Integrated Systems Health Management (ISHM) is an evolving technology used to detect, assess, and isolate faults in complex systems to improve safety. At the conceptual design level, system-level engineers must make decisions regarding the inclusion of ISHM and the extent and type of the sensing technologies used in various subsystems. In this paper, we propose an ISHM design tool to be used in conjunction with standard system modeling methods to help with the integration of ISHM into the system design process. The key to this analysis is the formulation of an objective function that explicitly quantifies the value derived by integrating the ISHM technology in various subsystems. Ultimately, to determine the best ISHM system configuration, an objective function is formulated, referred to as profit, which is expressed as the product of system availability and revenue per unit availability , minus the sum of cost of detection and cost of risk . The analysis is conducted at the system functional level appropriate for conceptual design using standard system functional modeling methods, and ISHM is allocated to the functional blocks using the ISHM design tool. The proposed method is demonstrated using a simplified aerospace system design problem resulting in a configuration of sensors, which optimizes the value of the ISHM system for the given input parameters. In this problem, profit was increased by 11%, inspection interval increased by a factor of 1.5 and cost of risk reduced by a factor of 2.4 over a system with no ISHM.