A simultaneous equation model is constructed in order to describe the health services delivery system serving the state of Indiana. The model consists of a set of stochastic equations that describe the joint dependency of physician manpower and short-term general hospital beds on social, demographic, and economic characteristics of the population served. The model is validated with county data from Indiana and the dynamic behavior of the health services delivery system that results from feedback in the model, and the inclusion of lagged physician manpower variables is analyzed.