How Much Does a Hospital Cost to Buy and Renovate?

Renovating large buildings requires a large investment. For example, when you consider how much does a hospital cost to buy and renovate, you could be looking at a very large building on a very large piece of land. The purchase cost alone could be high.

Here are some of the factors that go into answering the question, ‘how much does a hospital cost to buy and renovate?’

How Much Does a Hospital Cost to Buy and Renovate Based on Size?

One of the biggest factors that goes into the cost of any medical building is its size. A general rule of thumb is that a hospital requires 2,500 square feet per hospital bed. This space is obviously not all allocated to patient rooms. But the number of staff increases with each patient. Each doctor and nurse requires workspace. This is why a patient who may only occupy a 140 square foot room actually requires 2,500 square feet of hospital space.

A full-service hospital has several purposes, each of which will require space that is safe and of sufficient size. Some areas a full-service hospital requires include:

  • Emergency room: Most full-service hospitals provide a trauma center. A trauma center must include space for a waiting area, triage area, treatment areas, and reception. It must also have access for ambulances. The value of a trauma center starts at about $200 per square foot.

 

  • Radiology: Radiology requires specially constructed space to shield others from the x-ray radiation produced by the machines. Because of the shielding required, radiology usually costs 5% of the total hospital cost.
  • Storage: Hospitals store a lot of hazardous materials. The oxygen in oxygen cylinders is flammable and compressed. As a result, oxygen cylinders can pose an explosion and fire hazard. Anesthesia and medication must be stored so they cannot be stolen. Certain medications also must be stored at a specified temperature and humidity. This means that hospital storage must include a security system, refrigerators, and a fire suppression system.
  • Surgery: Surgical suites require special ventilation to minimize the risk of infection. They also require special lighting to assist surgeons. The materials must be specially chosen so they can withstand medical cleaning and sterilization. As a result, the cost of surgical space starts around $350 per square foot.
  • Patient rooms: Patient rooms are not luxurious. But they do provide a toilet, sinks, and climate control. They also include an intercom and usually include a data port to connect patient monitoring equipment. Patient rooms usually start at around $300 per square foot to build.
  • Testing labs and outpatient treatment: These rooms do not usually require any special fixtures other than plumbing, electric, and HVAC. These areas usually cost about $300 per square foot.
  • Administration: The least expensive areas in a hospital are the administrative offices. Although they are essential, they do not require floors that can be sterilized, extra plumbing, or high-capacity electrical systems. This is a place where a builder can save some money. Administrative office space usually costs about $150 per square foot.
  • Food service: Food preparation and service areas also provide a place where a builder can save some money. These areas are usually outfitted like a restaurant kitchen, so no special fixtures are needed. The space may be larger than a typical restaurant kitchen to minimize the risk of cross-contamination that might trigger food-borne illnesses or a food allergy. But these areas are relatively cheap at about $100 per square foot.
  • Laundry, housekeeping, supply storage: These are the least expensive areas of a hospital. These areas do not require anything except lighting, electricity, and HVAC. However, they do require access to the loading dock where linens, cleaning supplies, and paper products are delivered. The cost of the loading dock, housekeeping, supply storage, and laundry will depend heavily on the garage door companies installing the doors.

 

Once you average out all these costs weighted by the amount of space for each area, the typical hospital costs about $200-$300 per square foot to build.

How Much Does a Hospital Cost to Buy and Renovate Based on the Amount of Renovations?

Building a hospital from the ground up would typically cost between $200-$300 per square foot. But this is different from renovating an already-standing hospital. The reason is that a lot of the cost of the hospital is the plumbing, electrical, HVAC, and structural work that goes into the hospital. If the hospital is already standing, some of these costs will be eliminated or reduced.

  • Electrical: Hospitals need a high-capacity electrical system. Medical equipment runs on 120, 220, and 380-volt outlets. As a result, the electrical system must be capable of delivering higher voltages than a normal residence. Additionally, hospitals must supply enough electricity to illuminate surgical suites and outpatient treatment areas without overloading the electrical circuits. Finally, electricians need to install backup generators so the hospital can continue to function during an electrical blackout. This electrical work is not cheap. It can cost $3-$4 per square foot.
  • Plumbing: Hospitals use a lot of water. A rule of thumb is that a hospital’s plumbing system must be capable of handling as much as 120 gallons of water per hospital bed per day. So, an average hospital with 100 beds would use about 12,000 gallons of water every day for cleaning, drinking, food preparation, laundry, and medical treatment. This system can be costly at around $20 per square foot.
  • Heating, ventilation, and air conditioning: These costs are also higher for hospitals. Most hospitals use ULPA filters which capture bacteria and even particles small enough to carry a virus. In addition to installing specialty filtering systems, hospitals need more powerful blowers because the ULPA filters impede the air flowing through them. Despite this, hospitals use high-capacity systems that are designed to renew the entire volume of air in the hospital 15 to 20 times per hour. These systems cost around $45 per square foot.
  • Structural: Structural work makes up the bulk of the remaining cost. If you do not require electrical, plumbing, or HVAC, you can save about $70 per square foot on your renovation. This leaves you between $130 and $230 per square foot for structural and finish work.

Depending on the systems that need renovating, your renovation costs might as little as a few dollars per square foot to a few hundred dollars per square foot depending on the work needed.

How Much Does a Hospital Cost to Buy and Renovate Based on Location?

Location is a huge driver of construction costs. Hospitals in more populous states and in big cities will usually cost more than hospitals in low-population states or rural areas. There are a few reasons for this price difference.

  • Labor: Labor costs are usually higher in a more urban area and more populous states. The cost of living in a populous or urban area is greater, so workers expect a higher wage. Since labor is one of the biggest drivers of construction costs, an increase of just a few percent in your labor costs and amount to hundreds of thousands or even millions of dollars added to your budget.
  • Materials: Materials are usually more expensive in more populous areas due to greater demand. The materials you need are also needed by the addiction recovery center being built down the street. Whether you need lumber, concrete, copper wire, or steel pipe, it will almost always be more expensive in urban areas as a result.
  • Insurance: Construction insurance is always expensive. But areas where there are more bystanders who can get injured will usually have higher insurance costs. Similarly, in areas with greater traffic, your auto insurance rates for you and your vendors will be higher.
  • Land: Buying and renovating a hospital could run into cost overruns right from the start. In many areas, a large hospital building on a large lot might be highly sought after. You could get into a bidding war just to acquire the building. Even a smaller medical building could be turned into offices, retail stores, or animal hospitals.

How Much Does a Hospital Cost to Buy and Renovate Based on Specialty?

Specialty medical buildings will almost always cost more than primary care hospitals. But whether and how much more they cost will depend on the specialty. Some considerations include:

  • Patient needs: Some patients need greater levels of care and, as a result, more staff support. A highly staff-intensive practice such as a surgical center might require more workspace for doctors, nurses, and staff who clean and maintain the facility. Similarly, some facilities like cancer treatment centers, hospices, and children’s hospitals provide recreation spaces for patients and their families. These additional building requirements will increase expenses.
  • Staff needs: Some facilities need to accommodate increased staff needs. For example, a trauma center might include a few beds for doctors and nurses who work long shifts and need to rest. Likewise, a hospice might include church facilities and space for counseling to help staff cope with the daily stresses of working at the facility.
  • Family needs: In the age of COVID-19, many hospitals realized they are unprepared for visitors during a mass casualty event like a pandemic. Worse yet, hospitals have probably underestimated the risk that visitors pose to patients if they are infectious. The needs of family members and visitors are particularly urgent for facilities such as children’s hospitals where the family is an important part of the treatment program,

How Much Does a Hospital Cost to Buy and Renovate Based on Financing?

A hospital that is built using an endowment or contributions will cost much less than a hospital that requires loans or bonds for financing. A typical commercial construction loan will incur between 4% and 12% interest. For certain entities, bonds are a more attractive financing option. You might be able to finance the project with low-interest bonds that investors will grab up because hospital bonds are often tax-free.

But the least expensive route is to use an endowment, charitable gift, or other cash contribution to pay for your purchase and renovation. These options avoid interest. On a large construction project, interest can be substantial. On a million-dollar renovation, you will probably pay tens of thousands of dollars in interest over the life of your construction loan. By using charitable contributions, that money can go to construction or patient care rather than construction.

How Much Does a Hospital Cost to Buy and Renovate Based on Relationships?

Under the fee-for-service model used in the U.S. healthcare system, a hospital’s structure as a private or public entity makes a big difference in its profitability and, consequently, its ability to attract investors, lenders, and donors. These relationships can make a big difference in the resources at your disposal for construction projects.

Because they have a higher risk of non-collections, public hospitals have more precarious finances. This can affect the interest rates they pay to borrow money. It can also jeopardize the hospital’s ability to attract donors and insurance partners. But a public hospital with good lender, donor, and insurance partner relationships can make major investments in construction and renovation projects.

A private hospital, on the other hand, will have much greater access to cheap credit and construction resources. It can solicit investors to support the construction project and use a combination of loans and investment to pay for its construction projects. It will also be able to attract insurance partners because the insurers will have confidence that the hospital will remain in operation.

How much does a hospital cost to buy and renovate? It can depend on many factors. If only some of the hospital’s systems need renovation, the costs might be less than $100 per square foot. But if major structural changes are needed, the costs could expand greatly.

The costs will also depend on the design and how the needs of patients, staff, and families are handled. More money spent on support facilities will mean a more expensive project.

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