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Financial Feasibility Study for a Hospital Project

2010 June 24
Posted by Jithendra Kumar

Set Up a Hospital

By Dr. Mukesh Daftary

Many of us began our lives in one, and most of us have visited one under both happy and unpleasant circumstances. No doubt, hospitals are an indispensable part of people’s lives everywhere. This makes the healthcare industry a lucrative area to step into. In India, healthcare is the second-fastest growing sector right now, after retail. Many corporate houses are considering or have already diversified into this sector by setting up their own hospitals.

Since the process of setting up a hospital involves so many processes, sub-processes and finance, it is imperative to prepare a detailed feasibility study report before you get started. Most people misunderstand the FSR as a tool for obtaining finance from institutions. On the contrary, it is a tool that would clearly answer the five questions that form the basis of every good hospital:

Why am I doing it? Is it for the good of the people and the nation, or for my own financial interests?

When should I start out? Timing is important; make sure you start out at a time that’s most appropriate for bringing up a hospital.

Where should I set it up? Proper location is also extremely important. If there are existing hospitals in a particular area, it’s best not to start another one there. Also, the area you select should be easily approachable and have transportation facilities.

What kind of hospital will it be? Do you want to start a speciality or general hospital? Equipment and products need to be procured accordingly.

How will I go about it? Broadly outline the steps for building the hospital and having all the services in place.

If you are toying with this idea yourself, it is important to first ask yourself a few basic questions. Setting up a hospital is a complex mix that includes proper building design, permissions, finance, advisors and consultants.


Land and construction

The first thing to figure out is land. Keeping the approachability and transportability in mind, one should ideally look for non-agricultural land and it should be designated for hospitals. You can obtain this information from the land records of the local authorities or municipal corporations. In case the land is not designated for hospitals, you will have to notify the local authorities about the change of users.

To start construction, you will need certain documents, such as the land title deed, corporate or company details, permission from the local authority to use land space for construction, building permit, tax identification card and the architect’s plan. The architect’s plan must be approved by the local authorities before construction can commence. A certificate of no objection also needs to be procured from the local authorities.

On obtaining electricity supply and setting the tiles, you can get a completion certificate from the authorities after the premises has been inspected. An occupation certificate is issued after all clearances are obtained.


A hospital’s load requirement is calculated based on the lighting, air-cooling and medical equipment usage. These can be assessed with the help of the architect or hospital consultant. The permission is to be obtained from the local electric supply board.


The water requirement for a hospital can vary vastly from project to project, depending on whether it is a primary, secondary, tertiary or special care hospital. However, for a ballpark figure, your hospital will require approximately 100 liters of water per bed per day. This includes everything from a patient’s water requirements to hospital maintenance. Permission has to be obtained from the local authorities.

Sewerage and sanitation

For the installation of tanks, pipelines and the likes, you need to obtain permission from the local authorities.

Bio-medical waste

Large hospitals need to have incinerators installed for disposing bio-medical waste, such as body parts or tissues. As incinerators usually take up between 500 to 1,000 square feet of space, smaller hospitals cannot afford to have them installed. Therefore, they need to register themselves with municipal corporations for waste disposal.

Fire department approval

This is necessary for large hospitals.

Health certification

In most cities, the local authority will certify a healthcare facility only after all beds and equipment has been installed. This involves a nominal fee.


Obtaining finance for setting up a hospital or healthcare center is not difficult, as success rates in this industry is usually quite high. Banks are relatively easy targets for this sector.


In the process of setting up a hospital, you will need to enlist the services of these professionals:
• Architects
• Hospital design consultants
• Structural engineers
• Electricity consultants
• Water and sanitation consultants
• Fire prevention consultants


Choosing medical equipment vendors:
• Equipment planning, department-wise
• Budgeting
• Vendor identification
• Vendor selection
• Purchase
• Installation
• Signing annual maintenance contracts

Human resource functions:
• Making a requirement matrix, department-wise
• Making HR available
• Interview and selection
• Assessing financial implication

Types of doctors or consultants:
• Resident medical officers
• Full-time consultants
• Part-time consultants
• Visiting consultants
• Nursing staff

Automation and engineering services:
• Air-conditioner
• Air handling unit
• Plumbing
• Electricity maintenance
• Medical gas pipelines
• Civil works

• Hardware
• Software (Hospital Management Information System)

Systems and protocols:
• Nursing protocol
• Admissions protocol`
• Infection control protocol, etc.

You would also need to plan for:
• Stores and pharmacy
• Hi-tech equipment selection, installation and training
• Setting up super-speciality departments

Reference: as on 24 June 2010

©Entrepreneur October 2009

2 Responses Leave One →
  1. drjithendrakumar permalink
    June 24, 2010

    In a given project plan, various departmental expenses to be emphasized while doing the financial feasibility study. It will also give an insight into projects break-even analysis and pay-back period. The DSCR is crucial in the feasibility as the funders look into this while sanctioning the funds. Hence it is important to understand the feasibility of the project at the time of conceptualizing the plan.

  2. August 15, 2010

    Just wanna commentabout this article, after reading whole of this it make me to have new goal about one big event, hope I can read more great news again from you so I subscribe your website.

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