177.
PROFILE ON HIGHER CLINIC
177-2
TABLE OF CONTENTS
PAGE
I. SUMMARY 177-3
II. SERVICE DESCRIPTION 177-3
III. MARKET STUDY AND SERVICE CAPACITY 177-4
A. MARKET STUDY 177-4
B. SERVICE CAPACITY & PROGRAMME 177-6
IV. MEDICAL SUPPLIES & UTILITIES 177-6
A. MEDICAL SUPPLIES 177-6
B. UTILITIES 177-8
V. TECHNOLOGY & ENGINEERING 177-8
A. TECHNOLOGY 177-8
B. ENGINEERING 177-9
VI. MANPOWER & TRAINING REQUIREMENT 177-13
A. MANPOWER REQUIREMENT 177-13
B. TRAINING REQUIREMENT 177-14
VII. FINANCIAL ANLYSIS 177-14
A. TOTAL INITIAL INVESTMENT COST 177-14
B. OPERATING COST 177-15
C. FINANCIAL EVALUATION 177-16
D. ECONOMIC BENEFITS 177-18
177-3
I. SUMMARY
This profile envisages the establishment of a higher clinic with a capacity to treat 7,320
out-patients and 1,464 in- patients per year.
The market study shows that in Addis Ababa currently an additional 122 higher clinics
are required. If additional higher clinics are not established the requirement will increase
to 376 higher clinics by the year 2022.
The total investment requirement is estimated at about Birr 3.84 million, out of which
Birr 834.37 thousand is required for medical equipment. The service will create
employment opportunities for 10 persons.
The project is financially viable with an internal rate of return (IRR) of 14.46 % and a
net present value (NPV) of Birr 1.13 million, discounted at 8.5 %.
II. SERVICE DESCRIPTION
Higher Clinic is an institution run by a general medical practitioner or specialist assisted
by various other specialists; and where diverse out-patient medical services are given. A
Higher Clinic can have 1-5 beds for delivery and emergency cases.
Specifically, the Higher Clinic would provide the following services:
Antenatal out-patient emergency services;
Diagnostic services on laboratory, x-ray, sonography;
Minor surgery; and
Other services allowed to the medical members;
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III. MARKET STUDY AND SERVICE CAPACITY
A. MARKET STUDY
1. Past Supply and Present Demand
Health services are essential elements in ensuring a full and meaningful life for people.
Good health contributes to increased production of goods and services while poor health
puts labor force out of income. This implies the necessity of providing adequate health
services through establishment of health facilities that are adequately staffed and well
supplied with qualified medical personnel, equipment and drugs.
Current health service providers in the city include Federal Government Agencies, Addis
Ababa Health Bureau, Non Governmental Organizations (NOGs), factories, and the
private sector. There are 603 health facilities registered and licensed by the City
Administration in 2004/05 including 28 hospitals, 26 health centers, 507 clinics, and 42
health posts. Currently the private sector is leading in terms of ownership of number of
health facilities. It owns and operates 64.68% of the number of health facilities.
Though there have been some improvements in health status of residents in recent years it
is still at a low level. HIV/AIDS is registering a declining trend but the prevalence rate is
still very high in the city, which is another indication to the low level of development of
health service in the city.
According to the Ministry of Health one clinic is to serve a maximum of 5,000 people to
achieve a reasonable level of quality and coverage standard in health service in the
country. Supply gap/shortfall in health service in the city is calculated based on this
standard parameter. The result is that the supply of clinic is short of the demand by
30.3%, and to achieve the standard set by the Ministry of Health additional clinics are
required.
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Therefore, considering the shortage of medical service in the city, it is assumed that the
envisaged higher clinic will have adequate present and future market.
2. Projected Demand
The demand for health service facilities has unfilled gaps when compared to the standard
set by the Ministry of Health. The present observed gap is expected to be influenced in
the future by the rate of population growth and economic development. Accordingly,
based on the population projection by CSA and the standard requirement for clinics as set
by Ministry of Health and assuming the present existing clinics continue operating, the
number of additional higher clinics required is shown in Table 3.1 below.
Table 3.1
PROJECTED DEMAND FOR TOTAL ADDITIONAL HIGHER CLINICS
Year Total Additional
Higher Clinics
2006 88
2007 105
2008 122
2009 140
2010 159
2011 177
2012 195
2013 214
2014 233
2015 251
2016 270
2017 288
2018 306
2019 324
2020 342
2021 359
2022 376
177-6
3. Pricing
For the purpose of this study a price of Birr 50 and Birr 150 per check up for out-patients
and per night for in-patients respectively is adopted. More over, for x-ray check up and
laboratory analysis of blood and stool, the envisaged clinic will charge Birr 40 and Birr
25 respectively.
B. SERVICE CAPACITY AND PROGRAMME
1. Capacity
The clinic will have a capacity to treat 20 out patients per day. Therefore, the clinic will
treat 7,320 out-patients per year, Moreover, the clinic will have 12 beds for in-patients
and assuming that one patient will stay 3 days on average, the total annual number of in-
patients will be 1,464. Out of the total 8,784 patients that will be treated in the envisaged
clinic in a year, 80 % are assumed to make x-ray and laboratory check ups.
2. Service Programme
The Higher Clinic can deliver 24 hour medical service throughout the year from the very
beginning of its operation.
IV. MEDICAL SUPPLIES & UTILITIES
A. MEDICAL SUPPLIES
Emergency drugs and medical supplies required by the higher clinic are outlined in Table
4.1 below. The total cost is estimated to be about Birr 27,000. The materials can be
sourced locally from establishments such as PHARMID or pharmacies.
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Table 4.1
DRUG & MEDICAL SUPPLIES REQUIREMENTS & COST ( PACKETS)
Sr. No. Cost 'Birr
Description Quantity FC LC Total
1 Adrenaline injection 20 13,000 7,000 20,000
2 Minophyllioc injection 10 8,125 4,375 12,500
3 Savlon (Chlorhexidine +
Cotrimide) 25 17,875 9,625 27,500
4 Alcohol Solution 79% 15 7,313 3,938 11,250
5 Dextrese 40% injection 5 1,625 875 2,500
6 Ergometrine maleate injection,
tabs 10 8,775 4,725 13,500
7 Hydrocortisone sodium succinate 5 6,500 3,500 10,000
8 Lidocaine hydrochloride injection 5 5,688 3,063 8,750
9 Procaine hydrochloride injection 5 4,388 2,363 6,750
10 Vitamin k injection 5 6,500 3,500 10,000
11 Hyoscine hydropromide injection 10 7,475 4,025 11,500
12 Bandage different sizes 20 14,560 7,840 22,400
13 Cotton 20 - 13,000 13,000
14 Disposabel syringe different types 10 8,775 4,725 13,500
15 Disposable needle different types 10 6,175 3,325 9,500
Grand Total 116,773 75,878 192,650
B. UTILITIES
The major utilities required by a higher clinic are electricity and water. These are given
in Table 4.2.
Table 4.2
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ANNUAL UTILITIES REQUIREMENT & COST
Item Unit Of Qty Unit Rate Cost (Birr)
Measure
Electricity kWh 110,000 0.4736 52096
Water m3 1,000 3.25 3250
Total 55,346
V. TECHNOLOGY AND ENGINEERING
A. TECHNOLOGY
1) Process Description
The processes involved in the delivery of medical services at a higher clinic include:
Receiving/registering of patients;
Arranging orders to see doctors;
Seeing doctors; laboratory/other tests, and
Diagnosis and prescription.
Waste from the clinic is disposed off through Incinerator - incorporated while other
waste is disposed off through connection to the city`s drainage system.
A higher clinic does not have negative impact on the environment.
2. Source of Technology:
An agent of equipment supplier is PHARMID
B. ENGINEERING
1. Equipment
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Equipment required for a higher clinic are outlined in Table 5.1 below. The estimated
cost of the equipment is about Birr 834,365.
Table 5.1
EQUIPMENT RQUIREMENT & COST
Sr. Items Qty Cost (Birr)
No.
1 Sphygmomanometer 1 350
2 Clinical Thermometers 2 set 20
3 Diagnostic set 1 200
4 Adult Scale 1 750
5 Infant Scale 1 425
6 Examination bed 1 1,500
7 Infusion stand 1 300
8 Dressing Trolleys 1 500
9 Refrigerator 1 4,000
10 Catheter 1 20
11 Stethoscope 1 150
12 Binocular Microscope 1 10,000
13 Centrifuge 1 3,000
14 Lab bench 1 1,100
15 Timer 1 120
16 Photometer 1 50,000
17 Waterbath 1 1,260
18 Test Tube racks 1 set 500
19 Slides 1 set 80
20 Cover Slides 1 70
21 Hemocytometer with cover slide 1 350
22 Electrical boiler 1 1,500
23 Delivery table 1 1,200
24 Foetal monitor 1 4,250
25 Vacuum extractor/low forceps 1 2,450
26 Aspirator/manual 1 100
27 Breast pump 1 400
28 Resuscitator/Ambu bag 1 800
29 Suction machine 1 9,000
30 Portable light/mobile 1 4,900
31 Auxiliary operating light 1 10,000
32 Vaginal speculum 1 70
33 Minor operating set 1 500
34 Autoclave 1 14,000
35 Delivery Kit 1 500
36 Ultra sound 1 200,000
177-10
Sr. Items Qty Cost (Birr)
No.
37 X-ray Machine 1 500,000
38 Oxygen Cylinder 1 2,500
39 Incinerator 1 7,500
Total 834,365
2. Land, Building and Civil Works
The total land area required for higher clinic is estimated to be about 600 m 2. The built-
up area is about 200m2. It is estimated that building cost would be about Birr 500,000.
According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation
No 272/2002) in principle, urban land permit by lease is on auction or negotiation basis,
however, the time and condition of applying the proclamation shall be determined by the
concerned regional or city governments depending on the level of development.
In Addis Ababa the citys Land Administration And Development Authority is directly
responsible in dealing with matters concerning land. Accordingly, the initial land lease
rate in Addis Ababa set by the Authority based on the location of land is as shown in
Table 5.2.
Table 5.2
INITIAL LAND LEASE RATE IN ADDIS ABABA
Sr. Land Initial Price in
No Location of the land Grade m2
177-11
1 Central Business zones 1 1167.3
2 1062.9
3 916.2
4 751.5
5 619.2
Places That are Under
2 Transit 1 716.4
2 647.1
3 559.8
4 472.5
5 384.3
3 Expansion Zones 1 245.7
2 207
3 150.3
4 132.3
Source; Addis Ababa City Land Administration Authority
As can be seen from Table 5.3, the initial land lease rate ranges from Birr 1,167.3 to
132.3 per m2 .
Currently, most of the health facilities in Addis Ababa are located on the central business
zones of the city. Therefore, places under transit and expansion zones are recommended
as the best locations for the project. Accordingly, the average of the highest land lease
rates in places under transit and expansion zones, which is Birr 481.05 m2 is adopted.
The Federal Legislation on the Lease Holding of Urban Land legislation has also set the
maximum on lease period and the payment of lease prices ( see Table 5.3 and Table 5.4).
Table 5.3
LEASE PERIOD
Type of Service Lease Period
177-12
( Years)
Residential area 99
Industry 80
Education, cultural research health, sport,
NGO and religious 99
Trade 70
Urban Agriculture 15
Other service 70
Table 5.4
LEASE PAYMENT PERIOD
Period of Payment
Sr. According to the Grade of
No. Service Type Towns
Private residential are obtained
1 through tender or negotiation 50 - 60 years
2 Trade 40 - 50 years
3 Industry 40 - 50 years
4 Real estate 40 years
5 Urban Agriculture 8 - 10 years
6 Trade and social service 40 - 50 years
7 Others 40 years
Moreover, advance payment of lease based on the type of investment ranges from 5% to
10%. For those that pay the entire amount of the lease will receive 0.5% discount from
the total lease value and those that pay in installments will be charged interest based on
the prevailing interest rate of banks. Moreover, based on the type of investment, two to
seven years grace period shall also be provided. The lease price is payable after the grace
period annually.
Regarding, the terms and conditions of land lease the Addis Ababa City Government have
adopted Article 6 of the Federal Legislation with very minimal changes. Therefore, for
the purpose of this project profile since the project is engaged in social service , 99 years
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lease period, 50 years lease payment completion period, 5% down payment and seven
years grace period is used.
Accordingly, the land lease cost of the project, at rate of Birr 481.05 per m 2 for 99 years
of holding is estimated at Birr 28.57 million. Assuming 5% of the total cost ( Birr 1.42 )
will be paid in advance as down payment and the remaining Birr 27.14 million will be
paid in equal installments with in 50 years, the annual lease payment is estimated at Birr
542,913.
VI. MANPOWER AND TRAINING REQUIREMENT
A. MANPOWER REQUIREMENT
The manpower requirement for higher clinic is given in Table 6.1 below. The annual
salary requirement is estimated to be about Birr 381,000.
Table 6.1
MANPOWER REQUIREMENT & LABOUR COST
Sr. Description Req. Salary (Birr)
No. No. Monthly Annual
1 Specialist/General Practioner Head 1 12,000 144,000
2 Specialist 1 12,000 144,000
3 Nurse 2 3,000 36,000
4 Receptionist 1 600 7,200
5 X-ray Technician 1 1,500 18,000
6 Laboratory Technician 1 1,500 18,000
7 Cleaner 1 350 4,200
8 Guard 2 800 9,600
Total 10 31,750 381,000
B. TRAINING REQUIREMENT
177-14
The qualification of the professionals would be adequate for the operation of the higher
clinic.
VII. FINANCIAL ANALYSIS
The financial analysis of the higher clinic project is based on the data presented in the
previous chapters and the following assumptions:-
Construction period 1 year
Source of finance 30 % equity
70 % loan
Bank interest 8.5%
Discount cash flow 8.5%
Accounts receivable 30 days
Medicine and medical supplies 30 days
Cash in hand 5 days
Accounts payable 30 days
Repair and maintenance 5% of medical equipment
A. TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at Birr
3.84 million. The major breakdown of the total initial investment cost is shown in Table
7.1.
Table 7.1
INITIAL INVESTMENT COST
177-15
Sr. Cost Items Local Foreign Total
No. Cost Cost Cost
1 Land lease value 1,420.00 - 1,420.00
2 Building and Civil Work 500.00 - 500.00
3 Medical Equipment 834.37 - 834.37
4 Office Furniture and Equipment 150.00 - 150.00
5 Vehicle 450.00 - 450.00
6 Pre-production Expenditure* 355.08 - 355.08
7 Working Capital 130.16 - 130.16
Total Investment Cost 3,839.61 - 3,839.61
* N.B Pre-production expenditure includes interest during construction ( Birr 255.08
thousand ) and Birr 125 thousand costs of registration, licensing and formation of
the company including legal fees, commissioning expenses, etc.
B. OPERATING COST
The annual operating cost at full capacity operation is estimated at Birr 1.06 million
(see Table 7.2). The major components of the operation cost are direct labour, medicine
and medical supplies and cost of finance accounting for 21.42%, 18.05% and 14.33% of
the total operation cost respectively. The remaining 46.20% is the share of utility, labour
overhead, depreciation, repair and maintenance and administration cost.
177-16
Table 7.2
ANNUAL OPERATING COST AT FULL CAPACITY ('000 BIRR)
Items Cost %
Medicine and medical
supplies 192.65 18.05
Utilities 55.35 5.19
Maintenance and repair
41.72 3.91
Labour direct 228.60 21.42
Labour overheads
95.25 8.92
Administration Costs 152.40 14.28
Land Lease Cost - -
Total Operating Costs 765.97 71.76
Depreciation 148.44 13.91
Cost of Finance 152.97 14.33
Total Production Cost
1,067.38 100
C. FINANCIAL EVALUATION
1. Profitability
Based on the projected profit and loss statement, the project will generate a profit through
out its operation life. Annual net profit after tax will grow from Birr 283.48 thousand to
Birr 429.48 thousand during the life of the project. Moreover, at the end of the project life
the accumulated cash flow amounts to Birr 3.55 million.
2. Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yard
stick for evaluating the financial position of a firm. It is also an indicator for the strength
and weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
177-17
dividing net income by revenue, return on assets ( operating income divided by assets),
return on equity ( net profit divided by equity) and return on total investment ( net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory.
3. Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, the
break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.
BE = Fixed Cost = 38 %
Sales Variable Cost
4. Payback Period
The pay back period, also called pay off period is defined as the period required to
recover the original investment outlay through the accumulated net cash flows earned by
the project. Accordingly, based on the projected cash flow it is estimated that the
projects initial investment will be fully recovered within 6 years.
5. Internal Rate of Return
The internal rate of return (IRR) is the annualized effective compounded return rate that
can be earned on the invested capital, i.e., the yield on the investment. Put another way,
the internal rate of return for an investment is the discount rate that makes the net present
value of the investment's income stream total to zero. It is an indicator of the efficiency or
quality of an investment. A project is a good investment proposition if its IRR is greater
than the rate of return that could be earned by alternate investments or putting the money
177-18
in a bank account. Accordingly, the IRR of this porject is computed to be 14.46 %
indicating the vaiability of the project.
6. Net Present Value
Net present value (NPV) is defined as the total present ( discounted) value of a time
series of cash flows. NPV aggregates cash flows that occur during different periods of
time during the life of a project in to a common measuring unit i.e. present value. It is a
standard method for using the time value of money to appraise long-term projects. NPV
is an indicator of how much value an investment or project adds to the capital invested. In
principal a project is accepted if the NPV is non-negative.
Accordingly, the net present value of the project at 8.5% discount rate is found to be
Birr 1.13 million which is acceptable.
D. ECONOMIC BENEFITS
The project can create employment for 10 persons. In addition to contributing to the
improvement of the citys population health, the project will generate Birr 1.16 million in
terms of tax revenue. The establishment of the project will contribute to improving the
life of the residents of the City Administration.
