How to Start a Hospital

A hospital represents one of the few business opportunities that give you the ability to save lives on a regular basis. In addition to treating illnesses and injuries, many establishments offer preventive health services. They also provide access to advanced equipment that helps primary care physicians accurately diagnose ailments. 

If you desire to make a huge difference in peoples' lives and find innovative ways to improve medical care, consider starting a hospital.

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Learn how to start your own Hospital and whether it is the right fit for you.


Start a Hospital by following these 10 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. 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.

Check out our How to Start a Business page.

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:

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

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.

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.

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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.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

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

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.

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!

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You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.

Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.

Small Business Taxes

Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).

You can learn more about small business taxes in these guides:

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.

Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.

Open a business bank account

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.
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Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.

Open net-30 accounts

When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.

Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.

Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.

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Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment 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.

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.

Learn more about General Liability Insurance.

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.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
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Recommended: Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker.

How to promote & market a Hospital

You can enhance your institution's credibility by seeking positive media coverage of accomplishments and new services. Many local newspapers publish articles about nearby medical establishments. As Becker's Hospital Review points out, women often encourage men to visit health facilities. It's particularly important for your marketing messages to reach them. You need to gain the trust of surgeons and other doctors in the area as well. Invite these professionals to tour the hospital in hopes that they'll use it to perform operations. They could also refer patients to your establishment for services they don't provide.

How to keep customers coming back

Remember that a positive guest experience can turn visitors into customers. While sophisticated equipment and qualified staff hold great importance, simpler things like plants, artwork, and colorful decor also boost satisfaction. A warmer atmosphere creates more positive memories and may even promote faster recoveries.

To retain patients, collect feedback and respond to concerns quickly. Even when you provide exemplary health care, seemingly minor things like a tactless comment, billing error, or long waiting time can result in losing a customer. Don't overlook convenience and flexibility; patients want to feel "in control." They also appreciate efforts to enhance their enjoyment of life beyond the treatment of specific conditions.

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Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.

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Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.

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Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.

Start A Hospital In Your State

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Select your state below for an in-depth guide on completing each of these steps in your home state.

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.

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Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

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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.

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Take the Next Step

Find a business mentor

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

  • Funding
  • Events
  • Guides
  • Support

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a Hospital?

Before accepting patients, hold staff exercises that test out the new building and equipment by simulating medical emergencies. These drills provide beneficial training and a safe way to identify any defects. Be sure to collect detailed employee feedback. Clearer signage or enhanced lighting could make a big difference when the first ambulances arrive.

Use leasing to acquire a major piece of equipment if the machine involves rapidly changing technologies. For example, ultrasound tends to advance faster than X-rays. A lease lets you upgrade more easily. Otherwise, choose a financing option so that you'll eventually own the device.

If you rent out medical office space, you can make it more attractive with guaranteed parking spaces and permission to access the building at a wide range of hours. Don't require physicians to commit to leases for several years. They have many options, so it's crucial to offer flexibility and competitive pricing.

Some medical services need to subsidize others. Your hospital ought to charge private insurers enough money to compensate for smaller payments from other sources. Government programs often provide less reimbursement, and uninsured patients might lack sufficient income to pay bills in full. The same goes for insured customers with very high deductibles.

How and when to build a team

You'll have to immediately start hiring staff members such as managers, specialists, nurses, cooks, customer service representatives, and janitors. Hospitals don't necessarily need to hire physicians. They frequently lose money by directly employing doctors (rather than referring patients to independent doctors), according to the Harvard Business Review. Staff members should be qualified as well as caring and personable. Liability represents a serious concern; always thoroughly screen employees at every level, even when it becomes difficult to find suitable personnel. Health-oriented customer service representatives earn just over $12 per hour on average. Registered nurses get paid about $30 an hour, according to PayScale.

Next Steps

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