Healthcare Services Growth

Not all services contribute equally to your practice's profitability. A procedure that takes 90 minutes and reimburses $200 has very different economics than one that takes 20 minutes and reimburses $150. According to MGMA cost accounting principles, multiply these differences across dozens of services, and your service mix becomes one of the most important drivers of practice financial performance.

Yet most practices grow their service offerings organically without strategic analysis. You add services when providers learn new skills, when patients ask for them, or when competitors offer them. This reactive approach often leaves money on the table.

Service mix optimization means deliberately analyzing which services you should emphasize, maintain, de-emphasize, or add based on profitability, demand, and strategic fit. It's not about dropping every low-margin service—some serve important patient care or market positioning roles. But it is about making informed decisions rather than letting your service portfolio evolve by accident.

The Service Mix Puzzle

Your service mix shapes your practice in multiple ways:

Revenue composition determines your total income. But not all revenue is equally profitable. A practice generating $2M from high-margin services is more profitable than one generating $2M from low-margin services.

Time allocation follows your service mix. If you spend most of your clinical time on low-value services, you're limiting revenue potential regardless of how busy you are.

Market positioning reflects what you're known for. Patients and referral sources categorize you based on your visible service emphasis. If you want to be known for specialized services but spend most of your time on routine care, there's a disconnect.

Resource requirements vary by service. Some procedures need expensive equipment, extensive space, specialized staff, or unique supplies. These costs need to justify themselves through adequate volume or margins.

Provider satisfaction connects to service mix too. Most providers prefer certain types of cases over others. A mix heavily weighted toward services they find less satisfying affects morale and retention.

The goal is finding the right balance—profitable enough to sustain the practice, valuable enough to attract patients, interesting enough to engage providers, and aligned with your strategic direction.

Service Profitability Analysis

You can't optimize what you don't measure. Start with detailed profitability analysis for each service you offer.

Revenue per service is the starting point. Calculate average reimbursement across all payer sources:

Insurance reimbursement rates by plan
Self-pay pricing
Package or discount pricing
Average actual collection

Don't use fee schedule amounts—use what you actually collect. A service with a $500 fee schedule that collects an average of $280 has a real revenue value of $280.

Cost allocation requires identifying both direct and indirect costs:

Direct costs:

Clinical supplies and materials used
Lab or outsourced service fees
Single-use equipment or instruments
Medication or product costs

Indirect costs (allocated by time or complexity):

Provider time at their hourly cost
Support staff time
Room and equipment depreciation
Sterilization and processing
Administrative overhead

Calculate total cost per service incident. Be honest about time requirements—include preparation, treatment, and follow-up.

Time requirements drive capacity:

Clinical time (provider + assistant)
Pre-service time (setup, review, patient prep)
Post-service time (cleanup, documentation, follow-up)
Total appointment block needed

A 30-minute procedure that requires a 60-minute schedule block has a capacity cost of 60 minutes, not 30.

Margin calculation shows the bottom line:

Revenue per service: $500
Direct costs: $120
Allocated indirect costs: $180
Net margin: $200 (40%)

Compare margins across all services. You'll find wide variation—some services at 60%+ margins, others below 20% or even negative.

Your healthcare practice metrics should include service-level profitability as a core component of financial analysis.

Market Demand Assessment

Profitability means nothing without demand. A highly profitable service that nobody wants doesn't help your practice.

Patient demand patterns reveal what your market needs:

Service volume trends over time
Seasonal fluctuations
Demographic patterns (age, gender, income)
New patient requests vs. existing patient needs

Look at both current demand and potential demand. Some services may have low volume because you haven't promoted them, not because patients don't want them.

Competitive landscape affects your opportunities:

What services are oversaturated in your market?
Where are there unmet needs or underserved niches?
What do competitors charge and how do they position services?
Which services face the most price pressure?

If ten practices in your area offer the same routine service, margins will be compressed. If you're one of two offering a specialized service, you have pricing power.

Demographic trends signal future demand:

Aging population increasing need for certain services
Younger demographics preferring preventive and aesthetic services
Income levels supporting elective or premium services
Cultural factors influencing healthcare priorities

Plan your service mix for where your market is going, not just where it is today.

Insurance coverage shifts create demand changes:

Services gaining coverage becoming more accessible
Services losing coverage requiring self-pay positioning
High-deductible plans making cost transparency critical
Alternative payment models favoring different service bundles

A service that moves from well-covered to poorly-covered can quickly shift from high-volume to low-volume.

Strategic Service Decisions

Combine profitability and demand data to categorize your services strategically.

Services to grow meet these criteria:

Above-average margins (typically 40%+)
Strong or growing demand
Strategic fit with your positioning
Competitive advantage or differentiation
Provider interest and capability

These are your practice's profit engines. Invest in promoting them, ensure excellent delivery, and structure operations to maximize volume.

Services to maintain include:

Solid margins (25-40%)
Stable demand
Expected by your patient base
Competitive necessity (you need to offer them)
Foundation for more profitable services

These keep the practice running but aren't growth focuses. Deliver them efficiently and well, but don't over-invest.

Services to reconsider show warning signs:

Below-average margins (under 25%)
Declining demand
Significant competitive pressure
High complexity or resource requirements
Provider disinterest

These may warrant:

Price increases if market will bear them
Efficiency improvements to reduce costs
Referral to others if volume doesn't justify resources
Elimination if they're losing money with no strategic value

New services to add fill strategic gaps:

High demand with limited competition
Strong margins based on market research
Leverage existing resources and capabilities
Align with practice positioning and expertise
Support patient retention or acquisition

Don't add services just because you can. Add them because they strengthen your strategic position and financial performance.

The relationship to production per visit becomes clear—optimizing your service mix toward higher-value services increases revenue per patient encounter.

Capacity and Resource Planning

Shifting service emphasis requires operational changes.

Provider skills and training must match your desired mix. If you want to grow certain services, ensure providers have the expertise to deliver them excellently.

Identify skill gaps and create development plans:

Continuing education and training
Mentorship or coaching
Practice and skill development time
Certification or credentialing if needed

Don't market services you can't deliver at high quality. Build capability before building demand.

Equipment requirements can be significant:

Capital cost of new equipment
Ongoing maintenance and calibration
Space requirements
Utilization rates needed to justify investment

Calculate break-even volume before investing in expensive equipment. If you need 200 procedures per year to justify a $50,000 device, make sure that volume is achievable. This investment analysis should integrate with your healthcare technology stack planning to ensure new capabilities complement existing systems.

Space considerations affect what you can offer:

Procedure rooms suited for different service types
Waiting and recovery areas
Storage for specialized supplies
Compliance with regulatory requirements

Growing certain services may require facility modifications. Factor these costs into ROI calculations.

Staffing needs vary by service:

Number of assistants or support staff required
Specialized training or credentials needed
Staffing ratios for different procedure types
Administrative support for scheduling and billing

High-complexity services often need more staff time per case. Ensure you have adequate capacity before ramping up volume.

Connection to provider productivity is direct—service mix optimization often means shifting provider time toward higher-value services that better use their skills.

Marketing Alignment

Your service mix strategy should drive marketing priorities.

Promoting profitable services generates better ROI:

Website emphasis on high-value services
Content marketing educating about profitable procedures
Paid advertising focused on services you want to grow
Social proof and testimonials for target services

Don't spend equal marketing dollars on all services. Invest where returns are highest. This selective approach aligns with effective healthcare content marketing strategies that focus resources on high-value service promotion.

Referral targeting should emphasize your strategic services:

Educate referral sources about capabilities in high-value areas
Make referrals easy for services you want to grow
Build relationships that send you ideal cases
Create referral materials highlighting profitable services

The healthcare services growth model you follow should integrate service mix optimization into overall strategy.

Patient education creates informed demand:

Explain benefits of services you want patients to consider
Address misconceptions about valuable procedures
Share success stories and outcomes
Make information easily accessible

Patients often don't know about services you offer. Strategic education builds demand for profitable offerings.

Package development bundles services attractively:

Combine profitable services with complementary procedures
Create value perception while maintaining margins
Simplify decision-making for patients
Increase average case value

A package that bundles a high-margin service with a moderate-margin service can increase total revenue while appearing to offer savings.

Monitoring and Adjustment

Service mix optimization isn't a one-time project. Markets change, payer policies shift, and new opportunities emerge.

Service performance tracking should be ongoing:

Monthly review of volume by service
Quarterly profitability analysis
Annual comprehensive service mix review
Continuous monitoring of contribution to total revenue

Set up dashboards that make key metrics visible. When a service's performance changes significantly, investigate why.

Quarterly reviews examine strategic progress:

Are targeted services growing as planned?
Have margin assumptions held true?
Has demand materialized as expected?
Are operational capabilities adequate?

Use quarterly reviews to make tactical adjustments while maintaining strategic direction.

Strategic pivots may be necessary when:

Market conditions change substantially
Payer policies dramatically affect service economics
Competitive dynamics shift
Practice capabilities or priorities evolve

Be willing to change course when data shows your strategy isn't working. Don't persist with unprofitable services out of habit or ego.

For practices using models like the wellness center business model, service mix becomes even more critical as you're typically offering a wider range of elective and cash-pay services.

Common Pitfalls to Avoid

Don't confuse volume with profitability. A high-volume service that barely breaks even consumes resources better deployed elsewhere.

Don't ignore provider preferences completely. If providers hate delivering a service, quality and patient experience suffer even if margins are great.

Don't cut services too quickly based purely on numbers. Some low-margin services support patient retention, market positioning, or serve as entry points to more profitable services. Consider how each service contributes to your overall new patient lead generation even if margins are lower.

Don't fail to communicate changes to staff and patients. If you're de-emphasizing or discontinuing services, explain why and offer alternatives.

Don't optimize for short-term profit at the expense of long-term positioning. Sometimes building capability in emerging services requires tolerating lower margins initially.

Implementation Roadmap

Phase 1: Analysis (Month 1-2)

Gather financial data for all services
Calculate profitability by service
Assess demand patterns and trends
Evaluate competitive positioning

Phase 2: Strategic Planning (Month 3)

Categorize services (grow/maintain/reconsider/add)
Identify capability gaps and resource needs
Set service mix targets for next 12-24 months
Develop investment and divestment plans
Align with practice expansion strategy if considering adding locations or capabilities

Phase 3: Operational Preparation (Month 4-6)

Build capabilities for growth services
Train staff on priorities and workflows
Acquire necessary equipment or resources
Develop marketing materials

Phase 4: Execution (Month 7-12)

Launch marketing for growth services
Begin de-emphasizing lower-value services
Monitor performance against targets
Adjust based on results

Phase 5: Continuous Improvement (Ongoing)

Regular performance monitoring
Quarterly strategy reviews
Annual comprehensive service mix analysis
Ongoing optimization

Creating Your Ideal Service Mix

The ideal service mix is different for every practice. It depends on your market, capabilities, strategic goals, and values.

But the process is the same: understand the true profitability of each service you offer, assess market demand honestly, make strategic decisions about where to focus, and align operations and marketing to execute your strategy.

Practices that optimize service mix typically see:

15-30% improvement in overall practice profitability
Better utilization of provider time
Higher staff satisfaction (working on better services)
Stronger market positioning
More predictable financial performance

The work requires rigorous analysis and sometimes difficult decisions about dropping familiar services or investing in new capabilities. But the financial and strategic returns make it one of the highest-leverage activities for practice owners who want to build more profitable, sustainable practices.

Stop letting your service mix happen by accident. Take control of what you offer, emphasize what drives real value, and build a practice that's profitable by design.

Tara Minh

Operation Enthusiast