Invited Commentary
Health Policy
February 19, 2025
Understanding and Addressing the US Hospital Bed Shortage—Build, Baby, Build
Alexander T. Janke, Arjun K. Venkatesh
JAMA Netw Open. 2025;8(2):e2460652. doi:10.1001/jamanetworkopen.2024.60652
For decades, policymakers have faced the impossible task of balancing concurrent and competing demands for high-quality, broadly accessible, and affordable hospital care. These demands have created the contemporary hospital care iron triangle, with stakeholders on all sides. Since the 1960s, policymakers have understandably focused on reducing spending on hospital care as the cost of health care delivery spiraled. With decades of health policy limiting the supply of hospital care, have we achieved our goals for quality, access, and spending?
In the study by Leuchter et al,1 they provide simple yet provocative projections for the future of hospital care. They project that national hospital occupancy will exceed 85% by 2032, a critical threshold where basic hospital operations can become dysfunctional and even unsafe.2
Leuchter et al1 begin to quantify the story already felt at the bedside in hospitals across the nation—namely, a trajectory toward inadequate supply of hospital care for the anticipated demand of the coming decade. However, the aggregate national measure hides considerable geographic and temporal variation in hospital capacity constraints, which is already a public health crisis in many places and at peak demands. Since the beginning of the COVID-19 pandemic, media reports and epidemiological analyses have documented desperate shortages of available hospital space and the associated excess mortality.3 Hospitals and emergency physicians have sounded the alarm about ever-present and dangerous hospital “boarding,” where patients queue in emergency departments for hours and even days due to shortages of available hospital beds.4
Despite the contemporary problems, the historical focus on overall health care spending is understandable. Hospital care has long been the top-line budget item for health care spending, composing 29% of the estimated $1 trillion of yearly health care expenditures in the US.5 In the period from 1960 to 1982, hospital-based care spending grew rapidly as health insurance coverage increased, cost sharing fell, and technological innovations compounded growing demand for care. As these trends took shape, concerns about maligned incentives and low-value care grew.
In 1983, Medicare payment reform took shape in the Inpatient Prospective Payment System, designed to reimburse hospitals through retrospective cost-based methods (that is, based on estimates of the hospital’s cost of service provision). This was one of the earliest efforts to mitigate health care spending by adjusting payments based on diagnoses and other patient factors, as part of diagnosis-related groups (DRGs), which underlie a substantial amount of hospital care spending even today. These efforts fundamentally altered hospital’s incentives in care delivery to mitigate spending.
Though payment reform took effect to alter incentives for hospitals, policymakers pursued a range of other measures to curb spending. The most controversial but prevalent policymaker response to hospital care spending was certificate of need (CON) laws, regulating acute care beds. The first CON laws were passed in New York in 1964, though they were present in nearly every state by the 1980s. These efforts were motivated in part by enormous geographic variations in hospital spending, documented by the Dartmouth Atlas and labeled as supply-sensitive demand. Historical estimates claimed that one-third of hospital care spending was unnecessary, becoming a lynchpin for policies devised to limit hospital care services.6 Despite the ubiquity of CON laws even today, such coarse restrictions on supply have been criticized as ineffective at best and harmful at worst.7
Restrictive policies and high capital costs associated with hospital capacity expansion resulted in numerous process efficiency and productivity efforts seeking to manage demands without new construction. The application of Lean health care principles and just-in-time resources are fundamentally designed to avoid excess capacity. Unfortunately, these efforts to optimize the hospital bed productivity have also exacerbated macro trends in hospital consolidation. Mergers and acquisitions often result in reduced acute hospital capacity because of hospital closures, the conversion of short-term acute care beds into long-term acute care or skilled nursing capacity, and operational economies of scale that eliminate any flexible capacity.
These supply constraints are occurring alongside steadily growing demands for acute care taking shape in rising emergency department visitation rates. US residents are older and more medically complex than ever. Technologically sophisticated surgical interventions and medical therapies have transformed the long-term survival rates for serious conditions, such as end-stage kidney disease, heart failure, and chronic obstructive lung disease. In search of disruptive innovation, many policymakers and health systems have attempted to utilize hospital-at-home or next-day ambulatory care access to deliver care alongside incentives that avoid traditional brick-and-mortar hospital bed use, both to mitigate spending and reduce capacity constraints. Even in the most successful of implementations, the challenges of inadequate hospital capacity persist.
The US needs greater hospital bed capacity, particularly for critical care and complex care services. Addressing this need has been delayed by the current reality in which bed capacity is now geographically distributed. Often urban or referral center–based hospitals are overwhelmed while available beds remain at smaller or rural facilities. Unfortunately, the needs and preferences of patients as well as the specialization of care teams means that simply moving a patient from a hospital with no bed capacity to one with an available bed and staff is not always a viable option. Not all hospital beds are made equal, and intermittent, localized dips in occupancy should not be misinterpreted as evidence of excess capacity nationally.
Even the most conservative estimates by Leuchter et al1 project a need for an 11% increase in hospital capacity based on the aging population alone. While that projection would seem unachievable to any individual hospital, community, or even state, we need to create a regulatory environment that facilitates rapid capacity expansions. Early in the COVID-19 pandemic, the 1000-bed Huoshenshan Hospital was built in China in just 10 days.8 Unfortunately, in the US the current health care financing environment facilitates the rapid expansion of urgent care centers and ambulatory care9 while perversely restricting similar expansions in hospital capacity for our sickest patients. This selective infrastructure development is built on the premise that creating lower cost health care settings will improve the affordability of care and increase access to hospital care while in fact the literature suggests that no meaningful substitution occurs.10
The obligation to create additional hospital capacity risks greater spending on low-value care. While policymaking to reduce hospital care spending has historically affected reduced capacity, we now have better tools to mitigate low-value care in our hospitals while simultaneously allowing for flexible investments. Alternative payment models such as bundled payments and shared savings programs are more sophisticated, having evolved since the introduction of DRGs in the 1980s, and proven to reduce health care spending while preserving quality. That said, we must tolerate spending some amount on excess capacity both because standby resources are a cornerstone to our needs for surge and disaster preparedness and because additional hospital infrastructure is a major capital and human resource investment that requires many years of lead time to develop. It will not be possible to calibrate precisely. Absent policy and health system interventions to build more acute care hospital bed capacity, ill and injured US residents should expect increasingly overloaded hospitals incapable of delivering the quality and access to affordable care to which we aspire.
