WHEN it was revealed on Friday that the Parkway group's winning bid of $1.25 billion was twice that of the second highest bid, the eye-popping amount raised many questions.

What sort of hospital would it build in the Novena area to justify such an outrageous bid?

Yesterday, it answered its critics: It would provide the best hospital rooms money could buy in the region.A top-of-the-line A-class room in a public hospital is close to what will be a basic room in the hospital Parkway is building on the 1.7 ha site at Irrawaddy Road.

The group plans to spend between $300 and $500 million on the new 324-room hospital, which will be completed by July 2011.

The 17-storey hospital will have 350 beds. Aside from 90 beds for patients in intensive care and high dependency rooms, the rest will be split among single, deluxe and VIP rooms, which come with adjoining rooms for guests and personal butlers.

Parkway Health is mainly looking overseas to fill the beds. Foreigners from countries like Indonesia, Vietnam, Cambodia and even Russia, make up 65 per cent of patients at its three existing hospitals - East Shore, Gleneagles and Mount Elizabeth.

Parkway group president and chief executive, Dr Lim Cheok Peng, expects this percentage to grow, in line with Singapore's goal of pulling in a million international patients by 2012.

And if demand is strong, the hospital has made provision for a four-storey extension to double the number of beds.

The Parkway hospital will be a key tenant of the growing medical cluster in Novena, comprising public and private players such as Tan Tock Seng Hospital, Johns Hopkins International Medical Centre, Thomson Medical Centre and the Novena Medical Centre.

Nonetheless, its bid at close to $1,600 per sq ft per plot ratio, raised eyebrows when it became the most expensive commercial land sale in recent years.

Rumbles about its high price grew louder after Raffles Medical group executive chairman Loo Choon Yong commented on Monday that this was one tender he was happy to lose.

In response, Parkway's chairman Richard Seow said: 'Looking at the competitive landscape it's very difficult to advocate where everyone's going to come out...so we put in a bid which we were comfortable with.'

Analyst Jonathan Koh from UOB Kay Hian said Parkway could recover some of the investment by selling its medical suites, which make up 30 per cent of the hospital's floor space.

Medical suites at Mount Elizabeth Hospital last changed hands at $3,600 per square foot (psf), while at the Novena Medical Centre, next to the new hospital, units are currently selling for up to $3,800 psf.

But there is concern that the high bid placed by Parkway could contribute to the cost of health care. Health economist Phua Kai Hong from the Lee Kuan Yew School of Public Policy said the hospital will help meet the demand for beds in private hospitals for Singapore to become a medical hub.

'We are eyeing the economic benefits, but we have to be mindful of the social costs,' he said, referring to how wages for specialists and nurses will go up, pushing up healthcare costs.

To help limit some of this downside, Parkway said it plans to train 800 nurses for its own needs in its hospital in Malaysia.

Dr Lim added that there also are no plans to raise charges at Parkway's three existing hospitals until the new hospital is up.

But, the group has no control over doctors' fees which form the bulk of patient bills.