How Health Systems Rethink Services to Increase Capacity, Revenue

Limited capacity and growing financial pressure are forcing health systems to reconfigure service offerings as they look to increase access and revenue.

They are eliminating duplicative services after years of mergers and acquisitions. That often means consolidating low-volume facilities that are expensive to staff and operate and tend to produce worse outcomes.

Executives hope more rigorous service-mix evaluations and the resulting changes will prepare their organizations for reimbursement reductions and rising costs. Freeing space in their hospitals for additional complex cases can increase revenue and yield higher reimbursement.

Health system administrators are working closely with physicians as they map out service adjustments, some of which have started to show promising results.

“The end of Affordable Care Act subsidies and pressure around prior authorization and reimbursement are challenging hospital system margins,” said Jennifer Hwang, Head of the Healthcare Banking Group at Western Alliance Bank. “They have to find a way to optimize their services.”

Administrators are taking a closer look at overlapping services than in years past because their facilities are often full and margins have narrowed. As they weigh closing or consolidating clinics, system executives must consider patients who would need to travel farther for care.

Wellstar Health is looking carefully at its trauma, stroke, bariatric and cardiac services, among others, said Dr. Richard Freeman, chief physician executive. The Marietta, Georgia-based health system started consolidating some of those services in the Atlanta region over the past year, and it has helped Wellstar accept significantly more cardiac surgery transfers, he said.

“That not only helps our bottom line, but it’s better for patients,” Freeman said.

Health systems should get clinicians involved early in the restructuring process to limit potential unintended consequences, he said. Physicians can identify what types of equipment and supplies are needed in a revamped facility and can help garner clinicians’ support. Some services need to be accredited, and changing trauma center designations would require state oversight.

“It can take 12 to 18 months. You can’t just flip a switch,” Freeman said. “But now, we have seen a big effect on bed availability.”

Increasing inpatient capacity for complex care was a main driver behind the 2024 opening of University of Missouri Health Care’s Keene Street Medical Center, an outpatient hub.

MU Health Care typically has a huge backlog for MRIs, CTs and other imaging services, Chief Operating Officer Tonya Johnson said. To help meet that demand, it repurposed its Women and Children’s Hospital into Keene Street Medical Center. In mid-2024, the Columbia, Missouri-based academic health system opened a new children’s hospital that centralized pediatric services near the flagship hospital.

Since the new children’s hospital and Keene Street Medical Center opened, University of Missouri Health Care has treated more higher-acuity inpatient transfers in obstetrics, cardiology, neurosurgery, endoscopy and gastroenterology, Johnson said.

A growing number of patients with mental health conditions often strain hospital capacity. Many typically show up to the emergency department, forced to wait for an inpatient bed because many community-based mental health facilities are understaffed.

Those care gaps have created expansion opportunities for health systems like Bon Secours Mercy Health. It has treated a surge of mental health patients in the Youngstown, Ohio, region as area providers have closed, said Joseph Cazayoux, chief strategic planning and consulting officer. The Cincinnati, Ohio-based system opened freestanding rehabilitation and behavioral health centers in 2024 and 2025, helping move those patients out of hospitals and increase capacity.

As a result, Bon Secours Mercy has been able to treat more patients at its two Youngstown hospitals for cardiac care and other high-demand services, Cazayoux said.

“Behavioral health and rehabilitation occupy a lot of square feet and are expensive to maintain in the inpatient setting,” he said. “Moving those services to better-outfitted facilities has created a lot of capacity.”

Valley Health, a rural health system in Virginia and West Virginia, also is expanding its rehabilitation and mental health services. Next month, Valley Health plans to open a $21 million behavioral health pavilion. Early next year, the health system is set to open a $75 million rehabilitation tower near its flagship hospital, Winchester Medical Center.

The expansion projects will help Valley Health get mental health patients out of acute-care hospitals and into rehabilitation and intensive outpatient facilities, which the community sorely needs, said Mark Nantz, president and CEO of Valley Health.

“Our emergency department needs to be decompressed and we want to make sure our community has outpatient services to keep them from being institutionalized,” he said.

This article was originally published in Modern Healthcare by Alex Kacik and is republished here with permission. You can view the original version here.