How proactive hospital capacity management
can create financial value

 Just focusing on emergency room capacity can yield results. Of US health systems with a capacity management center that aimed to reduce emergency department boarding (holding admitted patients in need of inpatient beds), manage beds and handle transfers, 72% tracked a positive level of financial return on investment (ROI), according to the Hospital Capacity Management Consortium, an American Hospital Association (AHA) unit formed in 2020.2

Hospitals and health systems can focus on three areas — higher patient volume, lower variable costs and better patient experiences — to achieve positive ROI from capacity management.

How can hospital capacity management increase patient volume and improve patient placement?

A proactive approach to patient placement based on need and appropriate setting, using real-time monitoring, allows health systems to load balance across the system and absorb additional patient volume. Capacity management can effectively improve patient volume and monitor capacity across hospitals by directing new patient volume into the system through the flagship hospital, community hospitals or external network, as well as through intra-network transfers for patients requiring different levels of care.

A) Flagship hospitals and academic medical centers (AMCs) can benefit from the ability to transfer lower acuity patients to community hospitals. This will unlock capacity at the AMC that can then be backfilled with patients requiring more complex care. Further, community hospitals can benefit from a streamlined source of higher-volume, in-network patient transfers to increase bed utilization peripheral to the system hub or hubs.

B) Community hospitals may also need to transfer patients to another facility for a higher level of care or due to capacity constraints. Retaining patients within the health system will offer enhanced continuity of care for the patient, reduce leakage and may financially benefit the system if filling an empty bed at one facility creates an opportunity to admit a new patient at the transferring facility.

C) Capacity management strategies can also direct patient transfers from external hospitals to the health system. These patients could either 1) be transferred directly to the flagship hospital or AMC, with this hospital serving as a hub for patients and community hospitals as the spokes; or 2) be transferred to the community hospitals, with the flagship hospital or AMC decants from the community hospitals. (See Figure 1)

In addition to assessing patient needs and hospital occupancy, capacity management strategies can improve patient flow based on factors such as the availability of specialty care and specific procedures. A center of excellence or the establishment of hospital specialties can direct greater relevant patient volume to the appropriate location. Additionally, staff at these locations can work with inbound referral sources to expedite and streamline referrals for high-margin service lines in which the hospital may excel, such as cardiology or orthopedics.

Figure 1: Patient flow with AMC hub, community hospital spokes 

Source: EY-Parthenon analysis 

How can hospital capacity management reduce operating expenses?

Health systems can proactively manage variable costs, including labor expenses, as a result of real-time capacity monitoring. For example, with improved monitoring of hospital capacity and patient flow, health systems can better staff at the right levels at the right time, ultimately reducing the need for costly overtime and unnecessary contract labor. Similarly, during peak illness seasons, systems will be quicker to respond and flex their staffing mix as needed.

Lastly, as hospitals enable and leverage technology for real-time monitoring of throughput and bed capacity metrics, they can streamline their operations to assess capacity across hospitals more efficiently. This approach saves valuable time and resources compared to contacting house supervisors at multiple facilities individually. The resulting faster and more coordinated clinical operations will simplify labor management and reduce labor expenses.

How can better hospital capacity management enhance health care quality and the patient experience?

Strategic patient placements and streamlined post-acute care coordination will also promote patient quality, satisfaction and experience, and expand access to care. Patients will be transferred between hospitals, ambulatory centers and post-acute facilities, ensuring they are transitioned to a site with the right staff, clinical and support resources, and equipment to best address their needs and enable safe and efficient access. This strategic and proactive approach to placement and coordination reduces readmission rates, ultimately reducing overall costs to serve the patient.

Hospital capacity management is no longer just an operational tool, but a strategic lever. Done right, it unlocks capacity, improves margins and cash flow, and enhances patient experience—positioning health systems for more resilient and sustainable growth.