security personnel. This puts everyone in the ED on edge, staff and other patients alike. In some communities the closure of state mental hospital beds has led to increased volume of emergency psychiatric cases in private hospitals.

Postacute services. Postacute hospital services are long-term care services provided after an acute phase of illness. Hospital respondents from small MSAs rated this area as having frequency of capacity problems similar to those reported for emergency services (Exhibit 3). They and also some from moderate-size MSAs noted difficulty in finding postacute care placements for patients. These patients can remain in regular inpatient beds for longer than necessary and thus make it difficult for the hospital to admit patients from the ED or those scheduled for elective procedures. Hospital respondents from large MSAs did not rate this as a frequent or severe problem, most likely because their communities have more options for postacute and long-term care.

Contributing factors. The first factor typically mentioned as key to capacity problems by both hospital and nonhospital respondents was staff shortages, especially of nursing personnel. Ironically, these shortages could represent the indirect effects of hospitals’ earlier efforts to improve efficiency, in that fewer nurses carried higher patient loads and worked in more stressful environments and thus left hospital employment.¹⁸ Many respondents also mentioned growth in the demand for hospital services, especially emergency services. Most hospital respondents noted that increasing demand began around 2000. In some communities where population has been growing (such as Phoenix), demand has continued to grow, but others mentioned a leveling off in 2003, perhaps attributable to a mild flu season (Boston) or the growing capabilities of hospitals in outlying areas (Little Rock).

Another contributor to demand noted by hospital respondents was patients’ increased illness acuity. Many did not know why acuity had increased, but some suggested that changing demographics, including the aging of the baby boomers, was responsible. However, research suggests that the leading age of the baby boomers (people in their midfifties) has not yet been a major factor in increased service use and health costs.¹⁹

The second on-site survey provides a means to quantify these perceptions and compare the potential influence of twenty-four contributing factors. These potential factors relate to supply, demand, and market phenomena that could strain hospital capacity. Respondents were asked to rate each on a scale from 1 (not at all important) to 5 (extremely important).

Supply and demand. Certainly, the shortage of nurses has the highest average score (3.6 in small CTS markets to 4.3 in moderate-size CTS markets) (Exhibit 4). In relation to demand factors, respondents in small CTS markets indicated that the growing number of uninsured people who used the ED for primary care was also a major issue, but this item was rated less highly by respondents in the other MSAs. In moderate-size and large MSAs, increased volume of patients because of aging or other demographic factors and increased illness acuity were rated as very important. It is interesting that hospital respondents did not view HMOs’ reduced ability to limit patients’ service use as a major factor in the growing demand for their services. Many indicated that the growing demand for emergency and other hospital services started in 2000, which coincided with declines in HMO enrollment and also the movement to expand managed care patients’ rights.²⁰

Market phenomena. Hospital market phenomena had more relevance for hospitals in small MSAs, especially the effects of ambulance diversions to respondents’ hospitals. There are fewer hospital options in these smaller communities, so as one or more hospitals go on diversion, the remaining hospitals are especially affected.

Likely persistence of capacity problems. Hospital and nonhospital respondents were asked whether they believed that factors contributing to capacity problems would likely persist for the next five to ten years. This is important because if existing problems represent temporary phenomena, there is limited need for major public or private intervention. Generally, hospital respondents believed that capacity problems would continue and likely worsen over time. They noted national projections of worsening nurse shortages, especially given the aging nurse workforce and the increased health care needs of an aging population.²¹ They commented that illness acuity would likely increase with an aging population as well. Some hospital respondents suggested that future technological advancement could lessen these capacity problems if it enabled more outpatient care. Yet when asked what kinds of advances were on the horizon in this regard, hospital respondents provided limited insights, although some thought that the human genome project could be helpful.

Actions taken by hospitals and communities. Hospitals in the CTS markets have taken various actions to deal with their capacity problems: (1) actions to expand or convert hospital capacity; (2) actions to better manage capacity use; (3) responses to the nursing shortage; and (4) communitywide efforts to reduce ED diversion. Hospitals in the study MSAs used a mixture of these strategies, but some strategies were more common in certain types of markets.

Adding new capacity. Hospital respondents in small and large markets noted that hospitals were especially active in adding new capacity where it was lacking. In all four small markets studied, hospitals were adding long-term care beds, to provide postacute care and improve transitions to this level of care. In addition, systems in Greenville were planning to build new hospitals in areas where population growth was strong. Hospitals in the four large MSAs were adding ED capacity, ICU beds, and general medical/surgical floor beds. Phoenix in particular was experiencing an increase in the number of beds at existing facilities as well as the number of hospitals. Hospitals in small and large MSAs were also restoring in-patient capacity that had been converted to other purposes, such as nursing or administrative offices, and converting existing capacity from less- to more-needed services.

In moderate-size MSAs, moves to expand capacity were generally more limited. Hospitals were adding ED capacity in northern New Jersey and Cleveland, and some northern New Jersey hospitals were adding general medical/surgical beds. In addition, there were more-selective additions based on types of services that were especially stressed, including observation and telemetry beds. More limited increases in capacity in moderate-size MSAs might reflect the slower reductions in capacity that occurred for these markets, as in Exhibit 2.

Improving management. Hospitals also were attempting to improve management of existing capacity. Hospital respondents in moderate-size and large MSAs noted increased efforts to monitor bed use and availability. Some had developed elaborate computer-based systems to monitor patient flow into and out of units, with data refreshed daily or even hourly. Hospitals developed bed committees and appointed specific managers to do, as one person put it, "air traffic control," including assessment of whether patients could be discharged or moved out of especially crowded units. Hospitals were also taking action to speed up discharges and room readiness for new admissions. Physicians were being asked to do rounds earlier in the day and discharge patients before 11 A.M. Other hospitals had developed discharge lounges in which discharged patients can wait for working relatives to pick them up, which allowed their rooms to be vacated earlier and prepared for new patients. In addition, some hospital respondents noted efforts to develop clinical pathways for certain health conditions, either to structure outpatient treatment as an alternative to inpatient admission or to help improve the movement of patients mainly through better coordination and reduced length-of-stay. Hospitals in all markets were attempting to better manage their EDs through development of fast-track and short-stay units for less severely ill patients, providing more managers in the ED to deal with admissions and patient flow, or developing admissions units where patients waiting for beds could be housed and where care planning and treatment could commence.

Dealing with nurse shortages. Respondents in all CTS markets discussed recent increases in nurses’ compensation to make their hospitals more competitive in the labor market and to attract back nurses who had left the profession. Other actions included hiring nurse extenders, patient transporters, and administrative staff to relieve some of the non–patient care responsibilities that previously burdened nurses. In addition, hospitals were implementing more flexible scheduling to attract or retain nurses who were working mothers or near retirement age. Hospital respondents indicated that they were hiring retired nurses to strictly do paperwork and other administrative tasks or, as one interviewee put it, "for their brains, not brawn," which in turn allowed floor nurses to focus on caring for patients. Some hospitals were also providing tuition support for existing staff who were interested in pursuing a nursing degree; others were engaged in recruitment of nurses from other countries, although they noted that this strategy has become more difficult since September 11, 2001. Hospitals also were engaged in political action to lobby the state to expand nursing faculty and enrollment and to develop programs in high schools to attract students to the field.

Taking action in the community. Communitywide actions were common across all CTS markets. They included hospitals’ working with public emergency service departments to improve communication about ED available capacity and early warning systems when hospitals were nearing ED capacity limits. In some communities, hospitals participating in these activities agreed not to go on diversion or to do so only in dire circumstances, given improved local information and coordination. In addition, hospitals in some communities were working to deal with psychiatric emergency cases, through either joint actions to provide an alternative type of care or identifying other potential solutions with state and local authorities.

Discussion And Concluding Comments

Top Trends In Community Hospital... Study Approach Study Findings Discussion And Concluding... Editor's Notes NOTES

 
Common themes. Despite differences across the CTS markets, a variety of common themes emerged in relation to hospital service capacity. First, in all markets, both hospital and nonhospital respondents frequently voiced concern about increases in emergency service use and potential ED overcrowding. Respondents in all markets suggested that other hospital services were constrained for a subset of local hospitals from time to time. Most hospital respondents felt that illness acuity in both inpatient and outpatient settings was increasing. Some noted that annual increases in hospital service use, which began around 2000, were leveling off by 2002–2003. This observation is consistent with recent findings by the Centers for Medicare and Medicaid Services (CMS) that first- and second-quarter 2003 hospital admissions growth had decelerated.²² Respondents also believed that the nurse shortage was a major contributor to capacity problems, both now and for the foreseeable future. Finally, hospitals were implementing various strategies to expand or convert capacity, better manage capacity, attract and retain nurses, and work locally to better coordinate ED care.

Expanding hospital capacity. Although this paper’s objective was to provide insights into the question of whether U.S. hospital capacity needs to be expanded, it is apparent that several hospitals in the CTS markets have already answered this question in the affirmative. Many hospitals in MSAs of all sizes have already expanded their ED capacity. Some have also expanded their general medical/surgical, ICU, observation, telemetry, and long-term care beds.

Round Three of the CTS found that problems of strained ED capacity were widespread across markets and hospital types.²³ Thus, ED service expansions reported to us in Round Four were likely warranted. Indeed, such expansion could have contributed to reports of decreased ED diversion between 2001 and 2003. However, constraints in other hospital service areas are being felt by only some hospitals. This suggests that a maldistribution of capacity across hospitals rather than a general lack of hospital capacity exists within these markets. Such maldistribution would best be addressed if underused hospitals reduced their service capacity while constrained hospitals increased theirs. However, all of our discussions with hospital representatives focused on adding capacity, and we did not hear of simultaneous efforts to reduce capacity other than very general statements that some hospitals might close in the future. This suggests that current hospital actions in the CTS markets will most likely add to the existing stock of hospital beds and raises the question of how this new capacity will be staffed given the current, and likely continuing, nurse shortage.

Recommendations for government action. Public policymakers can take many actions to address the problems in U.S. hospitals. Given the widespread growth in ED use, local emergency medical service agencies should continue to work with hospitals and ambulance service providers to improve local communications and coordination of ED services. Several respondents mentioned these efforts and viewed them as helpful. Further, the problems arising as increased numbers of psychiatric ED patients are seen in private hospital EDs requires careful study and identification of creative solutions, given the strains that such patients can place on already taxed EDs.

Another area in which government agencies can help is reviewing existing licensure and health planning laws that might affect hospitals’ ability to restructure existing capacity. These laws vary markedly across the states and could be an impediment to some hospitals as they convert underused capacity. Allowing hospitals the flexibility to restructure their capacity to respond to changing local needs is a more sensible strategy than the more expensive option of building new hospital capacity to house expanded services.

Research needs. Given the exploratory nature of the research presented here and the small number of markets and organizations studied, the insights gained need thorough evaluation to see if they reflect experiences in communities across the United States. Nevertheless, the early insights from the CTS markets, in conjunction with recent CMS findings, suggest that wide-scale increases in hospital capacity are not immediately needed.²⁴ Therefore, there is time and opportunity to conduct more broad-based analyses before decisions about the adequacy of U.S. hospital capacity are made. In particular, research is needed to better understand the array of factors that affect hospital service demand, including not only long-term trends such as population aging, but also the influence of the economy, changes in health benefit design, potential new technologies, and the proliferation of ambulatory surgery and diagnostic centers. The slower-than-anticipated growth in hospital service use in the first two quarters of 2003 makes clear that recommendations to dramatically increase existing U.S. hospital capacity are prone to error if the drivers of demand for short- and long-term health care are not fully understood.

Further, research is needed to assess whether current hospital efforts to better manage their existing capacity are effective. U.S. hospitals are now facing the need to treat greater numbers of sicker patients with quicker turnaround than they did in the past. Hospitals in the CTS markets were implementing a variety of new and, as yet, untested management strategies to deal with this situation. If these efforts show promise, it would be valuable to disseminate knowledge about effective capacity management techniques to assist hospitals when they face peak demand.

Editor's Notes

Top Trends In Community Hospital... Study Approach Study Findings Discussion And Concluding... Editor's Notes NOTES

 
This study was conducted through the Center for Studying Health System Change, which is funded by the Robert Wood Johnson Foundation. The authors thank Kelly Devers, Paul Ginsburg, and Alwyn Cassil for many thoughtful comments on an earlier version of this paper.

Gloria Bazzoli is a professor in the Department of Health Administration, Virginia Commonwealth University, in Richmond. Linda Brewster is a health research consultant at the Center for Studying Health System Change in Washington, D.C., where Gigi Liu was a research assistant. Sylvia Kuo is a researcher at Mathematica Policy Research in Cambridge, Massachusetts.

NOTES

Top Trends In Community Hospital... Study Approach Study Findings Discussion And Concluding... Editor's Notes NOTES

 

1. B.Kirchheimer, "Full House: After Years of Decline, Inpatient Admissions Are Rising, Pushing New Construction," Modern Healthcare (26 November 2001): 28–31; American Hospital Association, "Forces Driving Inpatient Utilization," Trendwatch (November 2001); N. Petersen, "Hospital: Demand Outpacing Services," Philadelphia Inquirer, 6 November 2001; "Overflow in Many U.S. Hospitals, Study Finds," Los Angeles Times, 9 April 2002; and R.Abelson, "Patients Surge and Hospitals Hunt for Beds," New York Times, 28 March 2002.
2. California HealthCare Foundation, "Emergency Departments in the Health Care System: Use of Services in California and the United States," Issue Brief (Oakland, Calif.: CHCF, November 2002); P.Neurath, "Emergency Boom: Hospitals Pinched by Escalating ER Visits," Puget Sound Business Journal, 5 August 2002; "Harborview ER Project to Relieve Crowding," Seattle-Post Intelligencer, 10 April 2002; S.Patrick, "Study Shows More ERs Diverting Patients," Dallas Business Journal, 17 September 2001; S.Burke, "ER Traffic at Hospitals Increasing," Nashville Tennessean, 4 March 2002; and N.Shute and M.B. Marcus, "Code Blue Crisis in the ER: Turning Away Patients, Long Delays, a Surefire Recipe for Disaster," U.S. News and World Report, 10 September 2001.
3. U.S. General Accounting Office, Hospital Emergency Departments: Crowded Conditions Vary among Hospitals and Communities, Pub. no. GAO-03-460 (Washington: GAO, March 2003); L.RBrewster, L.S. Rudell, and C.S. Lesser, "Emergency Room Diversions: A Symptom of Hospitals under Stress," Issue Brief Findings no. 38 (Washington: Center for Studying Health System Change, May 2001); and S.S. Brown, "AHA: ED Diversions Point to Systemic Problems Not Readiness Inadequacy," AHA News, 22 October 2001.
4. Health Care Advisory Board, "The New Economics of Care: Briefing for the Board and Health System Executives" (Washington: Advisory Board Company, Fall 2001).
5. B.Japsen, "Hospital Capacity Debate Heats Up: Aging Population Means Sharp Rise in Need, Study Says," Chicago Tribune, 17 July 2003.
6. L.V.Green, "How Many Hospital Beds?" Inquiry (Winter 2002/2003): 400–412.
7. As defined by the AHA, staffed beds include only those that are available for patient care (set up and staffed). This measure is not the same as a hospital’s licensed bed capacity, which relates to the maximum beds that a hospital can operate. Of course, the meaning of "staffed beds" is left to hospitals’ interpretation and can vary considerably across hospitals and over time.
8. The deficiencies of using occupancy rates to measure the extent of use of hospital inpatient capacity are well known and have been discussed in several forums. They include lack of consideration of the type of hospital bed that is available versus needed at a point in time, the length of time patients wait until a needed bed becomes available, and the use of hospital inpatient beds for observation of patients receiving outpatient procedures.
9. J.Feder, J. Hadley, and S. Zuckerman, "How Did Medicare’s Prospective Payment System Affect Hospitals?" New England Journal of Medicine (1 October 1987): 867–873; and J.Hadley, S. Zuckerman, and J. Feder, "Profits and Fiscal Pressure in the Prospective Payment System: Their Impacts on Hospitals," Inquiry (Fall 1989): 354–365.
10. C.Worzala, N. Zhang, and G.F. Anderson, "The Effect of HMOs on Hospital Capacity, 1982–1996," Managed Care Interface (February 2000): 51–61; J.Ashby, S. Guterman, and T. Greene, "An Analysis of Hospital Productivity and Product Change," Health Affairs (Sep/Oct 2000): 197–205; and M.D.Rosko, "Impact of HMO Penetration and Other Environmental Factors on Hospital X-Inefficiency," Medical Care Research and Review (December 2001): 430–454.
11. In the simplest case, an increase in prices would clear a market with excess demand, but in health care, prices may adjust slowly given Medicare fixed prices and multiyear private-sector contacts. Further, even if prices could increase, hospitals may not be able to increase supply because of regulation affecting capital inputs (such as certificate-of-need requirements) or existing labor shortages. In addition, health markets are plagued with a variety of additional problems (such as imperfect information and the effects of moral hazard) that could lead to mismatch in the optimal supply and demand for health services. See C.W. Madden, "Excess Capacity: Market Regulations and Values," Health Services Research (February 1999): 1651–1668; and B.Friedman, "Excess Capacity: A Commentary on Markets, Regulation, and Values," Health Services Research (February 1999): 1669–1682.
12. See C.S.Lesser and P.B. Ginsburg, "Guest Editors Introduction: Community Tracking," Health Services Research (February 2003, Part II): 333–336.
13. Brewster et al., "Emergency Room Diversions"; and K.J.Devers et al., "Hospitals’ Negotiating Leverage with Health Plans: How and Why Has It Changed?" Health Services Research (February 2003, Part II): 419–446.
14. In fact, the response rate to the on-site surveys was roughly 82 percent.
15. All interview notes were stored and analyzed through Atlas.ti, a computer software package designed to support qualitative research.
16. Devers et al., "Hospitals’ Negotiating Leverage with Health Plans."
17. These differences were apparent even if one looked at older AHA Annual Survey data in relation to hospital occupancy rates. For example, occupancy rates for community hospitals in the Boston MSA ranged from 33 percent to 98 percent in 2001.
18. L.H.Aiken et al., "Nurses’ Reports on Hospital Care in Five Countries," Health Affairs (May/June 2001): 43–53.
19. B.C.Strunk and P.B. Ginsburg, "Aging Plays Limited Role in Increasing Health Care Cost Trends," Data Bulletin no. 23 (Washington: HSC, September 2002).
20. InterStudy, "HMO Enrollment Stabilizing, Medicaid Continues to Grow: InterStudy Releases Updated HMO Industry Report" (St. Paul, Minn.: InterStudy, 7 May 2002); and A.C.Enthoven and S.J. Singer, "Unrealistic Expectations Born of Defective Institutions," Journal of Health Politics, Policy and Law (October 1999): 931–940.
21. Health Resources and Services Administration, "Findings from the National Sample Survey of Registered Nurses," Pub. no. BHP00168(Washington: HRSA, 22 February 2002).
22. Centers for Medicare and Medicaid Services, "Health Care Industry Market Update: Acute Care Hospitals," 14 July 2003, www.cms.gov/reports/hcimu/hcimu_07142003.pdf (12 August 2003).
23. Brewster et al., "Emergency Room Diversions."
24. CMS, "Health Care Industry Update."

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