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Operations

Management
Shouldice Hospital
Group 12
1511041 Priya Jain
1511043 Ranjot Singh
1511060 Syed Ahmer Rizvi
1511062 Tanay Gupta
1511064 Utkarsh

CASE: SHOULDICE HOSPITAL

Question 1: How Successful is the Shouldice Hospital?


Business Performance of Shouldice Hospital
Operations: 7600 operations/year with 33 operations/day and 89 number of beds
available
Total Budget (Hospital + Clinic) = $ 12 million. Cost per operation = $
12,000,000/7600 = $ 1579. No. of Operations per doctor = 7600/10 = 760.
Revenue: Room charge for 3.5 nights = $ 1440; Surgery Charge = $ 650; Total
Charges/Operation = $ 2090; Total revenue from operations = $ 7600*2090 = $
15,884,000; Revenue from general anesthesia = $ 0.2*7600*300 = $ 456,000;
Total Revenue = $ 16,340,000; Revenue per operation = $ 2150.
Total Profit = $ (16,340,000-12,000,000) = $ 4,340,000. Profit per operation = $
571. Profit Margin Per Operation = 571/2150 = 26.55%
Patient and Employee Satisfaction
Employee satisfaction is quite high as there is quite low employee turnover with the
surgeons enjoying a good work-life balance and those who work for five years tend
to stay permanently.
Patients also get the benefit of having their family stay for free and their satisfaction
levels are also high as is evident from their desire to extend their stay by one day.

Question 2: How do you account for its performance?


The performance metrics we are using to analyze Shouldices performance are: 1. Throughput time: By focussing on only external abdominal hernias (instead of
internal), Shouldice hospital was able to reduce the flow time of the operations
by half of other hospitals. It also brought uniformity in the operation techniques
by focussing on only one type of operations.
2. Operating cost: The marketing to potential patients is word-of-mouth. The
throughput time is low by standardization of service as well as focussing on
external hernia. The demand is regulated by ensuring only as many patients are
taken as they can be serviced in 2-3 days.
Nursing costs are saved by allowing parents to stay in hospital when their children
are getting treated. The housekeeping staff has been kept low. Food for patients and
staff are prepared in same kitchen ensuring economies of scale. The patient rooms

contain no television or telephone sets. Not only it quickens recovery of patients by


encouraging them to walk, but it also reduces capital expenditure.
3. Employee satisfaction: The quality of surgeons is ensured by higher salaries and
bonuses. On an average the surgeons are paid 15% more than an average
surgeon in Ontario. They are trained rigorously in Shouldice method. The teams
were well rotated and given sufficient rest. Administrative staff are non-union,
they are given higher pay than in comparable jobs. The hospital does not fire
staff. The profits are shared amongst doctors, administrative and support staff as
well.
4. High Quality of service: The operational technique has been perfected over years
of practice. If a patients recurs hernia, the case is allocated to the same doctor
for self-correction and learning. The post-operation recuperation techniques
ensure high social interaction amongst patients. Also the exercise regime helps
in their speedy recovery.
Question 3&4: As Dr. Shouldice, what actions, if any, would you take to
expand the hospitals capacity? How would you implement changes you
propose?
As Dr. Shouldice, we have 3 options to consider in terms of expanding the hospitals
capacity.
Option 1: Start performing surgeries on Saturdays. This will increase the total
number of working days.
Option 2: Get Additional Beds for the Hospital to increase bedding capacity by
50%. This will lead to heavier scheduling of operations.
Option 3: Setting up branches of Shouldice Hospitals in other areas/Franchising
Since we can quantify changes to be made as part of options 1 and 2, the elements
to consider are:
Lead Time/patient = 4 days.

Hospital Throughput in terms of


operations/year = 146.2 patients per week.

surgeries

performed

Examination Rooms capacity


Examination Rooms
Patients checked per day per room
Days per week checking is done
Total room capacity / week
Operating rooms capacity

6
(3 hrs/room)*(60/20) = 9
5
270

7600

Operating rooms
Patients per room per day
(Morning + afternoon)
Days per week operations are done
Total patients operated per week

5
4+3 = 7
5
175

This improves to 210 in option 1 and becomes 200 in option 2 since in option 1 we
operate for 6 days instead of 5 and in option 2 we schedule operations more heavily
(8 instead of 7).

Surgeons capacity
Total surgeons
Average operations per day
Total operating days
Total patients operated per week

10
3.5
5
175

This improves to 210 in option 1 and becomes 200 in option 2 since in option 1 we
operate for 6 days instead of 5 and in option 2 we schedule operations/surgeons
more heavily (4 instead of 3.5).
Hospital bed capacity
Total beds
Average occupancy of each bed in a
week
Total patients operated per week

89
7/(4 days per patient) = 1.75
157.5

This increases to 236.25 patients /week for option 2 as number of beds increase to
133, whereas remains the same for option 1.
Units
Patients

Capacity of
Surgeons
Capacity of
operating
rooms
Capacity of
Examinations
Capacity of

Current
Process
No change

Option 1

Option 2

175 /week

Saturday
Surgeries
210/week

Get Additional
Beds
175/week

175/week

210/week

175/week

270/week

270/week

270/week

157.5/week

157.5/week

236.25/week

beds
Bed Capacity
utilization

71.43%

85.71%

71.43%

Let us also examine the profitability aspect of option 1 and 2.


Data

Cost($)
Revenue($)
Profit($)
Patients(throug
hput)
Throughput
(per week)
Cost($)/patient
Revenue($)/pat
ient
Profit($)/patien
t

Current
Process
No Change

(Option1)

Option 2

12,000,000
15,522,000
3522000
7600

Saturday
Surgeries
12,288,000
18626400
6338400
9360

Get Additional
Beds
16,720,000
23283000
6563000
11700

146.2

180

225

1538.46
1990

1312.82
1990

1429.06
1990

451.54

677.18

560.94

For option 3, since we do not have quantifiable data we have to work with
assumptions.
Franchise additional, off-site locations to expand operational capacity. Shouldice
should evaluate the potential to open a new facility in US as 1,000,000 hernia
operations were performed in US alone.

Since we are assuming the new facilities will be properly planned, no initial
bottlenecks will exist. However over a period of time, this might/will change.
Potential Benefits

1.

Help in rapidly expanding business at both the national and international level. Adds
to the revenue stream
2. Remove management and operational burden at main facility as patients will be
redirected to other branches.
3. Will help in neutralizing the threat to competitors trying to use the Shouldice brand
name.
Potential Problems
1. Quality of service/brand is jeopardized due to outsourcing as standardization of
procedures and techniques become difficult.
2. Current bottleneck in operations at main facility is not resolved.

Conclusion
As Dr. Shouldice, out of the 3 options we would go for option 2 as it directly
increases the capacity of the bottleneck and solves the current problem at hand.
Although option 1 increases the profits/patient more than option 2, for option 1, we
might face dissent from the doctors and the staff regarding addition of 1 extra
working day. As mentioned in the case, the doctors want to see their children
grow and will definitely object to this change. Also option 1 does not improve the
capacity of the bottleneck. Since for option 2 we do not plan to hire new doctors as
the existing doctors are expected to accommodate the additional patients, there will
be no protest from
surgeons.
Option 3 is open to debate, since the case does not provide data for analysis
regarding this particular option.
The following points need to be considered before thinking about the
implementation plan.

Finding a successor for Dr. Degani should be a priority for the Board. Dr Degani is
fast approaching retirement age and has resisted positive changes that may have
improved efficiency of operations.
Shouldice Hospital should not diversify into other specialties at this stage because
there will be higher chances of quality erosion.
Even after increasing the capacity, it is not advisable for Shouldice Hospital to
advertise. It should rely on word of mouth advertising. Providing high quality
experience to the doctors that are operated will be sufficient to get their referrals.

Appendix 1
Process Flow
Patients
Arrival at
Shouldice
(1-3 pm)

Wait +
Check +
Admin
(upto 4

Orientatio
n+
Dinner
(4:30 9

Tea and
cookies
(9 pm)

Exercise/R
ecreation
+ Dinner
(after op)

Surgery
(7:30
8:15 am)

Pre-op
Demerol
(6:45 am)

Pre-op
sedation
(5:30 am)

Recuperat
ion

Check out

Day

Clinical
Room

Day
1

Day
2

Day
4

Doctors
Scrubbing
(7:30 am)

Surgery 1
(7:30 am 8:15
am)

Surgery 2
(8:30 am 9:15
am)

Surgery 3
(9:30 am
10:15am)

Consult
(1 pm 4
pm)

Lunch
(12:30 pm 1
pm)

Surgery 4
(11 am 12:30
pm)

Coffee Break
(10:30 am
11am)

Current bed capacity utilization: -

New
incoming
patients
Patients
being
operated
Patients resting
post op
Total beds used

Mon
30

Tue
30

Wed
30

Thurs
30

Fri
0

Sat
0

Sun
30

30

30

30

30

30

30

30

30

30

30

60

90

90

90

60

30

30

Bed Capacity with Saturday Surgeries (option 1): New


incoming
patients
Patients
being
operated

Mon

Tue

Wed

Thurs

Fri

Sat

Sun

30

30

30

30

30

30

30

30

30

30

30

30

Patients
resting
post op
Total beds used

30

30

30

30

30

30

60

90

90

90

90

60

60

Bed Capacity for Increased Capacity (option 2): New


incoming
patients
Patients
being
operated
Patients
resting
post op
Total beds used

Mon
45

Tue
45

Wed
45

Thurs
45

Fri
0

Sat
0

Sun
45

45

45

45

45

45

45

45

45

45

45

90

135

135

135

90

45

45