Finance expert William Sassman has plans to open a hospital in Sacramento, California. Having spent his career as a finance expert, William – and others building hospital business plans – face unique challenges.
For one, hospitals aren’t cheap. Those that plan their hospital launch care genuinely about the healthcare needs of the community. Opening a new hospital is a massive undertaking in which the comfort and care of every patient is a priority.
Second, Dr. William Sassman and his team need funding. While most investors and lenders immediately recognize the ROI of a hospital, they still need a full breakdown of all costs and projects. Most hospital startups require funding in excess of $500 million.
IMAGE: PEXELS
Construction And Design
In hospital business plan pro forma statements, the initial costs revolve around real estate, construction, and design. Depending on the available real estate in an area, it may be possible for a hospital startup team to renovate an existing facility. This approach can save millions of dollars, and it can shrink the launch timeline. New hospitals often require new construction.
Those buildings from scratch must know how many patients the hospital will serve. Depending on the area, hospital rooms cost around $400/square foot. And according to HCD, the average patient hospital room is about 320 square feet. These calculations mean than most hospital rooms cost at least $128,000/square foot before beds and equipment.
Purpose of the Hospital
Some hospitals focus solely on surgery, treatment, and in-patient/out-patient care. Other hospitals concentrate on research and education. William Sassman notes that hospital square footage costs vary drastically depending upon the number of labs, classrooms, patient rooms, surgery rooms, size of ICU, and emergency rooms.
Medical Equipment
Again, the purpose that a hospital serves will determine the kind of equipment hospital staff require. Also, a hospital startup team needs to decide the speed and level of care they intend to provide for patients. Many hospitals meet basic in-patient/out-patient requirements and produce diagnostic results in a respectable time frame.
Other hospitals with more considerable resources can add more healthcare technology and services so that patients receive more comfort, faster treatment, and more exceptional customized care. That said, all hospitals need basic diagnostic, medical monitoring, and life support equipment. Those costs alone run more than 50 million dollars.
Every hospital startup team should include healthcare experts who can build an exhaustive list of all medical equipment needs. Those same experts should be able to accurately price the right-quality equipment.
Supplies
Like any office, the costs associated with pens, computers, desks, chairs, inventory, medical forms, and more add up quickly with an organization as large as a hospital. The different hospital departments – intake, physicians, pharmacy, etc. – each have their own set of supply requirements. Cost Finder noted that:
U.S. clinics [by and substantial spent] $3.8 million on supply costs, with a median of $9.1 million. Supply costs arrived at the midpoint of 15 percent of all the emergency clinic costs, with the center 50 percent of medical clinics running from 9 to 19 percent. The average patient admission required $4,470 of supply costs. These are exceedingly significant expenses.
Variable Costs Per Patient
Many hospital launch costs run on a per-patient basis. Square footage, equipment, supplies, and staff member costs all come down to how many patients a hospital intends to serve at one time. A hospital launch team also needs to consider the kind of patients the hospital will be able to help.
For example, some patient conditions can be triaged in an emergency room. Still, if the hospital does not provide the level of specialized care that the patient requires, the hospital must transport the patient to a hospital that can help them.
Risk Management
William Sassman recognizes that healthcare is a complex service. Despite a hospital staff’s best efforts, some patients will not recover. In rare cases, a hospital staff member may actually be guilty of medical malpractice. For these reasons and others, hospitals need to maintain a significant amount of legal counsel and liability insurance.
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