Rationale: Prior approaches to measuring healthcare capacity strain have been constrained by using individual care units, limited metrics of strain, or general, rather than disease-specific, populations.Objectives: We sought to develop a novel composite strain index and measure its association with intensive care unit (ICU) admission decisions and hospital outcomes.Methods: Using more than 9.2 million acute care encounters from 27 Kaiser Permanente Northern California and Penn Medicine hospitals from 2013 to 2018, we deployed multivariable ridge logistic regression to develop a composite strain index based on hourly measurements of 22 capacity-strain metrics across emergency departments, wards, step-down units, and ICUs. We measured the association of this strain index with ICU admission and clinical outcomes using multivariable logistic and quantile regression.Results: Among high-acuity patients with sepsis (n = 90,150) and acute respiratory failure (ARF; n = 45,339) not requiring mechanical ventilation or vasopressors, strain at the time of emergency department disposition decision was inversely associated with the probability of ICU admission (sepsis: adjusted probability ranging from 29.0% [95% confidence interval, 28.0-30.0%] at the lowest strain index decile to 9.3% [8.7-9.9%] at the highest strain index decile; ARF: adjusted probability ranging from 47.2% [45.6-48.9%] at the lowest strain index decile to 12.1% [11.0-13.2%] at the highest strain index decile; P < 0.001 at all deciles). Among subgroups of patients who almost always or never went to the ICU, strain was not associated with hospital length of stay, mortality, or discharge disposition (all P ≥ 0.13). Strain was also not meaningfully associated with patient characteristics.Conclusions: Hospital strain, measured by a novel composite strain index, is strongly associated with ICU admission among patients with sepsis and/or ARF. This strain index fulfills the assumptions of a strong within-hospital instrumental variable for quantifying the net benefit of admission to the ICU for patients with sepsis and/or ARF.