Financial diversification: Key to U.S. health care resilience
Financial diversification is becoming an increasingly important strategy for hospitals, health systems and insurers to sustain financial health amid a complex and evolving market. For those organizations that may be struggling with identifying a strategy, diversification refers to expanding revenue streams beyond traditional patient care services, including investments in new care delivery models, technology and ancillary services. These strategies are driven by market shifts such as the rise of value-based care, changing patient preferences and the pressure to control costs while improving quality. By diversifying, health organizations are reducing dependence on any single revenue source and can better manage financial risks in a competitive environment.
One common diversification approach involves expanding outpatient and telehealth services. The pandemic disrupted traditional health care operations and accelerated the adoption of telehealth, which continues to be valued for its convenience, accessibility and cost-effectiveness. Health systems are investing in telehealth platforms to capture higher-margin revenue streams while meeting patient demand for virtual care. According to CMS, 68.9 million people are enrolled in Medicare and this number will continue to increase as the Baby Boomer population ages into retirement over the next five to seven years. Additionally, ambulatory surgery centers and other outpatient facilities are targeted for growth to offer lower-cost alternatives to hospital-based care. These expansions not only increase revenue but also improve patient experience by providing care in more convenient settings.
Another key area of financial diversification is focusing on wellness and preventive care platforms, especially by health insurers. These platforms provide digital health coaching, AI-driven risk assessments and incentive programs that promote healthy behaviors. Insurers can use subscription models, corporate licensing or data monetization to create new revenue streams linked to population health management. Diversification into these preventive services supports long-term cost control by improving health outcomes while generating financial returns from services beyond traditional insurance claims.
Hospitals and health systems are also diversifying by adopting financial investment strategies, including private equity partnerships, venture capital investments in startups and creating for-profit subsidiaries. These financial moves allow health organizations to tap new growth opportunities, enhance efficiencies and build financial reserves that support core health services. Consolidation via mergers and acquisitions is another form of diversification that can improve scale, market power and financial stability. However, such financialization strategies must be balanced against potential impacts on competition, pricing, and patient access.
Finally, public health entities are increasingly focused on revenue diversification to enhance financial resilience. Local health departments diversify their funding by blending grants, fees, insurance reimbursements and local tax levies. Greater diversity in funding sources allows these agencies to maintain essential public health functions despite fluctuations in any single revenue source.
Overall, financial diversification in health care across different organizational types helps to foster long-term sustainability, improve care delivery and manage economic uncertainties.
Learn more about what’s happening in health care in our industry outlook.
