Problem definition: The shortage of inpatient beds is a major cause of delays and cancellations in many hospitals. It may also lead to patients being admitted to inappropriate wards, resulting in a lower quality of care and a longer length of stay. Academic/ practical relevance: Investment in additional beds is not always feasible. Instead, new and creative solutions for amore efficient use of existing resourcesmust be sought.Methodology: We propose a new configuration of inpatient beds, which we call the clustered overflow configuration. In this configuration, patients who are denied admission to their primary wards as a result of beds being fully occupied are admitted to overflow wards, with each designated to serve overflows from a certain subset of specialties and providing the same quality of care as in primary wards. We propose two different formulations for partitioning and bed allocation in the proposed configuration: one minimizing the sum of average daily costs of turning patients away and nursing teams, and another minimizing the numbers turned away subject to nursing cost falling below a given threshold. We heuristically solve instances from both formulations. Results: Applying the models to real data shows that the configurations obtained from our models compare very well with the other configurations proposed in the literature, provided that patients’ willingness to wait is relatively short. Managerial implications: The proposed configuration provides the combined advantages of the dedicated configuration, wherein patients are only admitted to their primary wards, and the flexible configuration, in which all specialties share a single ward. On the other hand, it restricts the adverse impacts of pooling and minimizes cross-training costs through appropriate partitioning and bed allocation. As such, it serves as a viable alternative to existing inpatient configurations.