The foundation of the Prasanthi Nilayam hospital was laid on 23 November 1954, and the hospital was inaugurated on 4 October 1956. Many devotees toiled to help build the hospital by carrying stones, bricks, cement, and other articles on top of thesmall hill on which it was constructed. From the hospital, one could get a bird's eye-view of the river Chitravathi, with the hills in the background.
The hospital initially had twelve beds, six of them for confinements, according to the needs of the time. The hospital catered mainly to the villagers and devotees. The doctors and the paramedical staff were appointed by Swami. They worked voluntarily without any remuneration.
Some ask why there should be a hospital here. Why shouldn't Bhagawan Baba cure diseases by the exercise of his will? To this, Swami has replied,
The question is silly, for it implies that everything here should be done through some miracle or in some inexplicable manner. It also implies that one who comes here should not fall ill or die. For me, this is not my only hospital. All hospitals are mine. The hospital seems to increase faith, to demonstrate divinity, and to remove doubt. It is Faith that matters and that cures. The patients who come here benefit by the spiritual vibrations that fill the air in Prasanthi Nilayam. There are also many who will be satisfied if drugs are given and injections administered. Their faith in grace is not yet strong. So a hospital is required for such.
Treatment both for inpatients and outpatients is free. Medicines, injections, operations, and deliveries are also free. During festivals like Dasara, Sivarathri, and Swami's Birthday, special medical camps are organised to cater to the needs of the large number of devotees. Doctors attending the festivals at Prasanthi Nilayam participate in the camps on a voluntary basis.
As the demands on the hospital built in 1954 increased due to the university campus and the large number of devotees, the need was felt for the construction of a new hospital building, equipped with all medical facilities. The foundation of the new hospital building was laid on 23 November 1982, and the hospital was inaugurated on Sivarathri Day, 29 February 1984.
The hospital has arrangements for one hundred beds with an air-conditioned, fully equipped, operation theatre; blood bank; laboratory; intensive care unit; X-Ray unit; eye unit; and dental unit. Well-qualified medical and paramedical staff have been recruited to staff the various branches of the hospital.