Feasibility Study of a Hospital Project

Preparing a feasibility study for a hospital project can be a significant undertaking. What follows are the key steps and phases to focus on.

Such a study is essential when you’re considering any large-scale acute care hospital project or a “micro-hospital” or a convalescent specialty hospital, such as a skilled nursing facility. You most likely know the first step is to complete a market needs assessment or demand analysis. But what happens after that? What steps are required during the feasibility study of a hospital project development?

The hospital planning, design, and construction process takes place in five major phases. These analyses will give you the knowledge and confidence that your plan will be successful.

Overview of the 5 Phases

The first phase starts with planning for the project by doing a market study and financial feasibility study. Afterward, you should have the data you need to decide whether you want to move forward with the project.
The second phase is the pre-planning stage. This is when you conduct on-site visits, meet with the bankers and find the answers to questions that may come up about your project.
The third phase is when financing is settled, the building is designed, and construction begins.
At the fourth phase, it’s time to begin operations planning. This includes starting recruitment, defining policies, and obtaining licenses and accreditation.
Finally, your implementation of a hospital project is complete, but work still needs to be done. The fifth phase involves the ongoing evaluation of hospital operations.

Details of hospital project phases

Phase 1 – Market needs assessment and financial feasibility study

A market assessment begins with a thorough review of market demand (Demand Analysis). Specifically, the market analysis includes researching aspects of the expected patient population: patient demographics, health plan/insurance coverage, diagnoses, and their expected treatments. Also, it’s helpful to look at your competitors and the value of their business to the community.

To conduct a financial feasibility study of a hospital project, you’ll need to develop a financial profile of the project from the pre-opening phase and through the next three years. The study should include your financial pro forma and a thorough market analysis. Particularly, the study should provide you with critical data such as:

Is there a sustainable demand for your service?
What competition do you have?
Can you get funding?
Will you attract investors, partners, or community support?
Can you get contracts with payors and participate in government healthcare programs?
Do you feel confident your project can succeed?

There isn’t a big loss of time or money in this first stage if you decide to end the project. Therefore, it’s helpful to gather everything you need to be as confident as possible your plan will be a success.

Phase 2 – Pre-planning

Your market analysis and financial feasibility study were favorable. That means it’s time for the pre-planning phase. Here you’ll gather the details you need before beginning the actual design and construction.

This phase includes:

Developing a services plan and a space plan to accomplish the services.
Engaging with architects/designers to develop initial plans.
Looking into planning issues such as major medical equipment, building permits, local staffing resources, licensing, and payors.
Obtaining estimates of construction and equipment costs.
Meeting with lenders or investors to discuss construction financing and long-term financing.
Considering construction management or construction companies.

A patient’s cultural background can influence their health beliefs and behavior.

During the pre-planning phase, don’t neglect to study the cultural aspects of the community that could affect service. Indeed, a patient’s cultural background can influence their health beliefs and behavior. Thus, knowing the multicultural society that your facility will provide for is one way to offer value to your patients.

Part of the pre-planning process is getting approval for your building. Local and state governments have various requirements for healthcare facilities. This step can seem overwhelming unless you have someone who knows local and state codes to guide you through the process.

Phase 3 – Design and construction

Finally, in phase three, you’re ready to begin the physical construction of your building.

This is when architectural plans are finalized, bids requested and evaluated, permits issued, and contractors hired. These professionals will complete the site survey, interior plans, and required construction documents. You’ll also begin the plans to purchase furniture, fixtures, and required medical equipment, and you must have your construction financing plan in place.

Phase 4 – Operations planning

A long time (!) before your building is complete comes to the details of operating a hospital, like:

Recruiting, hiring, and training staff.
Medical staff “recruitment” and developing relationships with hospitalists and/or community physicians.
Writing policies and procedures.
Creating the management structure.
Purchasing supplies.
Establishing billing and accounts receivable.
Setting up electronic health records and information services.
Identifying and writing HIPAA policies and procedures.
Obtaining payor contracts and enrolling with Federal and State healthcare programs.

Phase 5 – Post-opening evaluation and follow-up

A successful development doesn’t end with phase four. Once your hospital is up and running, you need to monitor the ongoing operations through:

Judging provider satisfaction.
Monitoring patient profile trends and financial trends.
Reviewing marketing and social media performance.
Holding board of directors meetings.
Looking at financial trends.
Creating a HIPAA compliance checklist.

Managing ongoing operations is helpful to determine whether your initial criteria for the project were met. Moreover, getting input from patients and staff will give you valuable insight.