The problem of determining the number of beds required in each type of service in a progressive hospital, subject to constraints of operating and investment costs and minimum service levels, is approached through computer simulation and mathematical programming. The simulation of the progressive patient care system is based on patient flow through the service zones in an operating hospital, but the program is capable of accommodating any other hospital's structure of facilities or set of patient paths. The mathematical programming approach to the solution of optimal bed allocation raises basic questions on the formulation of objective function and budgeting constraints which are open to further investigation.