How to Start a Hospital

Start a Hospital by following these 10 steps:

1. Plan your Hospital
2. Form your Hospital into a Legal Entity
3. Register your Hospital for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Hospital
6. Get the Necessary Permits & Licenses for your Hospital
7. Get Hospital Insurance
8. Define your Hospital Brand
9. Create your Hospital Website
10. Set up your Business Phone System

We have put together this simple guide to starting your Hospital. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

What are the costs involved in opening a Hospital?

You'll need to rent, buy, or construct a large building. A new hospital with 120 beds costs about $112 million to build, according to Fixr. You could reduce initial expenses by constructing a smaller "micro-hospital" for less than $55 million. These facilities often have ten beds at most. 

Either way, sophisticated medical equipment proves costly. You can finance or lease expensive devices to minimize upfront expenditures. Hospitals have to acquire furnishings, kitchen equipment, and computers as well. Specialized computer software frequently costs around $25,000 to $35,000.

What are the ongoing expenses for a Hospital?

Health facilities face high maintenance, utility, equipment replacement, medical supply, billing, and collection costs. Per-bed energy spending often exceeds $13,000. Salaries represent a large portion of the expenses due to the highly skilled and demanding nature of hospital labor. The typical facility devotes over $5 million to marketing, according to Healthcare IT Today. These establishments carry a range of insurance policies, such as liability, workers' compensation, commercial auto, property, and umbrella coverage.

Who is the target market?

Everyone could potentially need advanced medical services, but certain demographics require more hospital care. Federal data shows that Americans that are 65 to 84 years old visit these facilities most frequently and that women use hospitals in greater numbers than men.

How does a Hospital make money?

The facility bills patients after it provides services. Insurers and government benefit programs often pay at least a portion of the expense. Compensation must exceed total labor, medical supply, and overhead costs. Hospitals can also earn money by selling food to guests, and some establishments operate retail gift shops. It's possible to rent out office space to doctors as well.

How much can you charge customers?

Kaiser Health News reports that it costs $2,032 for an average emergency room visit. People typically spend over $15,000 on inpatient care. Major surgeries such as heart valve replacement might cost over $150,000, according to Debt.org. Hospitals may bill different amounts depending on whether the patient has insurance, uses a government program, or pays in cash. Managed-care contracts dictate the amounts that many insurers pay; you'll need to negotiate with specific insurance companies. A recently enacted law requires hospitals to list prices on their websites.

How much profit can a Hospital make?

Around three out of four hospitals operate as public or nonprofit institutions. Nevertheless, some for-profit companies have become quite successful. These facilities achieve a profit margin of 11% on average.

How can you make your business more profitable?

Outpatient treatments remain more lucrative than overnight inpatient services. While hospitals can advertise the benefits of highly profitable operations, it's difficult to control revenue. Closely monitor the number of minutes it takes to complete medical procedures. This will help you ensure that physicians don't retain operating rooms for unnecessarily long time periods.

Hospitals have many opportunities to cut expenses. They consume more energy than other buildings, so it's vital to optimize the orientation of new structures and insulate them thoroughly. Continually search for the best prices on well-made supplies; some hospitals successfully request discounts from existing suppliers. Encourage employees to think about the costs associated with their decisions and strive to find more economical solutions (without compromising the quality of care).

• Set up the HVAC system to automatically reduce heating or cooling levels in unoccupied areas.
  
  
• Identify patients who overuse the emergency room and help them find more suitable solutions.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your Hospital is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

You might succeed in this field if you don't mind complicated projects that take a long time to reach completion. Hospital executives must have a willingness to hire competent individuals and let them make important decisions. This opportunity isn't ideal for someone who prefers to complete major tasks single-handedly. There are easier, simpler ways to earn money; you should only get involved in this business if you genuinely seek to help others.

What happens during a typical day at a Hospital?

As patients arrive, physicians must diagnose a wide variety of conditions. Some people receive self-care instructions or referrals to specialists. Others need to undergo medical procedures in the operating rooms. Staff members also perform an assortment of mundane daily tasks, such as answering phones, serving meals, washing sheets, and cleaning surfaces.

What are some skills and experiences that will help you build a successful Hospital?

Management and medical skills will benefit you in this role. It helps if you have experience running a smaller health business, such as a clinic, pharmacy, or urgent care center. You'll need to communicate clearly and confidently. Hospital founders must have the ability to give commands as well as listen carefully. Successful health entrepreneurs may have prior experience in improving quality and efficiency within the limits of complex regulations.

What is the growth potential for a Hospital?

The federal government predicts that spending at hospitals will grow by nearly 6% annually through 2027. While some owners focus their efforts on a single facility, several companies operate large chains. For instance, Tennessee-based Hospital Corporation of America was founded in 1968 and eventually came to possess 185 locations.