Faced with diminishing government subsidies, competition, and the increasing influence of managed care, hospitals are under enormous pressure to cut costs. In response to these pressures, many hospitals have made drastic changes including downsizing beds, cutting staff, and merging with other hospitals. These critical capacity decisions generally have been made without the help of OR model-based analyses, routinely used in other service industries, to determine their impact. Not surprisingly, this has often resulted in diminished patient access without any significant reductions in costs. Moreover, payers and patients are increasingly demanding improved clinical outcomes and service quality. These factors, combined with their complex dynamics, make hospitals an important and rich area for the development and use of OR/MS tools and frameworks to help identify capacity needs and ways to use existing capacity more efficiently and effectively. In this chapter we describe the general background and issues involved in hospital capacity planning, provide examples of how OR models can be used to provide important insights into operational strategies and practices, and identify opportunities and challenges for future research.