CASE ANALYSIS: SHOULDICE HOSPITAL LIMITED

Shouldice Hospital � A Cut Above

1. How well is the hospital currently utilizing its beds?

2. Develop a similar table to show the effects of adding operations on Saturday.

(Assume that 30 operations would still be performed each day.) How would this affect
the utilization of the bed capacity? Is this capacity sufficient for the additional patients?

3. Now look at the effect of increasing the number of beds by 50 percent. How many
operations could the hospital perform per day before running out of bed capacity?
(Assume operations
are performed five days per week, with the same number performed on each day.) How
well would the new resources be utilized relative to the current operation? Could the
hospital really perform this many operations? Why? (Hint: Look at the capacity of the 12
surgeons and the five operating rooms.)
 
Shouldice Hospital Case

1.) How well is the hospital currently utilizing its bed?

90 beds x 7 days/ week = 630 beds available in a week

30 patients x 3 days x 5 days per week = 450 beds utilized

450 beds utilized / 630 availble beds = 71.43%

The hospital is currently utilizing 71.43% of their beds, this is actually an ideal operating point. To
increase its rate of utilization might decrease the service quality.

2.) Develop a similar table to show the effects of adding operations on Saturday. (Assume that 30
operations would still be performed each day.)

Check-in Day Monday Tuesday Wednesday Thursday Friday Saturday

Sunday
Monday 30 30 30

Tuesday 30 30 30

Wednesday 30 30 30

Thursday 30 30 30

Friday 30 30 30

Saturday

Sunday 30 30 30

Total 60 90 90 90 90 60 60

How would this affect the utilization of the bed capacity? Is this capacity sufficient

Executive Summary:

The Shouldice Hospital, Ontario, Canada is a pioneer in the field of treating patients suffering from
external abdominal hernia. The speedy ambulation coupled with its reasonable price rates leads to
satisfied patients publicizing the hospital by word of mouth.

The issues that confront the hospital management are:

·Deciding on ways to meet the backlog of operations, by expanding the hospital's capacity, while still
maintaining control over the overall quality of service delivered.

·Handling piracy and bad mouthing due to piracy.

·Selection of the next chief surgeon after Dr.Obney. After analyzing various plans of actions, it is
proposed that the capacity of the hospital be increased by scheduling the operations on Saturdays also.
At the same time a successor to Dr. Obney must also be selected. This solution seems like the most
feasible in terms of cost and time and also leverages the existing strength of the hospital in providing
quality services to the patients.

To implement the solution discussed above, first of all, awareness must be created among all the
employees by means of workshops etc., about the urgent need for such a step to expand capacity. The
selection of the new chief surgeon must be done by carefully scrutinizing all the surgeons in the hospital
as well as interviewing new candidates for the same.

The administrative processes in the hospital must be made computerized to improve their efficiency.
Proper training for using them must also be imparted to the employees.

If it is not possible to increase capacity beyond a certain limit due to the above plan and the backlog list
continues to expand, then opening an additional facility in some other geographical location, such as the
US of A may be considered.

Situational Analysis and Problem Definition:

The Shouldice Hospital, Ontario, Canada is a pioneer in the field of treating patients suffering from
external abdominal hernia. With its current capacity, it can treat 6850 patients annually.

The patients are treated using the operated upon using the Shouldice Method, and on an average each
patient has to spend four days in the hospital recuperating. The USP of the Shouldice Hospital is its
distinct surgical procedure. The speedy ambulation coupled with its reasonable price rates leads to
satisfied patients publicizing the hospital by word of mouth.

The hospital is having a successful run as a niche player catering to the demand for treatment of hernia
patients. In spite of this, there is a huge backlog that the hospital needs to meet. Because of an
increasing backlog, patients tend to go to other doctors for operations.

The issues that confront the hospital management can be primarily listed as follows:

·Deciding on ways to meet the backlog of operations, by expanding the hospital's capacity, while still
maintaining control over the overall quality of service delivered. The primary issue here is deciding on
the manner in which the capacity should be increased without diluting the quality of service rendered.

·The issue of piracy and bad mouthing due to piracy are also important concerns for the hospital. Many
clinics or doctors claim to use the Shouldice technique or the Canadian method and in the eventuality of
the operation performed by them being unsuccessful it brings a bad name to the Shouldice Hospital.

·The next chief surgeon after Dr.Obney, who is due to retire soon, has to be selected. At the same time,
retaining the existing talent pool of doctors and attracting newer doctors willing to learn the specialized
hernia operations skill is also a primary issue.

Long Term and Short Term Objectives:

Short term:

-To clear the backlog by increasing capacity of the hospital services.

-To select a successor for Dr. Obney, the chief surgeon who is to retire soon.

Long term:

-To sustain quality in their services, ensuring good patient experience.

-To remain the leader in the medical field of hernia operations.

-To maintain the brand equity associated with the specialized technique of Shouldice Method for
performing hernia operations.

-To ensure working towards goal of profitability while at the same time serving the society by passing on
the proper knowledge of the Shouldice technique to other surgeons.

Evaluation Criteria:

-Whatever step is taken, it must ensure that there is no dilution in the quality of the services rendered
by the hospital.

-The action plan implemented must adhere to the government regulations regarding the profitability of
hospitals.

-The solution implemented must be economically viable. Hence any step taken must be cost effective.

-There is an atmosphere of concern for the employees in the hospital. The decision with regard to the
issues at hand must ensure that the employees are receptive in accepting that decision.

-The existing strengths of the hospital setup must be leveraged in any decision taken.

-Also because of the increasing wait lists of patients to be attended to, it must be ensured that the plans
be implemented as swiftly as possible.

Alternatives:

1.Capacity of the hospital could be expanded by scheduling operations on Saturdays also,leading to a

20% increase in existing capacity.

2.An additional floor of rooms could be added to the hospital, with an investment of $2 million and
permission from the provincial government. This would expand the number of beds by 50% and result in
scheduling the operation rooms more heavily.

3.Expansion into other geographical locations such as the United States could be undertaken. For having
a quality level in the new facility equivalent to that as in the current Hospital facility at Canada,one
option maybe to transfer 6 of the 12 specialized surgeons to the new facility. Also diversification into
other related medical fields of surgery such as eye surgery, varicose veins, and hemorrhoids is possible.

4.Another alternative could be scheduling operations at other times during the day too, by utilizing the
capacity of the operation theatres to the optimum level. This can be implemented by having doctors and
other medical staff to work in shifts.

5.The successor to Dr. Obney as Chief Surgeon has to be selected. The selection of such a candidate
should preferably be done among the existing doctors in the hospital. In case a specialized doctor from
outside is appointed, proper induction to acquaint the existing surgeons must be carried out.
6.Currently the hospital's services are not being marketed. Plans to adequately market them in order to
create awareness of the genuine Shouldice method of surgery should be undertaken. This would also aid
in protecting against privacy to an extent.

Evaluation of alternatives:

1.Increasing the capacity by scheduling Saturday operations is a swift and cost effective solution (See
exhibit 2 and 3). No additional capital expenditures need to be incurred to carry out this plan. It does not
violate any government regulations and at the same time also leverages the existing strength of the
hospital in rendering high quality services to the patients. However, some employees seem to have
some reservations about operations on Saturday

2.This plan involves an additional capital expenditure of $ 2 million. While this would lead to an increase
in capacity of the number of beds by 50%, but it would also require additional well qualified surgeons
who will be able to carry on the quality tradition at the Shouldice Hospital. Also this solution would take
some time to implement.

3.The plan of expanding the capacity by moving into another geographical segment such as the United
States, involves extensive capital expenditure in setting up a new facility. Also by dividing half of the
specialized staff into the two respective facilities, the quality levels may not remain same for the initial
span of time. Since we are looking at the United States as an alternate the government regulations of
Canada would not be applicable. This plan would be beneficial in meeting the demand in the US of A of
the 42% American patients of the Shouldice Hospital. By diversifying into other medical fields of surgery,
the low cost and high quality advantage, which the Shouldice Hospital currently enjoys, will be diluted.
Currently the patients are made to become self sufficient soon after the operation.

4.By implementing the shift system, the existing strengths of the hospital will be leveraged. This is
similar to the plan 1 in terms of the expenditure involved and the time frame being talked of. However,
under the given case facts, the employees might resent this move of working in extra shifts during the
day.

5.The selection of a successor to Dr. Obney is a step that must be taken soon, in conjunction with any of
the above plans chosen.

6.Marketing the services of the hospital, though would lead to an increased awareness of the
authenticity of the Shouldice method, while exposing the piracy in the method, but at the same time it
will also lead to an increased number of patients wanting to come to the hospital. The backlog list would
continue to increase.

Recommended Solution:

After analyzing all the alternatives I would propose a combination of plans 1 and 5 to be implemented.
The operations should be scheduled on Saturdays also (see Exhibit 1). At the same time a successor to
Dr. Obney must also be selected. This solution seems like the most feasible in terms of cost (see Exhibit
2 and 3) and time and also leverages the existing strength of the hospital in providing quality services to
the patients.

Plan of Action:

To implement the solution discussed above, first of all, awareness must be created among all the
employees about the urgent need for such a step to expand capacity. Workshops for the same will help
dispel any fears in the minds of the existing staff. The selection of the new chief surgeon must be done
by carefully scrutinizing all the surgeons in the hospital as well as interviewing new candidates for the
same. The administrative processes in the hospital must be made computerized to improve their
efficiency. Proper training for using them must also be imparted to the employees.

Contingency

Plan:

If it is not possible to increase capacity beyond a certain limit due to the above plan and the backlog list
continues to expand, then plan 3 may be considered. This would need some capital expenditure but at
the same time will help us expand our capacity into another geographical location, i.e., the USA.

Information Adequacy Issues:

There is insufficient amount of information given in the

case about the internal dynamics of the hospital vis a vis the issue of the successor to Dr. Obney.

Also no information is forthcoming about the market status of other hospitals, that is whether they

are open on Saturdays or not. This bit of information is likely to hasten our decision making proces

s.

EXHIBITS

Exhibit 1 : Average Cost borne by patient

Charges for 4 day hospital stay= $111 per da

Surgical fee = $450

Fees for Assistant Surgeon = $60

Fees for Anesthetic= $75

(assuming all patien

ts use anesthetic)

Total cost excluding hospital stay = 450+60+75

= $585

Total Cost borne by patien

t per day = 585/4 + 111

= $257.25

Total Cost borne by patient over four days = $1029

(assuming patie

nt takes our days for recovery)

Exhibit 2 : Average Cost per patient borne by the Shouldice Hospit

al

Budget for operating costs

For hospital= $ 2.8 million

For clinic = $ 2 million

Total budget fo

r operating costs= $ 4.8 million

Total number of operations performed in 1982 = 6850

Hence Average

Cost per patient borne by the hospital = $ 4.8 million / 6850 = $ 701
Exhibit 3 : Net profit increa

se using proposed solution

Net profit per patient = 1029 - 701

= $328

By working on Saturdays we

are increasing the working days by 52.

No of operations per year = 6850

No of working days per year

= 261

Hence, number of operations per day= 6850/261

= 27

Hence net profit increase per year = 328 *

27 * 52

= $ 0.46 million

case analysis shouldice hospital limited executive summary shouldice hos

pital ontario canada pioneer field treating patients suffering from external abdominal hernia speedy

ambulation coupled with reasonable price rates leads satisfied patients publicizing hospital word m

outh issues that confront management deciding ways meet backlog operations expanding capacity while

still maintaining control over overall quality service delivered handling piracy mouthing piracy sel
ection next chief surgeon after obney after analyzing various plans actions proposed that capacity i

ncreased scheduling operations saturdays also same time successor obney must also selected this solu

tion seems like most feasible terms cost time also leverages existing strength providing quality ser

vices patients implement solution discussed above first awareness must created among employees
means

workshops about urgent need such step expand capacity selection chief surgeon must done carefully s

crutinizing surgeons well interviewing candidates same administrative processes made computerized im

prove their efficiency proper training using them imparted employees possible increase beyond certai

n limit above plan backlog list continues expand then opening additional facility some other geograp

hical location such considered situational analysis problem definition shouldice ontario canada pion

eer field treating suffering from external abdominal hernia with current treat annually treated usin

g operated upon using method average each patient spend four days recuperating distinct surgical pro

cedure speedy ambulation coupled with reasonable price rates leads satisfied publicizing word mouth

having successful niche player catering demand treatment hernia spite this there huge backlog that n

eeds meet because increasing tend other doctors operations issues confront management primarily list

ed follows deciding ways meet expanding while still maintaining control over overall quality service

delivered primary issue here deciding manner which should increased without diluting service render

ed issue piracy mouthing important concerns many clinics doctors claim technique canadian method
eventuality operation performed them being unsuccessful brings name next chief surgeon after obney
reti

re soon selected same time retaining existing talent pool doctors attracting newer willing learn spe

cialized skill primary issue long term short term objectives short term clear increasing services se

lect successor retire soon long sustain their services ensuring good patient experience remain leade

r medical field maintain brand equity associated specialized technique method performing ensure work

ing towards goal profitability while serving society passing proper knowledge technique other surgeo

ns evaluation criteria whatever step taken ensure there dilution rendered action plan implemented ad

here government regulations regarding profitability hospitals solution implemented economically viab
le hence step taken cost effective there atmosphere concern employees decision regard issues hand en

sure receptive accepting decision existing strengths setup leveraged decision taken because increasi

ng wait lists attended ensured plans implemented swiftly possible alternatives could expanded schedu

ling saturdays leading increase additional floor rooms could added investment million permission fro

m provincial government this would expand number beds result scheduling operation rooms more
heavily

expansion into geographical locations such united states could undertaken having level facility equ

ivalent current facility canada option maybe transfer specialized surgeons diversification into rela

ted medical fields surgery surgery varicose veins hemorrhoids possible another alternative times dur

ing utilizing operation theatres optimum level having medical staff work shifts successor selected s

election candidate should preferably done among case doctor outside appointed proper induction acqua

int carried currently being marketed plans adequately market them order create awareness genuine sur

gery should undertaken would protecting against privacy extent evaluation alternatives saturday swif

t cost effective exhibit additional capital expenditures need incurred carry plan does violate gover

nment regulations leverages strength rendering high however some seem have some reservations about
s

aturday involves capital expenditure million would lead increase number beds require well qualified

will able carry tradition take implement expanding moving into another geographical segment united s

tates involves extensive capital expenditure setting dividing half staff respective facilities level

s remain initial span since looking united states alternate regulations applicable beneficial meetin

g demand american diversifying fields high advantage which currently enjoys will diluted currently m

ade become self sufficient soon implementing shift system strengths will leveraged similar terms exp

enditure involved frame being talked however under given case facts might resent move working extra

shifts during conjunction above chosen marketing though lead increased awareness authenticity exposi

ng lead number wanting come list continue recommended analyzing alternatives propose combination
sch

eduled saturdays exhibit seems like most feasible terms exhibit leverages strength providing action
implement discussed first created among about urgent need workshops help dispel fears minds staff do

ne carefully scrutinizing well interviewing candidates administrative processes made computerized im

prove their efficiency training imparted contingency beyond certain limit list continues then consid

ered help another location information adequacy insufficient amount information given internal dynam

ics information forthcoming market status hospitals whether they open likely hasten making process e

xhibits average borne patient charges stay surgical fees assistant fees anesthetic assuming anesthet

ic total excluding stay total borne total borne over four days assuming takes days recovery average

budget operating costs million clinic budget operating costs performed hence profit proposed profit

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