To provide an alternative to Oregon's treatment-specific approach to rationing, we propose a prioritization based on the local hospital resources invested in discretionary medical admissions. We used 1988 Oregon hospital discharge data to determine age- and sex-adjusted per-capita rates of inpatient days for discretionary medical admissions (for high-variation medical conditions) in each of 33 hospital service areas. Potential ceiling rates were defined based on prevailing utilization rates for discretionary medical admissions in each hospital service area. Savings were calculated under the assumption that resources allocated for inpatient treatment of these conditions in areas that exceed the ceiling rates were reduced accordingly. Nonfederal, acute-care hospitals used by Oregon residents. Oregon residents. Savings were defined in terms of patient days, hospital beds, hospital charges, and average costs. Among the 16 largest hospital service areas, patient-day rates for discretionary medical admissions ranged from 188 to 335 patient days per thousand. Potential savings from applying different ceiling rates ranged from $0.4 million to $94.7 million per year. If the rate in the state capital (Salem) were used as the ceiling (218 days per thousand), then 238 beds could be closed in 20 hospital service areas, for an estimated cost savings of $47.3 million. Hospital resources invested in discretionary admissions in high-rate areas represent an important potential source of funds for reallocation to meet other defined health care needs. Setting limits based on units of health care supply (eg, beds, capital equipment, and physicians) should be considered as an option for resource reallocation within health care.