Allocation of hospital capacity to multiple types of patients

Allocation of a limited capacity of resources among several customer types is a critical decision encountered by many manufacturing and service firms. We tackle this problem by focusing on a hospital setting and formulate a general model that is applicable to various resource allocation problems of a hospital. To this end, we consider a system with multiple customer classes that display different reactions to the delays in service. By adopting a dynamic-programming approach, we show that the optimal policy for a system involving both lost sales and backorders is not simple but exhibits desirable monotonicity properties. Furthermore, we propose a simple threshold heuristic policy that performs well in our experiments.