smeda private hospital

Pre-Feasibility Study

PPRRIIVVAATTEE HHOOSSPPIITTAALL

Small and Medium Enterprise Development Authority

Government of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th Floor LDA Plaza Egerton Road, Lahore

Tel (042)111 111 456,

Fax: 36304926-7

[email protected]

REGIONAL OFFICE

PUNJAB REGIONAL OFFICE

SINDH REGIONAL OFFICE

KHYBER PAKTUNKHWA REGIONAL OFFICE

BALOCHISTAN

8th Floor LDA Plaza, Egerton Road,

Lahore.

Tel: (042) 111 111 456, Fax: (042) 36370474

[email protected]

5TH Floor, Bahria Complex II, M.T. Khan Road,

Karachi.

Tel: (021) 111-111-456 Fax: (021) 5610572

[email protected]

Ground Floor State Life Building The Mall,

Peshawar.

Tel: (091)111 111 456, 9213046-7 Fax: (091) 286908

[email protected]

Bungalow No. 15-A Chamn Housing Scheme Airport Road,

Quetta.

Tel: (081) 2831623, 2831702 Fax: (081) 2831922

[email protected]

April, 2012

Pre-Feasibility Study Private Hospital

PREF-53/Apr, 2012/Rev 3

2

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject

matter and provide a general idea and information on the said area. All the material

included in this document is based on data/information gathered from various sources and

is based on certain assumptions. Although, due care and diligence has been taken to

compile this document, the contained information may vary due to any change in any of

the concerned factors, and the actual results may differ substantially from the presented

information. SMEDA does not assume any liability for any financial or other loss

resulting from this memorandum in consequence of undertaking this activity. Therefore,

the content of this memorandum should not be relied upon for making any decision,

investment or otherwise. The prospective user of this memorandum is encouraged to

carry out his/her own due diligence and gather any information he/she considers

necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or other

form.

DOCUMENT CONTROL

Document No. PREF-53

Revision 3

Prepared by SMEDA-Punjab

Issued by Library Officer

Issue Date March, 2004

Revision Date April, 2012



3

1 EXECUTIVE SUMMARY................................................................................................................. 1

2 PROJECT PROFILE ......................................................................................................................... 2

2.1 OPPORTUNITY RATIONALE ............................................................................................................... 2 2.2 PROJECT BRIEF ................................................................................................................................. 2 2.3 PROJECT CAPACITY AND RATIONALE ............................................................................................... 2 2.4 PROJECT INVESTMENT ...................................................................................................................... 2 2.5 PROPOSED LOCATION ....................................................................................................................... 3 2.6 KEY SUCCESS FACTORS / PRACTICAL TIPS FOR SUCCESS ................................................................. 3 2.7 THREATS FOR THE BUSINESS ............................................................................................................ 3

3 SECTOR & INDUSTRY ANALYSIS ............................................................................................... 3

3.1 HEALTH CARE DELIVERY ................................................................................................................. 3 3.2 PHYSICAL TARGETS AND ACHIEVEMENTS DURING 2010-11 ............................................................. 4 3.3 HEALTH AND NUTRITION EXPENDITURES ......................................................................................... 5 3.4 REGULATIONS ................................................................................................................................... 6

4 MARKET INFORMATION .............................................................................................................. 6

4.1 MARKET POTENTIAL ......................................................................................................................... 6 4.2 NATIONAL MEDICAL AND HEALTH ESTABLISHMENTS ...................................................................... 6 4.3 TARGET CUSTOMERS ........................................................................................................................ 7 4.4 DEPARTMENTS .................................................................................................................................. 7

5 MACHINERY DETAILS................................................................................................................... 7

5.1 MACHINERY AND EQUIPMENT REQUIREMENT .................................................................................. 7 5.2 MOTOR VEHICLES ............................................................................................................................10

6 LAND & BUILDING REQUIREMENT .........................................................................................10

6.1 TOTAL LAND REQUIREMENT ...........................................................................................................10 6.2 SUITABLE LOCATIONS .....................................................................................................................11 6.3 COVERED AREA REQUIREMENT .......................................................................................................11 6.4 UTILITIES REQUIREMENT .................................................................................................................13

7 HUMAN RESOURCE REQUIREMENT .......................................................................................13

7.1 HUMAN RESOURCE REQUIREMENTS ................................................................................................13 7.1.1 Consultants ............................................................................................................................13

8 FINANCIAL ANALYSIS ..................................................................................................................15

8.1 INITIAL PROJECT COSTS ...................................................................................................................15 8.2 ESTIMATED TIME FOR PROJECT COMPLETION ..................................................................................16 8.3 PROJECT RETURNS ...........................................................................................................................16

9 FINANCIAL ANALYSIS ..................................................................................................................17

9.1 PROJECTED INCOME STATEMENT .....................................................................................................17 9.2 PROJECTED CASH FLOW STATEMENT ..............................................................................................18 9.3 PROJECTED BALANCE SHEET ...........................................................................................................19

10 KEY ASSUMPTIONS .......................................................................................................................20



1

11 EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

Population of Pakistan has been increasing with the greater percentage. It has become

very difficult for the Government to provide health facilities to large number of

population. This arise a strong need of private hospitals with modern technology and

better infrastructure. This pre feasibility study provides guidelines for setting up a private

hospital. The total project cost is estimated at Rs. 95.578 million including a capital cost

& working capital of Rs. 87.104 million and Rs. 8.474 million respectively. Projected

IRR, NPV and Payback period for the proposed project are 36.39%, Rs. 99.544 million

and 3.86 years respectively. The project is having capacity of 25 private rooms, 10 beds

for general ward, 10 beds for labor ward, 5 bed for ICU/CCU, and 10 beds for

emergency. The project is proposed in the main location of the city in densely populated

areas.

Government is also very much keen about the health services. Government allocation for

health sector has decreased almost 47% compared to last year. During the year 2010-11,

the total expenditure on health is estimated at Rs. 42 billion, of which Rs. 19 billion

allocated for development expenditure and Rs. 23 billion for current expenditure.

Pakistan has availability of well trained and skilled human resource in this sector which is

the key area and plays a major role in the success and popularity of private hospitals. The

Consultants are the main reason for good patient base of the hospital. If the hospital has

renowned consultants, it would bring many patients, who will not only be the source for

consultation fee but will also be using both the outdoor and the indoor facilities of the

hospital thereby increasing the revenues for the hospital. This will also create an image

and reputation of the hospital in the eyes of general public. This document has complete

details of setting up private hospital.



2

22 PPRROOJJEECCTT PPRROOFFIILLEE

22..11 OOppppoorrttuunniittyy RRaattiioonnaallee

Growing number of patients and lack of maintained infrastructure has put tremendous

pressure on public sector hospitals. This has resulted in a rising demand for health

services in the private sector. Moreover, introduction of latest technology, hygienic

environment and professional staff attitude at private sector hospitals has also contributed

to the popularity of the hospitals in private sector. In addition to this, increasing trend of

medical diagnosis through sophisticated scientific medical tests has increased the need of

high capital investment in the hospital sector. Investors in the private sector can therefore

exploit this opportunity and provide latest and dependable diagnostic services on round

the clock basis, which is not available in the public sector hospitals.

Hospital is a capital-intensive project. Once the required infrastructure is developed, the

management focus should shift to maintain its repute, provide quality services and

engage reputed consultants to attract patients. Considering the current market structure,

the key success factor for a successful hospital is the provision of modernized

consultancy and diagnostics services in multidisciplinary areas.

Constrained public sector health system, growing population, introduction of new and

modern medical technologies and increased healthcare awareness in the country provides

a better business opportunity for the private sector to invest in the health care services.

22..22 PPrroojjeecctt BBrriieeff

The proposed project is for setting up a private hospital. This hospital would be a general

hospital catering both, indoor and outdoor patients. The hospital indoor facilities include

emergency, ICU/CCU, Rooms, General Ward, Labor Ward with a fully functional

operation theatre capable of conducting major types of surgeries. The outdoor facilities

would include a diagnostic clinic consisting of a complete medical laboratory and a

radiology department.

22..33 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee

The proposed capacity of this hospital is given in the table below:

TTaabbllee 22--11:: PPrrooppoosseedd CCaappaacciittyy

EEmmeerrggeennccyy 10 Beds

IICCUU//CCCCUU 5 Beds

RRoooommss ((2255 NNooss)) 25 Beds

GGeenneerraall WWaarrdd 10 Beds

LLaabboorr WWaarrdd 10 Beds

22..44 PPrroojjeecctt IInnvveessttmmeenntt

Total project cost for setting up a Private Hospital is estimated at Rs 95.578 million.



3

22..55 PPrrooppoosseedd LLooccaattiioonn

Large public sector hospitals are concentrated in major cities of the country. Therefore, it

is suggested that new hospital should be opened up either in smaller cities, peripheral

areas or in those areas of the larger cities where there is little presence of existing medical

facilities. May be close to new emerging residential areas and main markets etc.

22..66 KKeeyy SSuucccceessss FFaaccttoorrss // PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss

Availability of reputed consultants plays a major role in the success and popularity of

private hospitals. It is suggested that consultants from a wide range of specialties

should be attracted for the hospital. The key success factor in this business is the

availability of renowned consultants in the hospital. The consultants are the main

reason for good patient base of the hospital. If the hospital has renowned consultants,

it would bring many patients, who will not only be the source for consultation fee but

will also be using both the outdoor and the indoor facilities of the hospital thereby

increasing the revenues for the hospital. This will also create an image and reputation

of the hospital in the eyes of general public.

Availability of trained and professional Paramedical Staff.

High standard patient care and hygienic environment for the patients, trained nurses

and courteous para-medical staff.

Modern and reliable diagnostic services which would include a fully equipped

Radiology Department consisting of X-Ray, ECG and Ultra Sound Equipment and a

dependable Medical Laboratory for routine medical examinations.

A well equipped Operation Theatre capable of conducting major surgeries.

Reasonable and competitive fees, positioned against competitors fees.

Each city and each area within a city has different demographic characteristics. This

means that every area has its own set of medical problems. For example, in those

areas where there is a large concentration of industries, environmental pollution

related diseases and industrial emergencies would be more prevalent. It is therefore

suggested that a careful market analysis of the surrounding population should be

carried out before determining the services to be provided in the hospital.

22..77 TThhrreeaattss ffoorr tthhee BBuussiinneessss

One of the major threats to the business is a high turnover rate of medical, paramedical

staff and the consultants. To retain the consultants and other medical staff, salary package

and other benefits / facilities should be competitive.

33 SSEECCTTOORR && IINNDDUUSSTTRRYY AANNAALLYYSSIISS

33..11 HHeeaalltthh CCaarree DDeelliivveerryy

While Pakistan enjoys a vast network of healthcare facilities, coverage, accessibility, cost

and quality of health care remain critical issues. An effective fight has been launched in

prevention and control of both communicable and non communicable diseases in order to

have an impact in the scenario of double burden of diseases in the country. The health

care system in Pakistan comprises the public as well as private health facilities. In the

public sector, districts have been given power for developing their own strategies,

programmes and interventions based on their local needs. In the private sector, the range



4

of health care facilities includes accredited hospitals and clinics, medical practitioners,

homeopaths and hakeems. In addition, non‐governmental organizations (NGOs) and

Pakistan’s corporate sector are also active in the health and social sector, the latter under

their Corporate and Social Responsibility (CSR) mandate. They have been successful to a

large extent in raising the level of awareness of positive health behavior among the

people. However, the health care system as a whole needs to be strengthened further at all

levels. The details of available human resource are given in the Table below:

TTaabbllee 33--11:: AAvvaaiillaabbllee HHuummaann RReessoouurrccee11

2008-09 2009-10 2010-11

Registered Doctors 133,984 139,555 144,901

Registered Dentists 9,013 9,822 10,508

Registered Nurses 65,387 69,313 73,244

Population Per Doctor 1,310 1,183 1,222

Population Per Dentist 18,101 16,914 16,854

Population Per Nurse 1,575 1,592 1,701

33..22 PPhhyyssiiccaall TTaarrggeettss aanndd AAcchhiieevveemmeennttss dduurriinngg 22001100--111122

Targets for the health sector during 2010-11 included establishment of 15 Rural Health

Centers (RHC), 40 Basic Health Units (BHUs) and up gradation of 45 existing RHCs and

900 BHUs. The manpower target included the addition of 5000 new doctors, 450 dentists,

3500 Nurses, 5500 paramedics and 500 traditional birth attendants. Under the preventive

program, about 8.5 million children were targeted to be Immunized and 25 million

packets of ORS were to be distributed during 2010-11. Till date 4500 HIV positive cases

have been reported to the National and Provincial AIDS Control Programs. It includes

3050 full blown AIDS cases. Around 1030 are receiving free treatment through 12 AIDS

Treatment Centers. Total numbers of TB cases reported are 62,321. Whereas the absolute

number of cases is 209,714 up to the third quarter of 2010 and the treatment success rate

remained 91 percent. The percentage of TB case-detection rate is 81 percent and cure rate

is 74 percent. Physical targets, achievements for 2010-11 are given in the table below.

1 Source: Economic Survey of Pakistan 2010-11 (Ch#11, Page #143)




5

TTaabbllee 33--22:: PPhhyyssiiccaall TTaarrggeettss aanndd AAcchhiieevveemmeennttss dduurriinngg 22001100--111133

Sub Sector Targets (No)

2010-11

Estimated

Achievements

(No)

Achievements

(%)

A. Rural Health Program

i. New Basic Health Units

(BHUs)

40 35 87

ii. New Rural Health Centres

(RHCs)

15 13 86

iii. Up gradation of existing

RHCs

45 40 88

iv. Up gradation of existing

BHUs

900 850 94

B. Beds in

Hospitals/RHCs/BHUs

4500 4300 95

C. Health Manpower

Development

i. Doctors 5,000 4,500 90

ii. Dentists 450 400 80

iii. Nurses 3,500 3,200 90

iv. Paramedics 5500 5000 90

v. Training of TBAs 500 450 90

vi. Training of LHWs 100,000 96,000 96

D. Preventive Program

i. Immunization (Million Nos) 8.5 8 94

ii. Oral Re hydration Salt

(ORS) (Million Packets)

25 24 96

33..33 HHeeaalltthh aanndd NNuuttrriittiioonn EExxppeennddiittuurreess

During the year 2010-11, the total expenditure on health is estimated at Rs. 42 billion, of

which Rs. 19 billion allocated for development expenditure and Rs. 23 billion for current

expenditure. These figures show decrease of 47% over the last year and work out to be

0.23% of GDP. It may be pointed out that as a result of improvement in fiscal front; the

government has been allocating relatively more resources to health sector.




6

TTaabbllee 33--33:: EExxppeennddiittuurree ddeettaaiill ((RRss.. bbiilllliioonnss))44

Fiscal

Year

Total

Expenditure

Development

Expenditure

Current

Expenditure

Change

(%)

As %of

GDP

2010-11 42 19 23 -47 0.23

2009-10 79 38 41 7 0.54

2008-09 74 33 41.10 23 0.56

2007-08 60 27.22 32.67 20 0.57

2006-07 50 20 30 25 0.57

33..44 RReegguullaattiioonnss

The doctors working in the hospital should be registered with the Pakistan Medical and

Dental Council (PMDC). Prior sanction/approval from the government through Pakistan

Atomic Energy Commission (PAEC) is required in case of the equipment being installed

in the hospital such as X Ray machines, as they emit radiation and has to be sanctioned /

approved.

44 MMAARRKKEETT IINNFFOORRMMAATTIIOONN

44..11 MMaarrkkeett PPootteennttiiaall

From 1981 to 2011, the estimated population of Pakistan has grown from 85 million to

170 million making Pakistan the seventh most populous country in the world. This

growth rate of population has posed tremendous challenge to the existing infrastructure

for basic facilities in the country. Growing population, increasing industrialization,

resultant high level of environmental pollution, and increased healthcare awareness has

specially stretched the existing public health care system in the country. This has given

rise to high demand of private sector health care facilities to compliment its public sector

counterpart.

44..22 NNaattiioonnaall MMeeddiiccaall aanndd HHeeaalltthh EEssttaabblliisshhmmeennttss55

Total number of hospitals and other health center detail is given in below table:

TTaabbllee 44--11:: HHeeaalltthh EEssttaabblliisshhmmeenntt iinn PPaakkiissttaann

Year Hospitals Dispen-

saries

BHUs

Sub

Health

Centers

Maternity &

Child Health

Centers

Total Beds Population

Per Bed

2005 919 4632 5334 907 101,490 1483

2006 924 4712 5336 906 102,073 1508

2007 945 4755 5349 903 103,285 1544

4 Source: Economic Survey of Pakistan 2010-11 (Ch#11, Page #142) 5 Source: Economic Survey of Pakistan 2010-11 (Statistical Appendixes, Health & Nutrition, Table # 11.1 )



7

2008 948 4794 5310 908 103,037 1575

2009 968 4813 5345 906 103,708 1592

2010 972 4842 5344 909 104,137 1701

44..33 TTaarrggeett CCuussttoommeerrss

The major target market for the facility consists of residential areas in the vicinity of the

hospital. The basic services that will be provided will also be determined by the need of

the locality and its adjacent areas.

44..44 DDeeppaarrttmmeennttss

The proposed hospital would have the following departments:

Emergency

ICU/CCU

Diagnostic Centre

Radiology Department

Surgical Consultancy

Medical Consultancy

Gynecology and Obstetrics review

55 MMAACCHHIINNEERRYY DDEETTAAIILLSS

55..11 MMaacchhiinneerryy aanndd EEqquuiippmmeenntt RReeqquuiirreemmeenntt

The major cost involved in establishing a well-equipped hospital is the cost involved in

machinery, equipment and furnishing. The proposed hospital is providing basic in-house

diagnostic and radiology services to its patients. It is also proposed that the hospital is

equipped with a fully functional operation theatre.

Following machinery is proposed for setting up the private hospital:

TTaabbllee 55--11:: MMaacchhiinneerryy aanndd EEqquuiippmmeenntt RReeqquuiirreemmeenntt66

Description No Cost Per Unit

(Rs)

Total in Rs.

Radiology Department

X-Ray Apparatus with motorized tilting

table

1 450,000 450,000

Dark Room X-Ray Accessories 1 75,000 75,000

ECG Machine 2 35,000 70,000

Ultrasound Machine 1 135,000 135,000

Printer for Ultrasound 1 58,000 58,000

Total 788,000

6 Machinery cost has been taken from Mediequip and Nurani Surgical, Lahore.



8

Diagnostic Center

Blood Analyzer 1 195,000 195,000

ELISA for hormone Analysis fully

automatic

1 3,200,000 3,200,000

Binocular Microscope 1 150,000 150,000

Centrifuge Machine 1 4,000 4,000

Clinical water bath 1 6,500 6,500

Photo Calorimeter 1 45,000 45,000

Lab Incubator 1 95,000 95,000

Miscellaneous Lab Equipment 1 500,000 500,000

Oxygen Supply Plant with Supply in all

Rooms

1 150,000 150,000

Total 4,345,500

Operation Theatre

Operation Theatre Shadow less Light 1 33,000 33,000

Electric suction apparatus 1 23,000 23,000

Surgical Diathermy 1 65,000 65,000

Anesthesia Apparatus 1 450,000 450,000

Trolley for Anesthesia 1 85,000 85,000

Cardiac Resuscitation Trolley 1 95,000 95,000

Cardiac Monitor 1 135,000 135,000

Hydraulic Operation Table 1 48,000 48,000

Horizontal and Vertical Autoclave 1 60,200 60,200

Operation Table 1 48,000 48,000

Emergency Oxygen Kit 3 350,000 1,050,000

Total 2,092,200

Gynecology, Obstetrics & Pediatrics

Operation Theatre Shadow less Light 1 33,000 33,000

Electric suction apparatus 1 23,000 23,000

Delivery Table 2 45,000 90,000

Computerized Baby Incubator 3 125,000 375,000

Phototherapy Apparatus 2 15,000 30,000

Baby Cot with side protection 5 8,500 42,500

Total 593,500

ICU/CCU 5 Beds

Ventilator 2 1,500,000 3,000,000

Cardiac Monitors 5 450,000 2,250,000

Arterial Blood Gas Analyzer 5 800,000 4,000,000

Total 9,250,000

Grand Total 17,069,200



9

In addition to this machinery, small auxiliary tools are also required for the smooth

operations of the hospital.

TTaabbllee 55--22:: OOtthheerr EEqquuiippmmeenntt RReeqquuiirreemmeenntt


(Rs) Total

Electricity Generator 1 1,700,000 1,700,000

Elevator 1 1,500,000 1,500,000

Light and Electricity Appliances 10 1,500 15,000

Instrument sterilizers 2 5,000 10,000

Baby Weighing Machine 1 3,500 3,500

Instrument cabinets 2 8,500 17,000

Stethoscope 12 2,000 24,000

LV Stands 40 850 34,000

Blood Pressure apparatus 6 1,950 11,700

Miscellaneous 500,000

Total 3,815,200

Moreover, there is other office equipment that is required for the daily operations of the

hospital.

TTaabbllee 55--33:: OOffffiiccee EEqquuiippmmeenntt RReeqquuiirreemmeenntt


(Rs) Total in PKR

Split Units 99 45,000 4,455,000

Refrigerators 30 29,000 870,000

TVs 25 11,000 275,000

LCDs 2 50,000 100,000

Computers with UPS 14 40,000 560,000

Printers 5 15,000 75,000

Telephone Exchange 1 100,000 100,000

Telephone Sets 40 1,000 40,000

Fire Extinguishers 20 4,000 80,000

File Cabinets 15 9,000 135,000

Total 6,690,000

To furnish the hospital rooms, laboratories, and visiting area the following furniture is

required.



10

TTaabbllee 55--44:: FFuurrnniittuurree aanndd FFiixxttuurree RReeqquuiirreemmeenntt

Description No. Cost Per Unit

(Rs)

Total

Single side liftable beds 71 18,900 1,341,900

Examination Couch 13 9,950 129,350

Sofa set 3 seat 57 18,400 1,048,800

Chairs etc 69 4,199 289,725

Office Table 24 3,450 82,800

Bed Side Cabinets 60 3,500 210,000

Mobile stretcher trolleys 8 8,500 68,000

Wheel Chairs 8 5,900 47,200

Instrument trolley 10 6,500 65,000

Total 3,282,775

Alternative Chinese machines are available for Radiology and Diagnostic Departments

and for the Operation Theatre. However, their prices are 2 to 3 times lower than Japanese

equipment. However, a mix of Japanese and Korean machinery is proposed for the

project.

55..22 MMoottoorr VVeehhiicclleess

Along with the above mentioned machinery and equipment the proposed hospital will

also be using two ambulances.

TTaabbllee 55--55:: AAmmbbuullaannccee

Sr. No Description QTY Cost per

Unit Total Amount in Rs.

1 Ambulance 2 1,500,000 3,000,000

66 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

66..11 TToottaall LLaanndd RReeqquuiirreemmeenntt

For above recommended size of hospital, approximately 6,750 square feet (1.5 kanal)

area is required with 4 floors including the basement and open area.

TTaabbllee 66--11:: LLaanndd CCoosstt

Description No. of Kanal Rate per Kanal (Rs.) Total Cost in PKR

Total Land 1.5 10,000,000 15,000,000



11

66..22 SSuuiittaabbllee LLooccaattiioonnss

A hospital is supposed to be in a location that is easily accessible and has considerable

population concentration. Considering the spread of new residential areas some of the

suitable locations in some of the cities of Pakistan are:

TTaabbllee 66--22:: SSuuiittaabbllee LLooccaattiioonnss aanndd tthheeiirr pprriisseess rraannggee

City Location

Lahore Main Road Johar Town

Canal Road

LCCHS New Phases

Jail Road, Gulberg

Ferozepur Road

Rawalpindi West Ridge

Peshawar Road

Karachi North Nazimabad

Gulshan-e-Iqbal

Defence Phase I to III

Quetta Satellite Town

Madrussa Road, Cantt

Hazara Town

Jinnah Road

Faisalabad Susan Road

Railway Road

Madina Town

Peshawar Dabgari garden

Hayatabad

Multan Cantonment Area

New Multan

66..33 CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt

Following is the covered area requirement split into various departments and sections:

TTaabbllee 66--33:: CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt

Building No Dimensions Required

Area

Rate per

Sq. Ft

Total Cost

in Rs.

Basement

Canteen 1 20 x 20 400 1,000 400,000

Pharmacy 1 20 x 15 300 1,000 300,000

Diagnostic 1 30 x 35 1,050 1,500 1,575,000

Wash rooms 5 6 x 6 180 1,000 180,000

Laboratory 1 30 x 35 1,050 1,500 1,575,000



12

ICU/CCU 1 20 x 25 500 1,500 750,000

Store room 1 20 x 15 300 800 240,000

Lounge 1 25 x 20 500 1,500 750,000

space for stairs and

elevator 1 20 x 15 300 1,000 300,000

Total 4,580 6,070,000

Ground floor

Reception and waiting

room 1 50 x 50 2,500 1,500 3,750,000

Emergency 1 20 x 30 600 1,500 900,000

Wash rooms 5 6 x 6 180 1,000 180,000

Consultants rooms 4 12 x 12 576 1,500 864,000

General Ward 1 20 x 30 600 1,500 900,000

Nursing centers 1 12 x 10 120 1,500 180,000

Doctors' Room 3 12 x 10 360 1,500 540,000

Lounge 1 25 x 20 500 1,500 750,000

Nurses' room 1 15 x 12 180 1,500 270,000

Space for stairs and

elevator 1 10 x 10 100 1,000 100,000

Total 5,716 8,434,000

1st Floor

Bed rooms 12 14 x 14 2,352 1,500 3,528,000

Wash rooms 5 6 x 6 180 1,000 180,000

Consultants rooms 4 12 x 12 576 1,500 864,000

Labor Ward 1 20 x 30 600 1,500 900,000


Lounge 1 25 x 20 500 1,500 750,000

Child nursery and labor

room 1 25 x 25 625 1,500 937,500

Space for Stairs and

Elevator 1 20 x 15 300 1,000 300,000

Store room 1 20 x 15 300 800 240,000

Total 5,553 7,879,500

2nd floor

Bed rooms 13 14 x 14 2,548 1,500 3,822,000

Wash rooms 5 6 x 6 180 1,000 180,000

Operation theatre 1 30 x 30 900 1,500 1,350,000



13

Sterilization room 1 15 x 15 225 1,500 337,500

Surgeons room 1 12 x 10 120 1,500 180,000

Recovery room 1 15 x 12 180 1,500 270,000


Lounge 1 25 x 20 500 1,500 750,000

Admin block 1 25 x 20 500 1,500 750,000

Space for Stairs and

Elevator 1 20 x 15 300 1,000 300,000

Total 5,573 8,119,500

TOTAL 21,422 30,503,000

Circulation Space 20% of Covered Area 4,284.4 1,000 4,284,400

Total Civil Works Cost 34,787,400

66..44 UUttiilliittiieess RReeqquuiirreemmeenntt

Electricity

Telephone

Gas

Water

Waste disposal

77 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

77..11 HHuummaann RReessoouurrccee RReeqquuiirreemmeennttss

77..11..11 CCoonnssuullttaannttss

Consultant services for the following specialized areas would be made available in the

hospital:

1. Gastroenterology Specialist

2. Pediatric Physician

3. General Surgeon

4. General Physician (Chest & TB)

5. Diabetes & Endocrinologist

6. Cardiologist

7. Orthopedic Surgeon

8. Gynecologist

9. Pathologist

10. Dentist

The consultants generally get 60-70% of the professional fee charged to the patient. In

surgical cases, 1/3rd of the fee charged is shared by the hospital, while the surgeon and

his team share the rest 2/3rd

.

For the proposed size of hospital, apart from consultants following manpower is required:



14

TTaabbllee 77--11:: HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt

Positions Required Salary per Month Salary per Annum

Chief Executive 1 100,000 1,200,000

Admin & Finance Manager 1 75,000 900,000

Admin Officers 2 35,000 840,000

Medical Officers 24 45,000 12,960,000

Nursing Staff 45 18,000 9,720,000

Laboratory Technicians 9 15,000 1,620,000

Operation Theater Assistant. 6 15,000 1,080,000

Mid Wives 6 12,000 864,000

Radiology Technicians 6 15,000 1,080,000

Receptionist 6 15,000 1,080,000

Accountant 2 25,000 600,000

Accounts clerk / Cashier 3 15,000 540,000

Security Guards 6 10,000 720,000

Electrician/technician 3 12,000 432,000

Cleaner + Ayas 6 7,500 540,000

Ward Boy /Office Boy 15 7,500 1,350,000

Male Nurse 18 10,000 2,160,000

Store Keeper 3 9,000 324,000

Total 162 38,010,000



15

88 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

88..11 IInniittiiaall PPrroojjeecctt CCoossttss

Following is the breakdown of the startup project cost for the proposed hospital. It is

suggested that the land for the hospital is purchased and a custom designed building

would be constructed keeping in mind the future expansion plan.

TTaabbllee 88--11:: TToottaall PPrroojjeecctt CCoosstt

Project Costs Total Cost in Rs.

Capital Costs

Land 15,000,000

Building 34,787,400

Machinery & Equipment 17,069,200

Other Equipments 3,815,200

Office Equipment 6,690,000

Furniture & Fixture 3,282,775

Ambulance (02 Nos) 3,000,000

Pre-operating costs7 3,460,000

Total Capital Costs 87,104,575

Working Capital

Raw Material Cost8 478,603

Cash Required for 2 Months Operations

Salaries 6,335,000

Electricity 660,015

Minimum Cash Required 1,000,000

Total Working Capital 8,473,618

Total Project Costs 95,578,193

TTaabbllee 88--22:: FFiinnaanncciinngg PPllaann

Financing

Debt (50%) 47,789,096

Equity (50%) 47,789,096

Total 95,578,192

7 These include salaries of administration staff during the period of construction; incorporation charges

and interest accrued during first year. 8 This represents chemicals, radiology films and other disposable items used in diagnostic department and

Operation Theatre.



16

88..22 EEssttiimmaatteedd TTiimmee ffoorr PPrroojjeecctt CCoommpplleettiioonn

Three months for completion of initial formalities i.e. formation, registration of the

company etc.

One year for purchase of land and construction of building.

Six months for sanction of loan (In case, if financing has to be arranged through

bank)

5-6 months for purchase of machinery, its installation and testing.

Thirty days for premises furnishing and Consultants / Staff appointments.

88..33 PPrroojjeecctt RReettuurrnnss

Project economics is intended to assess the financial sustainability of the project. This

financial analysis however, depends on the assumption used for the analysis. Since this

document concern a generic hospital business unit, the financials will vary considerably

for individual projects.

According to the information analyzed, the hospital business is a viable business

opportunity. Projected returns are given in the table below:

TTaabbllee 88--33:: PPrroojjeecctt RReettuurrnnss

Project

IRR 36.39%

NPV Rs. 99,544,391

Payback Period (Years) 3.86



17

99 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

99..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

PROJECTED INCOME STATEMENT

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees RupeesREVENUE

Indoors

- Surgery 19,800,000 24,750,000 30,492,000 37,853,640 46,822,236 58,074,996 71,641,692 88,978,128 110,222,736 136,807,284

- Room rent 23,850,000 28,858,500 34,918,785 42,251,730 51,124,593 61,860,758 74,851,517 89,459,586 102,635,032 112,898,535

43,650,000 53,608,500 65,410,785 80,105,370 97,946,829 119,935,754 146,493,209 178,437,714 212,857,768 249,705,819

Outdoors

- Consultation fee 33,750,000 42,075,000 51,756,000 62,937,000 75,831,000 90,675,000 111,720,000 136,059,000 164,118,000 196,470,000

- Diagnostic Center 12,420,000 15,028,200 18,207,360 22,060,800 26,698,320 32,304,096 39,119,040 47,349,972 57,300,552 69,343,008

46,170,000 57,103,200 69,963,360 84,997,800 102,529,320 122,979,096 150,839,040 183,408,972 221,418,552 265,813,008

Pahrmacy rent 180,000 198,000 217,800 239,580 263,538 289,892 318,881 350,769 385,846 424,431

Canteen Rent 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231 282,954 90,120,000 111,041,700 135,737,145 165,502,470 200,915,379 243,398,003 297,863,717 362,431,301 434,919,397 516,226,212

DIRECT COSTS

Surgeon's & Anaesthesist's Share 11,880,000 14,850,000 18,295,200 22,712,184 28,093,342 34,844,998 42,985,015 53,386,877 66,133,642 82,084,370

Consultants' Share 16,875,000 21,037,500 25,878,000 31,468,500 37,915,500 45,337,500 55,860,000 68,029,500 82,059,000 98,235,000

Direct diagnostic and Surgery costs 5,823,000 7,204,230 8,829,504 10,879,848 13,369,195 16,460,614 20,196,194 24,898,121 30,639,630 37,762,908

Rooms Electricity 2,760,090 3,440,902 4,230,274 5,143,110 6,196,209 7,408,496 9,127,250 10,946,523 12,403,404 13,497,822

Total Variable Cost of Services 37,338,090 46,532,632 57,232,978 70,203,642 85,574,246 104,051,607 128,168,460 157,261,021 191,235,676 231,580,100

Fixed Overheads

Payroll 27,324,000 30,056,400 33,062,040 36,368,244 40,005,068 44,005,575 48,406,133 53,246,746 58,571,421 64,428,563

Depreciation 5,474,578 5,474,578 5,474,578 5,474,578 5,474,578 5,474,578 5,474,578 5,474,578 5,474,578 5,474,578

Maintenance 686,446 755,090 830,599 913,659 1,005,025 1,105,528 1,216,081 1,337,689 1,471,457 -

Total Services Cost (Fixed + Variable) 70,823,113 82,818,700 96,600,195 112,960,123 132,058,917 154,637,288 183,265,251 217,320,033 256,753,131 301,483,241

Contribution Margin 52,781,910 64,509,068 78,504,167 95,298,828 115,341,133 139,346,395 169,695,257 205,170,280 243,683,721 284,646,111

Gross Profit 19,296,887 28,223,000 39,136,950 52,542,347 68,856,462 88,760,715 114,598,466 145,111,268 178,166,266 214,742,971

OPERATING OVERHEADS

Payroll 10,686,000 11,754,600 12,930,060 14,223,066 15,645,373 17,209,910 18,930,901 20,823,991 22,906,390 25,197,029

Depreciation 1,389,880 1,389,880 1,389,880 1,389,880 1,389,880 1,389,880 1,389,880 1,389,880 1,389,880 1,389,880

Electricity 1,200,000 1,320,000 1,452,000 1,597,200 1,756,920 1,932,612 2,125,873 2,338,460 2,572,306 2,829,537

Other operating costs 600,000 660,000 726,000 798,600 878,460 966,306 1,062,937 1,169,230 1,286,153 1,414,769

Legal & professional charges 75,000 82,500 90,750 99,825 109,808 120,788 132,867 146,154 160,769 176,846

Telephone 350,000 385,000 423,500 465,850 512,435 563,679 620,047 682,052 750,257 825,283

Amortization of pre-opertaing ezpenses 346,000 346,000 346,000 346,000 346,000 346,000 346,000 346,000 346,000 346,000

Total 14,646,880 15,937,980 17,358,190 18,920,421 20,638,875 22,529,175 24,608,505 26,895,767 29,411,755 32,179,344

Rental Income 420,000 462,000 508,200 559,020 614,922 676,414 744,056 818,461 900,307 990,338

Financial charges

Long term loan @ 16% 7,646,255 6,117,004 4,587,753 3,058,502 1,529,251 - - - - -

Net profit before tax (2,576,249) 6,630,016 17,699,207 31,122,444 47,303,258 66,907,954 90,734,018 119,033,962 149,654,818 183,553,965

Tax - 1,657,504 4,424,802 7,780,611 11,825,814 16,726,989 22,683,504 29,758,491 37,413,704 45,888,491

Net Profit after tax (2,576,249) 4,972,512 13,274,405 23,341,833 35,477,443 50,180,966 68,050,513 89,275,472 112,241,113 137,665,474



18

99..22 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

PROJECTED CASH FLOW STATEMENT

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

Profit after tax - (2,576,249) 4,972,512 13,274,405 23,341,833 35,477,443 50,180,966 68,050,513 89,275,472 112,241,113 137,665,474

Adjustment of non-cash changes and other items:

Depreciation - 6,864,458 6,864,458 6,864,458 6,864,458 6,864,458 6,864,458 6,864,458 6,864,458 6,864,458 6,864,458

Amortization of preoperating expenses - 346,000 346,000 346,000 346,000 346,000 346,000 346,000 346,000 346,000 346,000

Working Capital Changes

(Increase) in stocks (478,603) (113,526) (133,584) (168,521) (204,604) (254,089) (307,034) (386,460) (471,905) (585,475) 3,103,801

Increase/(Decrease) in financial charges payable - 7,646,255 (1,529,251) (1,529,251) (1,529,251) (1,529,251) (1,529,251) - - - -

Increase/(Decrease) in payables - 4,382,376 4,517,482 2,029,763 2,446,465 2,910,650 3,491,722 4,476,634 5,306,925 5,957,926 6,682,752

(478,603) 11,915,106 2,854,647 331,990 712,610 1,127,310 1,655,437 4,090,174 4,835,020 5,372,451 9,786,553

Net Cash Flow from operating activities (478,603) 16,549,315 15,037,616 20,816,853 31,264,901 43,815,211 59,046,860 79,351,145 101,320,949 124,824,021 154,662,484

Pre-operating expenses (3,460,000) - - - - - - - - - -

Fixed Capital expenditure (83,644,575) - - - - - - - - - -

Net Cash Flow from investing activities (87,104,575) - - - - - - - - - -

Capital issued 47,789,096 - - - - - - - - - -

Long term Loan 47,789,096 (9,557,819) (9,557,819) (9,557,819) (9,557,819) (9,557,819) - - - - -

Dividends paid - - - - - - - - - - -

Net Cash Flow from financing activities 95,578,193 (9,557,819) (9,557,819) (9,557,819) (9,557,819) (9,557,819) - - - - -

Cash generated (injected) during the year 7,995,015 6,991,495 5,479,797 11,259,033 21,707,081 34,257,391 59,046,860 79,351,145 101,320,949 124,824,021 154,662,484



19

99..33 PPrroojjeecctteedd BBaallaannccee SShheeeett

PROJECTED BALANCE SHEETYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

CAPITAL AND RESERVESIssued, subscribed and paid up capital 47,789,096 47,789,096 47,789,096 47,789,096 47,789,096 47,789,096 47,789,096 47,789,096 47,789,096 47,789,096 47,789,096

Retained Earnings - (2,576,249) 2,396,263 15,670,668 39,012,501 74,489,945 124,670,910 192,721,423 281,996,895 394,238,008 531,903,482

47,789,096 45,212,848 50,185,360 63,459,765 86,801,598 122,279,041 172,460,007 240,510,520 329,785,992 442,027,105 579,692,579

LONG TERM LOAN

Long term loans - unsecured

LONG TERM LOAN @14% 47,789,096 38,231,277 28,673,458 19,115,639 9,557,819 - - - - - -

CURRENT LIABILITIES

Creditors accrued and other liabilities - 4,382,376 8,899,858 10,929,621 13,376,086 16,286,736 19,778,459 24,255,093 29,562,017 35,519,943 42,202,695

Financial Charges payable - 7,646,255 6,117,004 4,587,753 3,058,502 1,529,251 - - - - -

- 12,028,632 15,016,863 15,517,374 16,434,588 17,815,987 19,778,459 24,255,093 29,562,017 35,519,943 42,202,695 95,578,193 95,472,756 93,875,680 98,092,778 112,794,005 140,095,028 192,238,465 264,765,612 359,348,009 477,547,048 621,895,274

FIXED CAPITAL EXPENDITURE

Freehold Land 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000

Building 34,787,400 34,787,400 34,787,400 34,787,400 34,787,400 34,787,400 34,787,400 34,787,400 34,787,400 34,787,400 34,787,400

Medical Equipment and furniture 33,857,175 33,857,175 33,857,175 33,857,175 33,857,175 33,857,175 33,857,175 33,857,175 33,857,175 33,857,175 33,857,175

Accumulated depreciation - (6,864,458) (13,728,915) (20,593,373) (27,457,830) (34,322,288) (41,186,745) (48,051,203) (54,915,660) (61,780,118) (68,644,575)

68,644,575 61,780,118 54,915,660 48,051,203 41,186,745 34,322,288 27,457,830 20,593,373 13,728,915 6,864,458 -

Preoperating expenses 3,460,000 3,114,000 2,768,000 2,422,000 2,076,000 1,730,000 1,384,000 1,038,000 692,000 346,000 -

CURRENT ASSETS

Raw Material Inventory 478,603 592,128 725,713 894,234 1,098,838 1,352,927 1,659,961 2,046,421 2,518,326 3,103,801

Cash and Banks balances 7,995,015 14,986,510 20,466,307 31,725,341 53,432,422 87,689,814 146,736,674 226,087,819 327,408,768 452,232,790 606,895,274

8,473,618 15,578,639 21,192,020 32,619,575 54,531,260 89,042,741 148,396,635 228,134,240 329,927,094 455,336,590 606,895,274 95,578,193 95,472,756 93,875,680 98,092,778 112,794,005 140,095,028 192,238,465 264,765,612 359,348,009 477,547,048 621,895,274



20

1100 KKEEYY AASSSSUUMMPPTTIIOONNSS

TTaabbllee 1100--11:: RReevveennuuee AAssssuummppttiioonnss

Description Annual

Growth Rate

Assumptions

Surgery

- General Surgery

- No of operations per month 15% 30

- Average fee per operation 10% 25,000

- Gynecology & Obstetrics

- No of deliveries per month 10% 45

- Average fee per delivery 10% 20,000

Room Rent

- No of Rooms 25

- Working Days 360

- Total Working Days (Weighted) 9,000

- Occupancy Rate 10% 45%

- Occupancy 4,050

- Room Rent per Day 10% 3,000

Emergency

- No of Beds in Emergency 10

- Working Days 360



- Occupancy 1,800

- Bed Rent per Day 10% 1,500

Labor Ward

- No of Beds in Labor Ward 10

- Working Days 360



- Occupancy 1,800


ICU/CCU

- No of Beds in ICU/CCU 5

- Working Days 360



- Occupancy 900




21

General Ward

- No of Beds in General Ward 10

- Working Days 360



- Occupancy 1,800


Diagnostic center

- Ultra-Sound

No of patients per month 10% 450

Ultrasound Fee per patient 10% 750

- X-Ray


X Ray Fee per patient 10% 550

- ECG


ECG Fee per patient 10% 500

- Complete Blood Test/Urine Test


Test Fee per patient 10% 500

TTaabbllee 1100--22:: EElleeccttrriicciittyy AAssssuummppttiioonnss

Room Electricity Consumption

One Ton AC Operating for 16 Hours/Day 26.67 units

Other Electric Appliances 6 units

Rate Per Unit (Rupees/Kwh) 15

Electricity Price Growth Rate 10%

TTaabbllee 1100--33:: OOppeerraattiinngg EExxppeennssee AAssssuummppttiioonnss

Costs Basis

Surgeon's & Anesthetist’s Share 60% of Total Surgery Fee

Consultants' Share 50 % of Total Consultation Fee

Direct Diagnostic Costs 15% of Total Diagnostic Center Fee

TTaabbllee 1100--44:: OOtthheerr OOppeerraattiinngg EExxppeennssee AAssssuummppttiioonnss

Accounts Payable Cycle 30 Days

Raw Material Inventory 30 Days

Amortization Of Pre-Operating Expenses 10 Years



22

TTaabbllee 1100--55:: FFiinnaanncciiaall AAssssuummppttiioonnss

Interest On Long Term Loan 16%

Long Term Debt Tenure 5 years

Weighted Average Cost Of Capital 20%

smeda private hospital

Documents

health care

good patient

increased

key success

total working

public sector

total project

working days