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Sustainability: the foundation of a new hospital’s decades of success

By Peter Sgro

Building a new hospital is one of the most expensive undertakings. On the mainland, it is not unusual to see construction costs of building a new hospital reach as high as $500 to $600 per square foot.

However, for purposes of estimating the building of a new state-of-the-art hospital on Guam, the realities associated with the need to ship in virtually everything associated with its construction, hospital equipment, supplies, furnishings, fixtures etc., will result in the cost per square foot running anywhere between $750 to $900 per square foot depending on the design.

You can count on increases in costs for every year the groundbreaking is delayed not limited to just the cost of construction, but also to increases in finance costs, labor costs, the cost of equipment and insurance.

In every single phase of a hospital development— especially during the design phase—financial sustainability must be seriously considered to avoid generations of taxpayers being financially responsible for its survival. This is especially the case when you consider that, for decades, the taxpayers of Guam have had to shoulder an average of $30 million annually in direct appropriations and subsidies to sustain Guam Memorial Hospital. The planning process must include eliminating these direct appropriations and subsidies.

When initially planning a new hospital, there is often a tendency

to design a facility much larger than community demand. In determining the size and number of acute care beds, the community hospital/bed need ratios must be considered. These equations take in such factors as our population base over the age of 65, and under the age of 65, our levels of chronic diseases and, just as important, our shortage of nurses to staff beds. It is critical throughout the development process that budgets are adhered to and financial constraints monitored daily.

Considering the above, I suggest the new hospital be designed as a facility with 150 acute care beds and a total size of 350,000 square feet. I also suggest, however, that the initial design include the seamless ability to expand in the future to 200 acute care beds. The design of the future expansion can be done to realize a much lower construction cost per square foot compared to the initial building.

By way of comparison, Guam Regional Medical City is approximately 280,000 square feet with 120 acute care beds. I added approximately 50,000 square feet of space not only considering financial sustainability reasons but the large demand for certain outpatient services. It is important to consider that federal Medicare limitations under the Tax Equity and Fiscal Responsibility Act do not apply to outpatient services.

With respect to the approximately 50,000 square feet of outpatient area, I feel financial sustainability is even better realized if this space is leased to experienced private providers of various care specialties. Space within this outpatient area would essentially be subject to competitive bidding by private providers with at least 10 years of experience in various forms of healthcare services.

The leased outpatient areas would be operated and managed by private providers offering radiology, laboratory, pharmacy, various forms of rehabilitation therapy such as speech, occupational and speech therapy, a wound care hyperbaric chamber clinic and a 20-chair outpatient dialysis center.

Our nursing shortage is not limited to Guam but is also a serious national issue. Our shortage of nurses and realistic solutions for recruitment must be considered in deciding the size of the hospital. Like hotel rooms, hospital rooms only generate revenue when occupied.


Our current shortage of nurses is the direct cause of acute care bedrooms both at GRMC and GMH not being operational.

It was reported earlier that the new hospital could be as large as 300 acute care beds. If this plan is followed, not only will construction costs get bloated, but will also result in revenue losses due to a projected 85 to 95 acute care beds that will be rendered inoperable due to an acute shortage of nursing staff.

It is commonly known in the hospital development industry that the useful life of a hospital is 40 years. GMH will soon turn 53 years old. The older the hospital, the more expensive it is to operate.

Various state-of-the-art IT systems, including building management systems, will not only prove to save on energy costs but extend the useful life of the new hospital. It all starts with the very first day of the design stage.

Our new hospital should be designed prudently and should offer services that will not only foster financial sustainability but also provide the highest standards of hospital care for generations of people that call Guam their home.

Peter R. Sgro Jr. is the president International Group Inc. He led a multisectoral community network that planned the establishment of Guam Regional Medical City. Send feedback to

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