# How To Determine the Capacity Utilization Rate for a Hospital

A capacity utilization rate, for any entity, is the amount of output it has compared to the potential output it should be producing. This, stated in simpler terms, simply is the difference between what a company is producing and what it is capable of producing at any given time. This formula is used in many aspects of commerce, including the government, in determining the potential for a company or product.

Hospitals can benefit from capacity utilization rate data because they will be able to tell what types of services are most needed and what, perhaps, is a waste of the hospital's resources. Economic stability is often determined by the capacity utilization rate of any given entity. If a hospital determines it is running to low or too high it can adjust the operations accordingly to allow for a profit to be made. This also will allow a hospital to streamline its offerings to meet the public’s needs. A hospital that is over utilization in one department and way under in another may adjust this to fill the demands of the area it serves.

To determine a hospitals capacity utilization rate you may wish to break this down into specific departments so you can reach a credible number. For instance, to get accurate rates throughout the hospital divide the hospital into major areas such as ER, outpatient, administration, long term or how ever you see fit. You can begin to determine each department’s capacity much easier this way and get a better general outlook of the entire operation.

The proper formula for capacity utilization rate is
actual output – potential output x 100
potential output

So, if the ER has 100 beds and the hospital uses 70 beds you are looking at a 70% utilization rate and have room to grow to 100. On the other hand, if the hospital has 100 beds and is using extra beds to meet the demand, the hospital is over capacity and needs to increase its offerings.

Capacity utilization rate can also be used to determine the cost of services. Hospitals can determine if the cost of treating patients will increase or decrease if they accept more patients. This determination will allow the hospital to view its current economic standings and see where prince increases or decreases may need to come into effect.

The main point behind determining capacity utilization rates is to determine if the amount of production available is actually being used. If a hospital is capable of treating 1000 patients a day and is only treating 500 there is a problem somewhere in the system. If the hospital is treating 1500 a day and is only realistically capable of treating 1000 effectively, again there is a problem. Constant review of capacity utilization rates will enable management to run the hospital at maximum capabilities and encourage growth where needed.

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