If You Were Building Your Health System Today, Would You Build the One You Already Own?

Those transactions brought much more than physicians into health systems. They brought clinics, leases, diagnostic equipment, procedure capacity, employees, administrative functions and support infrastructure. Hospital acquisitions and ambulatory expansion added another layer of assets and obligations. Over time, the question can quietly shift from what network would best support our strategy to how do we continue supporting the network we have accumulated?

Demand is Growing – But Where That Demand is Served is Changing

The challenge should not be oversimplified into a narrative that hospitals are becoming less relevant as outpatient care grows. The data suggest something more nuanced. The American Hospital Association reports that inpatient volumes increased 5.3% in 2025, while outpatient visits grew 9.8%. Hospitals are treating more patients, while substantial portions of care continue moving toward ambulatory and other distributed settings. [2]

Hospitals will remain essential to complex surgery, critical care, trauma, high-acuity cardiovascular care, complex oncology and other services requiring sophisticated infrastructure and around-the-clock clinical capabilities. The strategic issue is not simply inpatient versus outpatient. It is matching each component of demand with the appropriate site of care – and then aligning the physical network accordingly.

When a Successful Project Creates an Enterprise Problem

Consider a health system developing a new ambulatory surgery center. The market analysis supports it. Physicians want it. Patients gain more convenient access. The pro forma generates an acceptable return. Three years later, the ASC meets its volume and financial targets.
But assume that a meaningful portion of those cases previously occurred in hospital operating rooms. The cases have moved; the hospital operating rooms remain. So do the pre- and post-operative areas, support departments, utilities, maintenance, depreciation and much of the staffing and overhead associated with them.

What Happens When the Network – Not the Project – Becomes the Unit of Analysis?

We saw the difference firsthand in work with a multihospital health system serving a major metropolitan market. The organization operated multiple hospital campuses and a substantial network of outpatient locations. Each had developed over time in response to its own history, market position, physician relationships and community needs.

Instead of approaching the future one campus at a time, we examined the system as one healthcare network. For each location, the team assessed services, clinical and equipment capacity, utilization, market demand, competitive position and financial performance.
That analysis allowed leadership to ask a different question: What should each location do, and what should it not do, for the overall system to perform better?

The answers did not simply lead to cuts. Some services were concentrated at campuses where clinical infrastructure, market position and economics best supported them. Other services were redistributed to improve access or eliminate unnecessary duplication. Equipment capacity was recalibrated against current utilization and projected demand rather than perpetuating historical capacity because it already existed.

The same analysis also identified where the organization needed more. Geographic gaps supported new ambulatory access points. Physician specialties and target geographies were identified for recruitment or practice acquisition to strengthen clinical programs and support future growth.
Finally, service, physician, facility and market strategies were brought together into an integrated financial and capital plan. The result was a realigned capital strategy: better utilization of existing assets, reduced or redirected duplicative capital requirements, and targeted new investment in markets, access points, physicians and clinical capabilities that supported future growth.

Utilization is Necessary But Not Sufficient

Healthcare organizations already measure bed occupancy, operating room utilization, imaging throughput, exam-room utilization, clinic sessions and procedure-room utilization. Those metrics remain essential, but utilization alone can mislead when evaluating an enterprise portfolio.
A hospital can be operating at high inpatient occupancy while carrying excess capacity elsewhere. An apparently underutilized facility may have strategic importance because of geography, clinical mission, emergency preparedness or community obligation.

The more meaningful question is: How much of this asset is productively supporting our future care model? We think of this as effective asset utilization – combining traditional utilization with market demand, site-of-care strategy, asset economics and strategic importance.

The Most Valuable Project May Be the One That Changes

Consider a health system projecting significant growth and contemplating a new clinical building. The conventional process may move quickly toward programming: exam rooms, diagnostic capacity, square footage, site and cost. An enterprise portfolio approach begins earlier: How much capacity exists elsewhere? Is it in the right location? Could existing clinical space be used differently? Could services move to lower-cost settings? Are leases duplicating owned capacity? Could existing facilities be repurposed? Could technology or process changes increase throughput?

The answer may still be a new building. It may be a smaller building, an ambulatory facility rather than a hospital addition, or no building at all. Avoiding unnecessary capital is itself a return on strategy – and dollars not committed to unnecessary capacity remain available for investments that may create greater value.

From Accumulated Assets to an Intentional Network

The health system of the future is unlikely to function as a collection of independently optimized buildings. It is more likely to operate as an interconnected care network: hospitals for high-acuity and infrastructure-intensive services; ambulatory hubs for specialty and procedural care; ASCs for appropriate surgical services; neighborhood locations for primary care, diagnostics and selected specialties; and virtual and home-based care extending the network beyond traditional facilities.

The strategic challenge is determining the role each asset should play within that network – and then aligning capital accordingly.

Sometimes that means building. Sometimes it means modernizing. Sometimes it means expanding ambulatory access or acquiring physician capabilities. Sometimes it means consolidating, repurposing or eliminating capacity. But in every case, investment should follow a clear view of the enterprise network the organization is trying to create.

If the answer to the opening question is no, the next question should not immediately be ‘What should we build instead?’ A better question is: “What network does our strategy require, and how do we transform the assets we already have to create it?”

Because the ultimate goal isn’t the next building.  It’s an intentional health system.

References

[1] American Medical Association. Physician Practice Benchmark Survey / 2024 practice ownership findings. 2025.

[2] American Hospital Association. Costs of Caring: Challenges Facing America’s Hospitals as They Care for Patients in 2026. March 2026.

[3] Mortenson. Construction Cost Index: 1st Quarter 2026.

[4] American Hospital Association. The Cost of Caring: Challenges Facing America’s Hospitals in 2025. April 2025.

Editorial Note: The client case is intentionally anonymized. Quantified client outcomes should be added only if they can be validated from engagement records and disclosed without compromising confidentiality.