STOCHASTIC DEMAND FOR HOSPITALS AND OPTIMIZING EXCESS BED CAPACITY

This paper addresses the issue of hospital bed capacity by considering the stochastic demand for United States hospitals. An equilibrium con dition for the optimal number of ''excess'' beds is derived and applie d using a cost function estimated with a panel data model for the peri od 1987-1992. Results indicate that it may be difficult to justify the costliness of existing levels of empty hospital beds. The Department of Justice and the Federal Trade Commission should be cognizant of the potential effects of hospital mergers on undesirable excess bed capac ity.