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Critical Success Factors for a Greenfield Hospital Project

In the last decade, healthcare has become a booming business in the Middle East. This is clearly seen by the number of Greenfield Hospital projects under development. A Greenfield development is defined as a project that is completely new or a start-up organisation, and in hospitals it usually refers to a newly constructed stand-alone facility.

According to BNC Network, there are currently over 445 Greenfield Hospital projects in planning or execution phase throughout the Gulf Cooperation Council (GCC) countries. However, many of these projects will not come to fruition or meet the expectations of their investors and owners. There are multiple reasons why this is so. Hospitals are highly complex facilities and organisations that require in depth planning, market driven services, the right number of qualified staff, hospital management expertise, and a long-term mindset.

Realistic Vision
The first step to any successful project is to have a clearly defined vision and understanding of what the investors/owners expect from the hospital. This vision needs to be based on realistic projections and growth plans. It is unrealistic to believe “if we build it they will come”. Most people prefer to access healthcare services close to home. 

The first step of any project is to understand the catchment area this hospital will serve and the demographics of that area. The demographics will drive the number of patients, visits and procedures, types of clinical services required as well as the ability of people to pay for healthcare services. For example, building a 1,000-bed hospital in a catchment area of 400,000 people will never generate enough patients, visits and procedures to fill the hospital even if 100 per cent of the population made it their preferred hospital. When you add in competitors in the catchment area, insurance plans, income level of the population, you reduce these numbers even more.

It is critical for any successful project to have a comprehensive, geographic specific market study. The study should define a realistic catchment area, create a demographic profile, analyse the local competition and their service offerings, analyse how healthcare is paid for i.e. insurance, out of pocket, government and evaluate the current and future burden of disease for the area. This study then in turn will drive the medical and business concept for the hospital. For example, a catchment area of 400,000 people of which 25 per cent are under age 20 and 60 per cent are nationals may indicate a need for 150 bed specialised children’s hospital while the same size catchment area of which 70 per cent of the population is under 45 and 70 per cent expatriate might indicate a need for a 100-bed primary care hospital to cater to basic insurance patients. Each of these hospitals would then have a very different financial profile with differing levels of revenue, expenses and profitability, which may or may not meet investment criteria or expectations.

Once a realistic financial feasibility study is completed and it is agreed to go forward with the project, it is imperative to engage companies with strong hospital expertise whether it be architects, contractors, consultants, advisors or planners. It is also important to engage expert hospital management professionals early on. The planning and design of a hospital can have significant impact on patient safety, operational efficiency and financial profitability. For example, if you plan for 20 medical beds and design them as two 10 bed wards this may require duplication of staff to operate them safely when compared to a single ward of 20 beds. With staffing accounting for anywhere from 50–70 per cent of a hospital’s operating cost, this can have significant impact on financial performance. Improper planning, design and project management can also lead to delays during construction, which can end up costing millions of dollars in re-work, in cost of staff and resources not being properly utilised and in not beginning to generate financial return in a timely manner. It is critical to involve seasoned professionals with strong track records in hospital planning, design, start-up and management.

It is also important to involve the hospital operator early on, usually during the design phase, to avoid delays and design issues. During construction, the operator will begin developing the policies and procedures, systems, and processes, as well as assist with project management and supervision. Over time they will also begin to hire key senior management and staff to prepare for operational commissioning and opening. The commissioning of a hospital can take up to nine to 12 months, so it is best to begin during the latter part of construction and not wait until three months before opening. Recruitment of staff is also crucial to a successful opening. It can take six to nine months to recruit one doctor or nurse given visa and licensing requirements. Once recruited, the staff need to be oriented and trained on the policies, processes, equipment and practices of the hospital. This can require another two to three months. The operational planning time frame is lengthy and needs to be incorporated into the overall timeline of hospital construction, technical commissioning and building handover to avoid delays.

Rewarding Investment
In addition to the hospital operator, there are many external parties such as the Ministry of Health, Civil Defense, Department of Radiation Protection, and Electric Company to name a few, that need to approve, certify and/or license the building before it can be operated. If not involved early and communicated with frequently external parties can create significant delays and additional costs before the hospital can be occupied. Proactive project and stakeholder management is vital to keeping a Greenfield project on time and budget. A project requires people who are skilled and knowledgeable in local codes, regulations and licensing requirements for not only the building but for hospitals and specific hospital departments such as radiology, lab, waste management.

Lastly, it is important to understand that most Greenfield hospitals require three to five years of operation before they reach their capacity and begin to turn a profit. Focus is usually put on the cost of designing, constructing and equipping the building and not on initial operational start-up deficits. Once the facility and staff are ready for operation, there needs to be enough funds or working capital available to see the hospital through the first few years. The costs of running the hospital i.e. salaries, medicines, supplies, utilities need to be covered during the period the hospital is ramping up its services. In many cases, working capital is often forgotten in the budgeting stages for a Greenfield hospital and can create additional delays as well as investor/owner dissatisfaction when additional funds are required.

Building a hospital is a complex and highly technical initiative that requires a well-conceived, market-based plan, realistic projections and budget, early involvement of subject matter experts and rational time lines to attain the owners/investors vision and expectations. Even when implemented well, there are still many things that can go wrong. Strong project and risk management are imperative, as well as a clear understanding of all that is involved and required. If given the right ingredients for success, a Greenfield hospital can be both personally and financially rewarding. Hospitals can provide a long term, stable investment that provide a much-needed service while giving back to the community.

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