New ambulatory facilities are a hot ticket among hospitals and health systems of all sizes, and providers are tapping into a variety of sources to foot the bill.
Providers have for years sought to meet patient demand for lower-cost ambulatory services, and the need for facilities to house those services has only grown with an aging population. To stay relevant, providers need to funnel their capital toward ambulatory care.
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“Every health system we meet with, at some point the topic of patient access comes up — that more and more patients, i.e. consumers, want care close to home,” said Mark Pascaris, senior director at credit rating agency Fitch Ratings.
Providers have multiple options for funding capital projects. Health systems, particularly larger operations with more resources, often rely on their cash flow and reserves to cover the costs. While debt financing is often used for higher-cost inpatient facilities, it is still a common option for long-term outpatient projects. Philanthropic donations are another possibility.
Here’s how five health systems are investing in and planning to fund ambulatory care projects.
Sutter Health
Sacramento, California-based Sutter Health is using a combination of cash flow and debt financing to fund its ambulatory aspirations. The system went to the bond market for $750 million in 2023 to help cover the costs of its ambulatory projects. It plans to go back to the bond market for more funds later this year.
“These are 20-, 30-, 40-year projects, so it makes sense to [fund] them with debt given the duration and the longevity of a lot of these assets,” President and CEO Warner Thomas said. “We’ve made a very concerted effort to reallocate capital and make sure that we are putting more of our capital dollars into ambulatory [care].”
Sutter, a more than $16 billion system, is investing $800 million in an ambulatory care hub that includes two new medical campuses, Sutter East Santa Clara Campus and Sutter West Santa Clara Campus. The campuses will offer primary care, imaging, lab, urgent care and specialty services across 1 million square feet of retrofitted space. The smaller east campus, about 300,000 square feet, is scheduled to open in the second half of 2025, followed by the west campus in 2027.
The Santa Clara projects are happening in tandem with the first phase of an ambulatory growth plan approved in 2023, which includes $1 billion earmarked for opening approximately 25 ambulatory care sites across northern California. Sutter plans to open 15 of those sites this year, Chief Operating Officer Mark Sevco said.
Sutter is also looking to add 27 urgent care sites in the next three years, Sevco said.
Advocate Health
Advocate Health in December announced plans to invest $1 billion over 10 years in South Side Chicago, roughly $700 million of which is earmarked for ambulatory care expansion and related programs.
Charlotte, North Carolina-based Advocate, a $32 billion system, is funding the investment using reserves, bond proceeds and potentially a philanthropic campaign, according to a spokesperson.
More than $500 million will go toward 10 new neighborhood care sites, the first of which will open this year at South Side YMCA. Two additional sites are expected to open in 2025. Plans also include a mobile medicine vehicle for primary care and more clinicians, services and appointments at Advocate’s Imani Village outpatient clinic.
Another $200 million will go toward chronic disease management services and resources for pre- and post-natal care, among other projects. Advocate wants to open up 5,000 annual OB-GYN visits, in addition to new programs and expanded services for women.
“We are attacking [care] from multiple angles,” said Michelle Blakely, president of Advocate Trinity Hospital. “I tease and I say, ‘I’m a hospital administrator, but I don’t want anyone in my bed.’”
Children’s Health
Dallas-based Children’s Health, a roughly $3 billion system, has two specialty centers in the pipeline.
A 28,000-square-foot, $33 million location is set to open at Fairview later this year and will house 19 providers across 11 specialties.
Children’s Health is also moving into the second floor of an old Sears building in Dallas, which is now part of the 150,000-square-foot UT Southwestern Medical Center at RedBird. That $37 million center will house eight specialties and is expected to open in 2027.
The projects are being financed with operating cash flow and reserves, Chief Financial Officer Robert Fries said.
For capital projects, Children’s Health typically draws on philanthropic donations or debt financing first, followed by operating cash, Fries said. However, operating margins were strong enough to support the use of cash for the specialty centers, he said.
UC Davis Health
UC Davis Health in Sacramento, California, will open in July a 268,000-square-foot ambulatory surgery center as part of its $589 million 48X Complex, which will offer specialties including radiology, orthopedics, neurology and urology.
The center will help with capacity constraints at UC Davis Medical Center, which reported $3.8 billion in revenue in fiscal 2024.
About half of the surgeries performed at the main hospital are outpatient procedures, and most of those procedures can be performed at the new facility, Dr. Bruce Hall, chief clinical officer, said via email. UC Davis estimates 48X can serve up to 15,000 patients per year at full capacity, he said.
The system funded the project through debt financing, Hall said.
Harris Health
Bellaire, Texas-based Harris Health is using a $2.5 billion bond package approved by voters in 2023 to fund new construction and renovation projects that are part of a larger strategic facilities plan.
The bond translates to a 2-cent tax increase for property owners in Harris County.
Most of the bond money will go toward a new trauma hospital, but about $500 million has been set aside to add new community clinics or improve existing ones.
Harris operates more than 30 clinics offering a range of services, including urgent care, specialty care and pediatrics. The system hopes to add up to three more locations. Plans for the new clinics are in the early stages, and the design phase likely won't start until 2026 or 2027, said Jennifer Small, executive vice president and administrator of ambulatory care services.
"Not only does [the bond] provide a structure in terms of how we're going to be funded, but it also shows that there is agreement across the community that this is also needed," Small said. "It really cements that this is something that the community supports."
