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Journal of the Academy of Hospital Administration

Cost Evaluation of Construction at 500 Bed Tertiary Care Teaching Hospital

Author(s): Tabish Syed Amin, Qadri G.J.

Vol. 11, No. 2 (1999-07 - 1999-12)

Abstract : A cost analysis conducted at 500 bedded tertiary care teaching hospital (using average costing method) to work out the unit cost reveals that the expenditure incurred on the construction (civil, mechanical and electric work) is Rs. 3.54 lacs (11800 US$)

Keywords : Cost, Evaluation, Tertiary care, Hospital

Introduction :

Hospitals account for 60-80 percent of the government expenditure for health facilities in developing countries (Barnum et al, 1992). The concern about the high costs of healthcare in light of scarce national resources has resulted in the close examination of the hospital sector of the health system.

Construction of the Hospitals on the basis of well conceived plans is important, not only because of the large capital outlays involved but also because of the longterm cost implications associated with construction decisions. New health facilities absorb billions of dollars/rupees worth of resources each year in various countries. Avoidance of these (unsaved) costs can result in savings of as much as ten percent of annual health budget.

The savings of this magnitude are more crucial in effective facility planning in developing countries with far more critical resource constraints. A careful design of the needed facilities to maximise efficiency and productivity can limit operating cost substantially.


To find out the construction cost of the health facility per bed and to examine various aspects of planning and design considerations, constructional practices, and hospital economics that have been observed to create this hospital.

Material and Method

Cost analysis

Estimating cost of construction :

Hospital costs vary greatly depending on locality, availability of capital, and interest rates charged. There are some good sources of current information on hospital construction : the "Dodge Building cost calculator" and "Means Building construction costs Data" that give costs of different elements of construction for hospital built in USA enabling one to make comparison and approximate the cost of hospital construction closely enough for planning purposes. Developing countries have less information and a greater spread of construction costs.

One of the major elements driving up the cost of health facilities construction is construction codes that lag behind the state of the art in the building trades.

Conversion of capital costs to an Annual Basis

In many developing countries the government pays for the cost of all construction, which is budgeted as a one time capital cost. However, there is an increasing trend towards use of non-governmental funds for hospital construction and for a realistic allocation of the governmental funds on an annual cost basis. This is particularly true as the use of government loans or bonds to finance construction of government hospitals increases.

To convert the cost of construction to an annual basis, one should use the concept of "debt servicing" charge : such a charge includes the payback of principal, plus the interest on the remaining principal. A common method of allocation of debt servicing charges is to make equal payments each year for the period of the loan. Planners must learn to use one of the inexpensive financial calculators to estimate the impart of different systems of allocation of the dent servicing charges for hospital construction.

Comparison of New Facilities cost with old

In estimating the costs of operating new facilities, one starts with the debt servicing charges. In addition to the cost of debt servicing, one must estimate the cost of maintenance of the facility. Maintenance cost of the new facility may be substantially less than that for an existing one.

Sources of Funding for construction

Estimation of the availability of funds for hospital construction is a complex art. Essentially all funding in developed countries is financed by loans which depend on current interest rates and the existing money market. In developing countries where the government finances hospital construction, the interest rates are often hidden, as construction costs become a part of the national debt. International agencies (like the world Bank) provide funds on varying terms. Other sources include fund raising within the community, short term debt financing; issuance of bonds (both tax-exempt and taxable); convertible mortgages and other possibilities of private funding. Such funds are frequently matched by state and local authorities; often the local funds are augmented by central level matching grants or loans.

These complex elements come together to give rise to the debt servicing cost (interest plus pay back of loan), which must be counted as part of the ongoing operating expenses of the hospital.


Average costing Technique has been adopted to compute the unit cost. The total costs of the facility was determined and devided in rational proportion among total number of beds-thereby deducing the cost of construction per bed. The unit cost has been worked out separately for construction work, equipment and housing facility.

The data was obtained from :

01. Study of records available with :

  • Hospital construction division
  • Hospital Engineering department
  • Import section
  • Accounts section

02. Questionnaire (for key persons involved in the construction)

03. Interview with Hospital Administrators

04. Project report of the organisation

05. Annual report of the organisation


The construction of this 500 bedded tertiary Care teaching hospital started in 1975 and the hospital was commissioned in December 1982.

The Polyclinic complex supported by 160 bedded complement provides primary ambulatory care. A bed complement of 28 speciality beds, distributed amongst various clinical disciplines provide the intermediate care to patients admitted through the Referral clinic. The Emergency department with 16 observation beds, fully equipped with resuscitation equipments, beside piped Oxygen and suction etc. provides acute care to the admitted patients. A 32 bedded emergency ward serves as a buffer between the Emergency and speciality beds. The intensive care unit with 14 beds provide post operative intensive care and coronary care to the critically ill has been provided with sophisticated equipment. A 16 bedded post operative ward is well equipped having resuscitation facilities with piped Oxygen and suction etc.

The other facilities include Library, Seminar hall, Faculty rooms, Mortuary and Auditorium. The disciplines like cardiotheracic and vascular surgery, Cardiology, Neurosurgery, Neurology, Gasteroenterology, Urology, Pediatric Surgery, Plastic surgery, Neonantology, Endocrinology, Hematology, Medical and Surgical Oncology, Radiotherapy, Nuclear Medicine, Radiodiagnosis, Physical Medicine, Anaesthesiology, Medical Physical and Bioengineering, Pathology, Microbiology, Blood Transfusion and Immunohematology Biochemistry, clinical pharmacology and Hospital Administration have been developed as independent disciplines.

A floor area of 3.50 lac square feet has been provided for the Main Hospital Block excluding housing and auditorium.

Table 1

Breakup of the expenditure on Main Hospital

Subject/Title Amount in Rupees
Architects fees 5,663,033
Land compensation 7,598,629
Site Development/Landscape 6,141586
Civil works 107,666,846
Sanitary Installations 5,318,180
Electric Installations 11,052,561
Mechanical Works (including Air conditioning/ central heating, installation of Lifts etc.) 34,796,254
Sewage Treatment Plant 2,037,060
Water Treatment Plant 647,444
Fire Alarm system 576,867
Miscellaneous 962,634
Total 177,362,914

Most of the land was donated by the Government and some voluntary agencies.

Table 2

Expenditure on Housing

a) Architects fees 220,030
b) Civilworks Nurses Hostel 5,240,358
  Doctors Hostel 6,661,337
  Married Doctors Quarters 7,252,451
  Officers Quarters 234,545
  Faculty Houses 3,690,130
c) Sanitary Installations 8,528,075
d) Electric Installations 24,782,873
e) Miscellaneous works 24,782,873
  Total 59,046,584

Table 3

Breakup of equipment cost

S.No Speciality Amount (in Rupees)
01. Cardiotheracic & VascularSurgery 2,830,000
02. Neurosurgery 2,460,000
03. General surgery 701,000
04. Pediatric surgery 2,183,000
05. Plastic surgery 110,000
06. Gastronterology 1,696,000
07. Nephrology 1,965,000
08. Neonatology 1,781,000
09. Neurology 440,000
10. Urology 982,000
11. General Medicine 127,000
12. Cardiology 5,396,000
13. Physiotherapy 362,000
14. Blood Bank 723,000
15. Pharmacology 702,000
16. Pathology 678,000
17. Immunology 689,000
18. Biochemistry 122,000
19. Hematology 1,777,000
20. Microbiology 1,004,000
21. Radio diagnosis 1,257,000
22. Nuclear Medicine 3,922,000
23. Radio therapy 1,827,000
24. Med. Physics & Bio- engineering 25,000
25. Anesthesiology 1,430,000
26. Intensive care unit 5,120,000
27. Operation theaters 400,000
28. Inpatient areas (wards) 1,500,000
29. CSSD, Laundry & Dietetics
  Total 186,477,000


Constructional Practices

Civil Works

The buildings are R.C.C. framed structures ranging from single-storeyed Referal Clinic to seven storeyed ward block, Keeping in view the severe climatic conditions of the region emphasis has been laid on the construction of the buildings so as to provide for the most economical heating arrangements. This has been in the form of hollow clay brick walls on the external skin of the buildings.

The roof and floors also have hollow cement concrete blocks used in conjuction with R.C.C. ribs and slabs, to avoid heat loss.

In order to save on the maintenance costs. Kota stone flooring has been provided, in all the public areas. The external finish is of exposed grit finish which requires minimum maintenance.

Emphasis has been laid on the utilisation of locally available materials from the local industries (Joinery Mill, Brick & Tile Factory).

Adequate space has been provided for ducting passages which cater to all the needs of the services such as electric and public heath installations, central heating and medical gases and suction.

Public Health Works

In order to put minimum load on the scarce water resources of the place, particularly during the winter months, an independent tubewell has been provided in the hospital premises which provides 200 thousand gallons of water per day (the requirements of the hospital complex).

A sewage treatment plant has been provided to adequately treat the effluent before being discharged in to adjacent lake. (The sewage treatment facilities in the city are under-developed particularly in this area making it essential to have its own sewage treatment plant). Separate provision has been provided for the storm water drainage of the campus.

Additional water mains have been provided as per the standard code of ISI (Indian Standards Institute) for such institutions.

Adequate provision has been made for both under ground and overhead water storage tanks to ensure uninterrupted water supply.

Electric Installations

Whereas electricity is being made available by the local government, but at the same time in view of the frequent power failures, provision has been made for 2x300 KVA standby diesel generating sets (to ensure uninterrupted power supply). which are used in the case of emergency. These generators cater to the needs of the operation theaters, lifts and other essential areas. Stabilisors have been provided to take care of frequent voltage and frequencey problems.

The system of conduction has been evolved in such a manner that electric throughs have been introduced in the floor systems at regular intervals which entail lot of savings in as far as the electric fixtures are concerned.

Central Heating

In view of the climatic conditions, provision has been made for central heating on the basis of cost benefit studies and suitability.

Air Conditioning

The Operation theater block is fully air-conditioned which conform to the latest trends of air changes, temperature and humidity control and provides Saminar ventilation (air flow) in the operating rooms. ICU, emergency department, other therapeutic and investigating departments also have this facility. The system has been designed at -10°C Ambient temperature to give 21° - 23°C inside temperature.

Housing and Development

The housing facilities were developed in order to provide about 50% satisfaction rate to the staff which is higher in case of faculty and other essential categories of personnel in relation to ancillary and ministerial staff. Hostel accomodation has been provided to house the nurses, house surgeons and post graduate students who have to perform round the clock duties in the hospital. The total expenditure on housing is Rupees 59,046,584 (Table 2).


The hospital is providing referral care of the highest order and has been equipped with sophisticated equipment for the diagnostic and treatment of the rarest of the disease. The total expenditure on the equipment is Rupees 186,477,000 (table 3).

Support Services

The services like CSSD, Laundry and Linen, Dietary Service, Boiler House, Electric Substation Medical Gas section, medical and general stores

supply service etc. (directed towards the development of replenishment system within the hospital) contribute towards the effectiveness of patient care. A greatemphasis has been laid on the optimum performance of this supply line and the repair and maintenance of equipment in the design of the institute. Ground floor of the ward block houses the support and utility services, which during working hours reaches out to patient care areas to top up their supplies through an efficient communication link between them.

Hospital Economics

While developing the investigative, operating sterilisation, laundry, dietetics and other such Services, a very careful analysis of the workload in relation to patients needs has been made and the layout planning of these services has been done to satisfy the total needs of the hospital. All the investigative, therapeutic, support and utility service departments have been thoroughly investigated in terms of their scope of work before physical designs have been prepared.

The physical plans of this health facility have been so structured over the functional system that the design goes well with quality of service and the economy and promptness at which it can be rendered.

Sign Posting

The hospital building has been designed as a definite system with 300 feet corridor serving as a spine. All the departments emerge out of this spine as ribs. This helps in locating any of the hospital unit from the corridor through scientific sign posting.

Operation Theater Block

Locating the operation theater away from the ward block, the development of an efficient communication link between the two and zoning mechanism have been envisaged in operating theaters. In order to create an environment free from the hazards of infection, the operating theater, the emergency department the Intensive care unit


Going by the survey conducted in some developed economics (Table 4) it appears that the construction cost per bed 28,166 USD (1985) is much less as compaved to construction cost of US teaching hospital 250,000 USD (1975), keeping in view the escalation (increase in costs) by at least ten percent per year.

Table 4

Illustrative construction costs*

General Hospital (Cost per bed)

Cost Year Location-Type
50,000 1975 U.S., 100 bedded
65,000 1975 US, 400 bedded
250,000 1975 US, teaching hosp
105,000 1980 US, 200 bedded
25,000 1975 Singapore
375,000 1975 Abu Dhabi
290,000 1981 Saudi Arabia
19,000 1986 Malawi

(Costs are estimated to have increased by at least ten percent per year since the survey done in 1975)

* Courtesy : Timothy D.Baker. Planning Health Facilities.


Planner should be familiar with the new techniques in hospital architecture such as:

  • The computer design for similar health facilities
  • the "fast track" system for initiating construction before design is complete (to prevent increased construction costs from inflation).
  • the use of interstitial floors to provide easier access for the various services such as water and electricity.
  • The use of traffic models for hospital design, and
  • the use of flexible designs with open options for expansion or change of facilities.

Hospital administrators should be called on to make estimates of the saving in personnel and materials through the use of new systems in comparison to old systems before reaching decisions as to whether to continue with the old system, to renovate, or to build a new.

Master planners must take a comprehensive view of the rapid changes that are occuring in most developing countries. They must build for the future, not the past, anticipating world side trends, such as urbanisation, and plan for facilities to meet these major trends.


  1. Barnum H, Kutzin J. Public Hospital in Developing Countries : Resources, Use, Costs, Financing. The World Bank, Baltimore : John Hopkins University Press, 1992.
  2. Dodge building cost calculator and evaluation Guide, New York : Macgraw-Hill Information system co.
  3. Godfrey, R.S. (ed). Building Construction Costs Data, Kingston, MA : R.S. Means co; Inc.
  4. Project Report, Institute of Medical Sciences, 1975.

* Sr. Consultant and Administrator, S.K. Institute of Medical Sciences, Srinagar - 190011.

** Professor, Deptt. of Hospital Administration S.K. Institute of Medical Sciences Srinagar-190011.

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