Outpatient care is where health systems are placing their biggest bets. Patient preference, payer pressure, and care model evolution have all pointed in the same direction: capital investment in ambulatory infrastructure is a strategic necessity, not a line item to revisit next cycle.
But the opportunity comes with real financial complexity. Construction cost volatility, supply chain disruption, and compressed development timelines have made traditional pro forma assumptions fragile. Budgets that look solid at kickoff erode by the time a project closes.
The question most health system executives are wrestling with is no longer whether to expand. It's how to expand without the budget moving on them. That requires rethinking how cost certainty gets built into a project from the start.
This piece looks at the disciplines that separate capital programs that hold from ones that don't, and why we increasingly call the target number the lowest responsible cost.
The Outpatient Opportunity: Budget Reality Follows
The shift from inpatient to outpatient care has fundamentally changed where health systems put their capital. Ambulatory surgery centers, multispecialty outpatient facilities, and distributed care campuses now represent a growing share of development pipelines across the country.
That growth creates real opportunity for health systems willing to move. It also creates a specific financial risk: the multi-year gap between project inception and facility operation, during which cost assumptions can be disrupted by forces no project team controls.
Interest rate shifts change financing cost. Supply chain conditions change materials pricing. Labor market tightness changes subcontractor availability and wage rates. Permitting timelines change carrying costs. Each variable might seem manageable on its own. Across a multi-building program, they stack.
The systems that come out whole don't do it by predicting any of that. They do it by removing variables early, before those variables have a chance to compound.
What "Lowest Responsible Cost" Actually Means
There's a version of cost management health systems should avoid: the race to the lowest bid. Lowest-bid procurement produces the number that wins the room on day one. It rarely produces the number that holds through delivery.
Lowest responsible cost is a different target. It's the number that reflects disciplined scope definition, validated assumptions, aligned incentives, and realistic market conditions. The number that survives delivery, not just the approval process.
"At Boldt, we believe the goal isn't the cheapest number on paper. It's the most accurate number in practice — the one that doesn't move."Heidi Lau, VP of Business Development, Boldt Real Estate
When the goal is lowest responsible cost, the development team stops optimizing for initial price and starts optimizing for total delivery cost. That includes the carrying cost of delays, the premium on mid-project change orders, and the opportunity cost of a facility that opens six months late.
It also changes what you need from a project partner. A team oriented around lowest responsible cost isn't trying to win a bid. They're trying to protect your pro forma. That takes a different skill set, a different process, and a different incentive structure.
2025 hospital construction survey data show that only 47% of projects are being completed on or under budget and on or ahead of schedule, while 24% are both over budget and behind schedule.
Source: ASHE Health Facilities Management, 2025 Hospital Construction Survey
Why Pro Formas Break: The Full Picture
Budget erosion in healthcare real estate development is rarely catastrophic in a single moment. It accumulates. A scope assumption that wasn't validated. A unit cost sourced from last year's data. A schedule dependency nobody mapped. Each gap looks small. Together, they're the conditions that produce a project finishing 15 to 25 percent above where it started.
The standard narrative focuses on construction-side variables: scope creep, bad estimates, unaligned contractors. Those are real. But health system executives know the list is longer than that. Some of the most consequential cost drivers originate inside the organization, not on the job site.
Undisciplined early-phase scope definition. When program requirements are still fluid at budget approval, every subsequent decision is made against a moving target. Cost estimates built on incomplete scope are optimistic by design.
Unvalidated pro forma assumptions. Unit costs, escalation rates, lead times, and subcontractor availability are often pulled from historical data rather than current market conditions. In a volatile environment, that gap matters a lot.
Owner decision latency. Delayed responses on design alternatives, deferred physician input, or late changes to clinical requirements don't just cost time. They cost money. Each week a project waits for an internal decision carries financing exposure, subcontractor availability risk, and potential materials repricing. The schedule is a cost document.
Internal stakeholder misalignment. A clinical champion who expands the program after budget approval. A CFO and a CNO working from different space assumptions. Competing priorities between the employed physician group and the health system's capital committee. These aren't project management problems — they're organizational dynamics that land in the pro forma if nobody manages them upstream.
Municipal and regulatory review delays. In most markets, permitting timelines have lengthened. Certificate of Need processes, zoning approvals, and municipal utility coordination can add months to a project schedule. A pro forma that doesn't account for realistic review timelines isn't modeling the actual project.
Clinical program changes midstream. Service line strategies shift. Reimbursement assumptions evolve. A procedure that was projected to anchor a facility gets reclassified or see volumes change before the building opens. Facilities built to a clinical model that changed mid-design carry that mismatch for 20 years.
Closing these gaps requires more than construction discipline. It requires a project structure that accounts for how health systems actually make decisions, and a partner willing to manage the organizational variables, not just the construction ones.
What Certainty Documentation Actually Looks Like in a Board Package
Finance committees and boards increasingly ask for a number that holds. What they're less often given is the documentation that would let them evaluate whether it will. That gap is where budget problems begin.
A well-constructed board package for a capital project doesn't just present a budget. It presents the assumptions behind the budget, the conditions under which those assumptions are valid, and the scenarios under which they're not. That's a different document than a project summary with a cost line at the bottom.
Specifically, certainty documentation in a board package should include:
- A scope confirmation memo signed by clinical, operational, and facilities leadership — documenting that the program reflected in the budget is the program the organization has agreed to build, with a clear change-order threshold and process.
- A market conditions brief showing how unit costs, subcontractor availability, and escalation factors were sourced, when they were sourced, and how they compare to the project's assumptions. Not just what the number is, but where it came from.
- A schedule risk register with the three to five variables most likely to affect project timeline — permitting, municipal approvals, physician tenant commitments, clinical program finalization — and the cost exposure attached to each.
- A reimbursement sensitivity analysis showing how the facility's financial performance holds under different payer mix, volume, and rate scenarios. If the project only works under a best-case reimbursement assumption, the board should know that before they vote.
- A physician alignment summary documenting which physician groups are committed to the facility, at what volume and tenure commitments, and what ownership or lease structures are in place to back those commitments. A facility without anchored physicians isn't a project — it's a vacancy risk.
Boards that receive this kind of documentation can make a real decision. Boards that receive a project summary and a cost number are approving a hope. The difference between those two situations is usually upstream work done before the package was ever prepared.
The Five Levers of Healthcare-Specific Cost Certainty
Generic construction cost discipline addresses one dimension of what makes healthcare real estate projects succeed or fail financially. Health systems operate in a more complex environment than most commercial developers encounter — and the variables that destabilize a pro forma in healthcare are often different in kind, not just degree.
Boldt's approach to cost certainty in outpatient expansion is organized around five levers that are specific to how healthcare projects actually work:
Five Levers of Healthcare Cost Certainty
1. Physician Alignment Before Design. In healthcare real estate, the tenants drive the program, and the program drives the budget. Physician commitments — their specialties, volumes, ownership participation, and tenure expectations — need to be validated before floor plans are drawn. A facility designed around a physician group that isn't truly committed produces a very expensive mistake.
2. Reimbursement-Grounded Financial Modeling. Most healthcare real estate pro formas model revenue as a function of occupancy. The better model starts with reimbursement: what procedures will be performed in this facility, under what payer mix, at what rates, with what projected volume trajectory. Those assumptions determine whether the facility generates the cash flow required to support the capital stack — and they need to be stress-tested against payer mix shifts and rate compression before they go to the board.
3. Campus Adjacency and Network Logic. Outpatient facilities don't perform in isolation. Their financial performance depends on referral relationships, campus traffic, proximity to the health system's employed physician base, and how they fit into the system's outpatient network strategy. A facility in the wrong location — even a beautifully designed, on-budget facility — can underperform for reasons the construction team had no ability to address.
4. Regulatory Timeline Modeling. Certificate of Need states, municipal approval processes, and healthcare-specific building code requirements add time and cost variables that generic commercial construction doesn't face. These aren't unknowns — they're largely predictable with experience in a given market. A project that doesn't model realistic regulatory timelines isn't modeling the real project.
5. Ownership Structure as a Cost Tool. How a facility is owned, and who shares in that ownership, directly affects project economics and incentive alignment. Structures that offer physicians a stake in the building they practice in — aligned with the health system's strategic goals — reduce tenant risk, accelerate leasing, and give every party a financial reason to protect the pro forma. Ownership structure isn't an afterthought. It's a cost certainty mechanism.
These five levers are where healthcare real estate differs most from standard commercial development. Getting them right upstream is what separates projects that perform as modeled from ones that require the board to revisit the capital decision two years after approval.
Upstream Certainty: The New Standard for Capital Planning
The conventional capital planning model treats certainty as something that emerges at the end of the design and procurement process. Under that model, a health system doesn't really know what a project will cost until it's too late to change much without spending real money to do it.
A better model flips that sequence. Certainty is a deliverable, created before scope is finalized, before the first design document is issued, before the pro forma goes to the board.
Getting there requires three things:
- Disciplined scope lock. Program requirements validated against operational reality and regulatory requirements before cost modeling begins.
- Current-market assumption validation. Unit costs, escalation factors, and schedule assumptions benchmarked against live market data, not historical averages.
- Incentive alignment. A project delivery structure where every partner has a stake in the outcome, not just the process.
Baptist Memorial Health Care Corporation
Baptist Memorial Health Care Corporation (BMHCC) needed to expand across two Mississippi campuses simultaneously, during a period of active inflation, supply chain disruption, and rising construction costs. Exactly the conditions that erode pro formas when certainty is treated as an output.
Boldt engaged upstream. Program requirements were validated and scope was locked before cost modeling began. Assumptions were benchmarked against live market conditions. And the ownership structure was designed from the start to align incentives: physicians were offered a stake in the buildings, giving every partner a reason to protect the pro forma rather than simply execute a contract.
Two on-campus medical office buildings resulted: an 89,000 SF facility on the DeSoto campus (opened 2022) and a 97,000 SF Class A building on the Madison campus (opened June 2024). Both delivered on time and on budget, with Boldt assuming development risk so BMHCC didn't have to. Both opened with strong occupancy. The budget that went to the board held through delivery.
Designing to Budget: A Discipline, Not a Constraint
There's a persistent assumption in healthcare capital development that cost discipline means compromise: less square footage, cheaper materials, simpler building systems. It's rarely stated directly, but it shapes how these conversations go.
It's also wrong. Design-to-budget discipline isn't about reducing quality. It's about understanding what each design decision actually costs and what it delivers, and making sure every dollar spent is working for the clinical program and the patient. That's a different conversation than cutting scope.
"High quality doesn't require high cost. It requires aligned decisions made against a validated budget, with the reasoning documented and understood."Alex Brewer, VP of Real Estate, Boldt Real Estate
When cost discipline is built into the design process from the beginning, the team stops discovering budget problems after the fact and starts making informed choices throughout. Where to invest. Where to optimize. What trades off against what.
Documenting the reasoning matters too. When stakeholders can see why a cost decision was made, "we shifted to this structural system because it meets the same performance standard at 12% lower cost," they can evaluate it rather than just accept it. That transparency moves alignment faster than any other tool.
Building Pro Formas That Hold: Stress-Testing for the Real Environment
A pro forma built on optimistic assumptions is a story, not a financial plan. The test isn't whether it's compelling at board approval. It's whether it holds when markets tighten, supply chains slip, or a permitting timeline runs six months long.
Pro formas that hold share a few characteristics. They're built on current, market-validated cost assumptions rather than historical benchmarks. They include escalation modeling tied to realistic project timelines. They account for schedule-driven financing exposure. And they get stress-tested against plausible adverse scenarios before anyone calls them final.
Three Scenarios to Stress-Test Before Approval
Consider modeling: (1) a 6-month schedule extension driven by permitting or weather; (2) a 10 to 15 percent materials cost escalation in a key trade; and (3) a 50 to 75 basis point shift in financing rates. If any of these scenarios breaks the project economics, the assumptions need to be hardened before the project moves forward.
The goal isn't a conservative budget with margin buried in it. It's a budget that accurately reflects the real cost of delivery, backed by a project execution model built to protect that number.
Certainty as a Deliverable: What to Expect From Your Development Partner
Not all development and construction partners are structured to deliver certainty. Some are structured to deliver a competitive bid. You can tell the difference over the course of a project, but the signals are there earlier than that, if you know what to look for.
A partner oriented toward certainty engages with budget validation before design is complete. They document the assumptions behind every major cost estimate and update them as market conditions shift. They raise scope changes early, when the cost to address them is low, rather than late, when those same issues become change orders.
They're also clear about what certainty requires from the health system: decisions made on schedule, scope held against validated requirements, and stakeholder alignment maintained through delivery. Certainty is a shared outcome. No project team can manufacture it alone.
"Certainty isn't a product you buy. It's an outcome you create together — through discipline upstream and honest communication when assumptions change."Sam Smith, Development Manager, Boldt Real Estate
For health system executives evaluating development partners, the more useful question isn't "What is your price?" It's "Show me the last three projects where your initial budget held. Walk me through how you got there."
The Strategic Case for Getting Certainty Right
Health systems expanding their outpatient footprint are making long-duration bets on where care will be delivered, how it will be reimbursed, and what patients will expect. Those bets need to be protected through rigorous capital discipline, not just sound clinical planning.
Budget certainty in healthcare real estate isn't a function of favorable markets or good timing. It's a function of process: disciplined scope definition, validated assumptions, aligned incentives, and honest communication throughout delivery.
Organizations that build those disciplines in early, before scope is locked, before contracts are signed, before risk compounds, produce better financial outcomes than those waiting for favorable circumstances to cover for optimistic assumptions.
In a capital environment where every dollar of cost overrun is a dollar that doesn't go toward staffing, technology, or the next expansion, getting this right isn't optional. It's the foundation of a growth strategy that actually holds.