Calculating the Cost of a
Healthcare Project
Nearly $200 billion of healthcare
construction is expected by the
year 2015, and nurse leaders must
expand their knowledge and capabilities
in healthcare design. This
bimonthly department prepares
nurse leaders to use the evidencebased
design process to ensure that
new, expanded, and renovated
hospitals facilitate optimal patient
outcomes, enhance the work environment
for healthcare providers,
and improve organizational performance.
In this article, the author
introduces important project
budget terms and a method of calculating
an estimation of probableAlthough nurse executives are
very competent in planning and
managing capital and operational
budgets, many do not have
knowledge or skills in project
budgeting for healthcare design
and construction projects. This
article defines project budget terms
and introduces a quick method
of determining a preliminary estimate
of probable costs associated
with a healthcare design and
construction project. The proposed
methodology is not meant
to replace the rigor of a comprehensive
cost estimation prepared
by a contractor or professional
cost estimator, but it does provide
the nurse executive with the
tools to determine where projectrelated
expenses can be anticipated.
The budgeting tool also
outlines areas of the budget that
nurse executives must anticipate
for planning purposes during the
project planning and management
process. A clear understanding
of project budgeting terms,
line items to anticipate, and the
methodology in estimating the
total project cost will facilitate
the nurse executive’s communications
with other members of the
C-suite, the board of directors,
and other decision makers in the
organizationConstruction Planning
and Budgeting
There are 2 critically important
terms in projecting an estimate of
probable cost for a healthcare
project that are frequently confused.
The terms construction
cost and project cost are not
synonymous terms, and it is important
for nurse executives to
understand the difference in the
terms and the budget components
that comprise these line items
in a project budget. Figure 1
outlines the 11 line items of a
project budget, and each line
item will be discussed in further
detail. Figure 2 outlines an estimation
of probable cost for a
hypothetical project, demonstrating
the differences between the
terms construction cost and project
cost.
Determining the
Construction Cost
The construction cost is based on
the projected gross square feet
planned for a project and is
determined by the sum of the
following line items: (1) building
cost, (2) site development costs,
(3) fixed equipment costs, and
(4) construction contingency reserves.
Each of these costs and reserve
are discussed in more detail
to enhance the nurse executive’s
knowledge of the terms.
Building Cost
The building cost, represented as
line item A in Figure 1, includes
all costs associated with the construction
of the hospital within
5 ft of the structure itself and all
cost for a building project