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How to Start a Hospital

Hospitals are an integral component of a community’s or region’s emergency services plan. They are a place where the injured are treated, the sick can become well, and sometimes complicated surgeries and treatments happen. Not every community has this service, which is why knowing how to start a hospital could be profitable knowledge.

The problem that will be encountered for this type of business is that there are a number of barriers to entry for a hospital in most communities. There are a number of national providers that have hospitals in most major urban centers and this allows them to secure lower prices for their supplies. They also have established brand names that have value. Look for locations that have low competition and then begin the zoning process.

1. A Hospital Must Be Correctly Zoned.

Like most other businesses, a hospital must be in a proper zone. A new hospital will likely need to go before a local zoning board to have land specifically designated for the business. This can take some time and requires several public meetings, so expect to spend at least 12 months on the planning process alone.

2. Most Hospitals Must Be Built From Scratch.

Unless you’re purchasing an existing building that was once used as a hospital, you’ll need to build something from scratch. Some buildings can be remodeled to meet needs, but the costs are often virtually the same. A new building allows for better room structuring and patient flow, so look for architects, planners, and builders that are local who might want to take on the project and solicit for bids.

3. Look For Physician-Owned Opportunities.

Most new hospitals are going to need tens of millions of dollars in start-up capital to achieve a grand opening. That doesn’t even include the cost of hiring physicians and other providers who will be treating patients within the building. The average investor doesn’t have that kind of cash, so the physician-owned model is often a better way to go. This allows the doctors to have a portion of the equity of the hospital so that initial costs are reduced and there is an incentive to recruit patients over to your new hospital.

4. Be Prepared To Meet Current Laws.

Hospitals that offer emergency services are obligated to treat people whether they can pay or not. There may also be certain permits, licenses, and other requirements that must be met in order for the medical practice to be in business. This may even include specific licenses for diagnostic equipment. Some jurisdictions might even require the collection of sales tax on certain services that are rendered.

5. Develop Relationships With Health Insurance Agencies.

In the United States, the law mandates that health care insurance be carried or a taxation penalty occurs. This means most patients that come into the new hospital are going to have health insurance. The job of the hospital is to have a relationship with that insurance company so that services which are rendered can actually be paid. You’ll need to look at government sponsored plans, private insurance, and other relationships and partnerships to navigate these waters.

6. Secure The Equipment You’ll Need.

Not every hospital is designed to be an all-in-one treatment center. Many rural hospitals offer some basic treatment services, an emergency department, and a birthing center. Difficult injuries or illnesses are often referred to a larger hospital within the region. Although limiting treatment options can save some money on the initial investment, a CAT scan, an MRI, and x-ray equipment are all going to be likely investment needs.

7. Finish Off The Commission.

Once the building is in place, there are doctors that are ready to serve, and there is equipment to use, then it is time to have the new hospital commissioned. Although people will seek treatment at a new hospital, a marketing effort must be initiated to let people know that you’re open for services. Having operational policies in place and the final regulatory approvals will also be part of this process. Then your official launch will go off without a hitch.

Knowing how to start a hospital means being able to provide needed health services to a community and its surrounding region. It’s often an expensive proposition and requires a number of investors or a large equity investment, but with a consistent series of patient treatments, it can also be an extremely profitable venture that promotes better health. That makes it a win/win entrepreneurial opportunity.

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