Indoor navigation systems (indoor positioning systems) can improve orientation for patients in hospitals and help employees to track assets. Many hospitals would like to implement indoor positioning systems but do not know how. To support them in doing this, and to gain knowledge about the requirements for indoor positioning system implementation, our research identifies the design criteria relevant to indoor positioning system implementation projects. A design science research process is built to design and evaluate an artifact. For this, five indoor positioning system developers and five hospital IT management representatives from various hospitals and companies in Germany are interviewed. Further, controlled experiments are conducted in Germany, using an ultrasound-based indoor positioning system. We determined and tested indoor positioning system functions, evaluated indoor positioning system performance criteria, and identified the operating conditions in hospitals. Our results show that indoor positioning system functions should provide a benefit to a hospital's daily operations, that some performance criteria are more important than others, and that operating conditions are important, e.g., radiation. As a theoretical contribution, we show how design science research can be applied to the context of indoor positioning systems in hospitals. In addition, we make a practical contribution in that our propositions can be used for future indoor positioning system developments.