If your LinkedIn feed looks anything like ours lately, you’ve seen no shortage of posts about the shift to outpatient care. Lower costs! Better patient experience! The future of healthcare delivery! And they’re not wrong. Outpatient migration is real, it’s accelerating, and its reshaping healthcare real estate.
But after more than four decades and thousands of transactions in this space, we’re in a good position to say this isn’t new, but it is nuanced.
What They Get Right
The fundamentals driving outpatient migration are real. Technology continues to enable more procedures and services outside traditional hospital settings. Patients genuinely prefer convenient, accessible care closer to where they live and work. And while healthcare systems—particularly here in Minnesota—remain cost-sensitive and thoughtful about expansion decisions, the strategic shift toward outpatient delivery continues to gain momentum. The trend is legitimate, well-documented, and likely irreversible.
What We See Differently
This is not a new trend.
In fact, we’ve seen significant outpatient, off-campus development for over a decade! Some visionary groups have been benefiting from and scaling this strategy.
Consider MNGI Digestive Health’s expansion into Woodbury—not on a hospital campus, but at the site of a major redevelopment of a former State Farm headquarters now known as CityPlace. In their search for optimal space, location strategy focused on specific factors: freeway adjacency, proximity to a retail hub, and access to strong patient demand in both Woodbury and Western Wisconsin markets. MNGI’s commitment to anchor the building with less than 50% pre-leased reflected confidence that the location would drive patient volumes and practice growth.
When we conducted a full metropolitan site selection process for Shriners Children’s to relocate its ambulatory services from its hospital campus, that same Woodbury location was selected. This wasn’t about convenience alone; it was about referral access, demographics, visibility, and positioning within a growing medical hub.
Or take North Memorial’s search for space in Minnetonka. After nearly a year of searching with another firm yielded nothing suitable in their target market, Davis stepped in and shifted the focus from what was available to identifying the ideal location. That required assembling seven parcels—only one of which was on the market—in a mature market with excellent demographic indicators. The site filled a critical gap in North Memorial’s market coverage, positioning them to serve an underserved area with strong patient demand. Today, more than 10 years after opening, the Minnetonka Medical Center houses North Memorial’s primary care, urgent care, and surgery center—proof that the right location, even when difficult to secure, creates lasting value and supports multiple service lines.
The lesson: The best outpatient locations often require creativity, persistence, and strategic thinking, not just browsing available listings. Demographics, referral patterns, visibility, access, and even community relationships all factor into whether a location truly succeeds.
Cost is Just One Part of the Equation
Everything is more expensive than it was five years ago, and moving to a new clinic is no exception. Construction costs have increased dramatically, financing is more expensive, and rental rates that seemed unthinkable a few years ago are now necessary to make deals pencil.
The smart groups are deliberate about where they go and looking at revenue, not just costs. They’re thinking through creative approaches to making economics work and increasingly recognizing that “expensive” is relative.
Opportunity Cost Considerations:
- What’s the cost of not expanding to meet demand?
- What’s the cost of constrained hospital capacity or limited access to quality space?
- What’s the opportunity cost of ceding market share to competitors willing to make the investment?
Revenue Growth Opportunities:
- How much additional revenue could we generate in an efficient facility in a growing market?
- How much could we reduce our staff turnover with a facility that supports them?
- How many more patients would come to our site that’s easy to access and instills confidence in the quality of care they’ll receive?
Care delivery and profit are the ultimate goals. Sometimes a higher cost alternative is the way to achieve those goals.
The Bottom Line
Our 2025 data showed groups focusing on optimization over expansion, with renewals outnumbering new leases as organizations maximized existing footprints rather than taking on new space. But that strategy only works for so long. At some point, genuine growth needs require new locations, and the current supply-constrained market means groups can’t afford to wait for perfect conditions or perfect pricing.
After decades in this space, we’ve learned that successful outpatient projects aren’t just about following trends, they’re about fundamentals that don’t make headlines: rigorous demographic analysis, understanding referral networks, realistic pro formas, persistent site acquisition, and location decisions that support both patient access and operational viability. The economics may be challenging, but when weighed against the alternatives, the math often favors those willing to think creatively about making projects pencil.
The trend is real. The opportunity is real. But so is the need for sophistication and expert guidance.