Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak

Shukla (B15159)

SHOULDICE HOSPITAL

SHOULDICE HOSPITAL

Question: What are the sources of Competitive advantage of

Shouldice?
The sources of competitive advantage can be divided into four parts
1. Process
Standardization: Shouldice hospital had a highly standardized
operating procedure for a specific type of hernia. The core of this
procedure was ensuring an early recovery of patients enabling
higher patient turnover i.e. more patients are treated in a given
time as compared to the competing hospitals. The time required
to service customers was well defined which increased customer
satisfaction.
Cost reduction: Due to these standard operating procedures,
Shouldice was able to reduce variability and costs. While most
hospitals considered this to be a bread and butter surgery,
Shouldice decided to generate revenue from clinic rather than
the surgeries.
Customer Participation: It also enabled higher customer
participation by enabling patients to do their daily activities
themselves further reducing operating costs & the need for
nurses. Patients were able to interact and counsel each other.
Hence the need for counselling reduced while increasing the
credibility of advice given by other patients who had a great
experience.
2. Employee
Nurses: Shouldice hospital required fewer nursing staff as
compared to a competitor hospital of a similar scale. The work of
nurses was well defined and hence they were able to gain
enough experience to do their job well. Shouldice also ensured a
higher than Union rate pay package which ensured that these
trained nurses do not leave the hospital for a better paying job.
Hence attrition was as low as 10% p.a.
Doctors: Doctors also had their day well chalked out for them.
Shouldices standard procedures enquired quick turnaround time
for the operating rooms enabling doctors to perform more
surgeries. This also resulted in higher degree of specialization in
the domain. The doctors were well trained in the Shouldice
technique which was unique to the hospital.
Administration: The administration staff was enabled to perform
cross functional tasks there by reducing dependency on one
department or person. This enabled the hospital to run even in
case of higher volume of work in another department.
3. Capital
Facility: The facility was designed by Dr. Shouldice himself and
played a crucial role in ensuring quick recovery of patients and
Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla
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SHOULDICE HOSPITAL

less reliance on nursing staff. The patients were able to move

around freely and the interiors reduced the feeling of being in a
hospital. This additionally enabled cost reduction and helped
Shouldice become a cost leader in the industry.

4. Loyal Customers
Marketing: Shouldice hospital relied only on word of mouth. The
standard and predictable customer experience enabled higher
WOM. In this industry, the most reliable source of information for
new customers would be an old customer. Due to the experience
provided to patients, Shouldice was able to generate loyalty
which is evident from the amount of recurrence patients.

Question: How is Demand Managed at Shouldice? Comment on

the role of service design; employee job Design and engagement;
customer variability management, and service delivery process?
Demand Management at Shouldice:

Patients received a Medical Information questionnaire, and

confirmation card is sent if no undue risks are involved.
If confirmation cards are not returned by patient three days
prior to the scheduled operation, the patient is contacted over
phone.

Organization

Service
Providers

Customers

Organization:

Hospital was operated on a nonprofit basis and clinic on a for-profit

basis

Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla

(B15159)

SHOULDICE HOSPITAL

Shouldice value proposition is to provide an engaging service

environment within the hospital. The operation procedure was
modified such that patients can walk immediately after the
operation, facilitating rapid recovery.
The tangible service environment was developed / positioned in a
way so as to both increase the customers satisfaction and at the
same time reduce their stay in the hospital by enabling speedy
recovery. For e.g. in each of the patients rooms there was no TV or
phone, so every time they had to call someone they had to walk
across to the phone area, the idea was that if the patient keeps
moving he would feel more confident about his speed of recovery.
They also had carpeted their floor and used odourless disinfectant
so as to a) make the patient feel that he is not really in a hospital
and b) to avoid unnecessary injuries in case of small accidents. The
whole atmosphere of the hospital was developed in a manner that
was unlike a typical hospital. Small-rise stairways were constructed
especially for patients who had just undergone a surgery. Many such
examples can be cited.
Relied on WOM advertising, has reasonable rates

Service Providers/ Employees:

Minimal patient needs allowed much lower nurse-to-patient ratio

Training: Surgeon is expected to perform the operation exactly the
way he has been told to. The juniors are encouraged to consult the
experienced surgeons No Empowerment
Surgeons schedule was light at Shouldice as compared to other
hospitals performing the procedure. But a one-type routine job can
cause boredom. Are recruitment and HR benefits aligned with this?
There is no firing policy at Shouldice
People pitch in to help each other, a secretary can switch to other
functions, towards elimination of boxed organization chart. But are
there incentives and ways to measure extra work?

Customers:

Patients carry out their daily activities themselves so that they feel
confident of resuming their pre-surgery lives and also these patients
acted as morale boosters for other patients who were to be
operated.
Shouldice has number of methods to keep patients at ease. There
are several activities which facilitated interaction. Patients are even
sometimes asked to stay an extra day.

Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla

(B15159)

SHOULDICE HOSPITAL

Customer Variability Management:

Supply aspect

The demand on the service of hernia operation is greater than the

Hospitals capacity with patients are coming from more than 80
countries to do the operation in this hospital.
Operations are performed only 5 days a week, 8 hours a day (7:30
AM to 4 PM)
There are 12 surgeons, 7 part time surgeons, and 1 anaesthetist
Nursing staff comprised of 22 full time members and 18 part time
members
Requirement of an operation is 1 surgeon + 1 assistant
surgeon + 1 scrub nurse + 1 circulating nurse
Surgeon can perform 4 operations per day, thus 12*4= 48
operations /week
However only 30-36 operations/week are actually performed

When hospital was overcrowded, doctors identify postoperative

patients who could be released early
Also there were hostels where they used to house the patients
awaiting rooms

Pricing aspect

As hospital is operated on a non-profit basis and only one set of

customers (hernia patients) arrive, pricing management (premium
pricing, value based pricing etc.) is difficult

Recommendations:
In line with Aravind Eye Hosptials Model, Shouldice should focus on
service efficiencies based on production approach. This would result in
reduction in service experience, but patients were attracted due to its
reasonable rates.
If Shouldice doesnt want to drop its unique service delivery model, then
premium pricing should be adopted, and thus dropping the non-profit
strategy.

Question: How should Shouldice expand capacity?

First looking at the current infrastructure of the hospital to arrive at
possible courses of action.
Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla
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SHOULDICE HOSPITAL

CURRENT INFRASTRUCTURE:

Currently Shouldice has a capacity of approx. 90 beds [actual 89]

and approximately 6850 operations are performed in a year.
The hospital consists of five operation rooms, a patient recovery
room, a laboratory and six examination rooms. Patients generally
stay in the hospital for 3 days. And operations are performed only 5
days a week.
There are 12 full time surgeons and 7 part time assistant surgeons
in the Shouldice Hospital. They generally take 1 hour to prepare and
operate on patients and do 4 operations a day.

Shouldices management is considering expanding the hospitals capacity

to serve a considerable unmet demand. There are two options on the
table.
Option1: Adding Saturdays to the 5 other days for operation which will
increase the beds capacity by 20%.
Option2: Adding another floor of rooms to the hospital increasing the
number of beds to be135 beds in total which is a 50% increase in beds
capacity.
Option3: Adding both Saturdays and another floor of rooms and adding a
new operating room.
Option4: Adding both Saturdays and another floor of rooms without
increasing the operation rooms.
Option 5: Opening another branch at a different location

Considering four factors: utilization for surgeons, operation rooms, and

bed rooms. Service quality will be taken into consideration to make sure
increasing capacity will not lead to a lower level of service.
ASSUMPTIONS:

Capacity of operation rooms is 8 hours per day

Present Scenario
1 There are 90 beds each day. So, the maximum number of using
beds in a week is 630. However, the hospital is doing the operations
5 days only.
2 There are 450 beds service used from the maximum of 630
available to be used. So the utilization of beds is 71.4%.
3 Each day the hospital can operate 40 operations each day (5
operation rooms * 8 hours). Operation rooms utilization is 75%.
Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla
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SHOULDICE HOSPITAL

4 Surgeons utilization per day is 62.5% (Maximum is 48 and

operations are 30) assuming all 12 surgeons are working every day.

Check-in Day
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Total

Present scenario
Beds required
Monda
Tuesda
Thursda Frida Saturda Sunda
y
y
Wednesday y
y
y
y
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30

60

90

90

90

60

30

30

Total beds = 450

Evaluating Suggested options
Option1: Operating on Saturdays.
1 It will increase beds capacity by 20%. Also, bed utilization will
increase to be 85.7%. Operation rooms utilization and surgeons
utilization per day will be the same as the current situation.
2 There will be 30 extra operations each week.

Check-in Day
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Total

Monda
Tuesda
y
y
30
30
30
30
30

60

90

Option 1
Beds required
Thursda
Wednesday y
30
30
30

90

30
30
30

90

Frida
y

Saturda
y

Sunda
y
30

30
30
30

30
30

30

90

60

60

Option2:
1 Adding bed capacity by 50% which is 45 extra beds.
2 Investment cost will be $2,000,000 .(Page 11)
3 The maximum number of beds available per week is 945. Since the
hospital can perform 40 operations a day as the maximum, beds
utilization will decrease to 63.5%
4 Utilization of operation rooms is 100% for all five days.
Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla
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SHOULDICE HOSPITAL

5 Utilization of surgeons is 83.3% for all five days.

6 The hospital will be able to perform 50 operations more than the
current situation every week and 13,000 operations over 5 years.

Check-in Day
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Total

Monda
Tuesda
y
y
40
40
40
40
40

80

120

Option 2
Beds required
Thursda
Wednesday y
40
40
40

120

Frida
y

Saturda
y

40
40
40

40
40

40

120

80

40

Sunda
y
40

40

Option3:
Combining options1 and 2.
1 Maximum beds per week will be 945. Utilization of beds will be
76.2% which is a little bit more than the current situation of 71.4%.
2 The hospital will perform 90 operations more than the current
situation and 23,400 operations over 5 years.
3 Utilization of operation rooms is 100% for all six days.
4 Utilization of surgeons is 83.3% for all six days. Initial Investment
will be $2,000,000.

Check-in Day
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Total

Monda
Tuesda
y
y
40
40
40
40
40

80

120

Option 3
Beds required
Thursda
Wednesday y
40
40
40

120

40
40
40

120

Frida
y

Saturda
y

Sunda
y
40

40
40
40

40
40

40

120

80

80

Option 4:
Option 3 plus adding one operation room.

Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla

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SHOULDICE HOSPITAL

1 Even though, we do not know if we can add new operation room in

the hospital or not and we do not know the cost of it but this action
may increase the profit and utilization of capacities more than all
other options
2 Operation rooms will be six and maximum operations per day will
be 48. Thus, each day the hospital can operate on 45 days due to
the 3 day process ((135 beds / 3 days) = 45).
3 Utilization of beds will be 85.7% which is more than the
current situation of 71.4%.
4 Utilization of operation rooms is 93.8% for all six days. Utilization of
surgeons is 93.8% for all six days.
5 Initial Investment for the beds only will be $2,000,000. However,
we do not know how much it will cost to add a new operation room.
6 The hospital will be able to perform 120 extra operations every
week. Operations will increase by 31,200 operations during 5 years.
,

Check-in Day
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Total

Monda
Tuesda
y
y
45
45
45
45
45

90

135

Option 4
Beds required
Thursda
Wednesday y
45
45
45

135

45
45
45

135

Frida
y

Saturda
y

Sunda
y
45

45
45
45

45
45

45

135

90

90

Option 5
Since no data is available for it, we are ignoring this option for our final
evaluation. However, this method might require heavy infrastructure
development costs and creating the same organizational culture would
require skilled employees. There might be a need to transfer some of the
doctors from the current facility to the new facility in order to train the
new employees. This may be useful in the long run, but requires heavy
expenditure, both in terms of effort and costs.
On the other hand, setting up in another location may help in acquiring
new customers who are not travelling to Shouldice now because of the
distance. If the costs of setting up a new facility is less than the profits
Shouldice gets, then this step can also be taken.
Shouldices management should evaluate their hospitals situation
and estimate the average unit cost of bed rooms or operation rooms after
Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla
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SHOULDICE HOSPITAL

increasing capacity. If the average unit cost will decrease, Shouldice

hospital is encouraged to increase capacity. If not, they have to estimate
if the extra profit will exceed the extra cost which will be incurred after
increasing capacity and take a decision accordingly. Furthermore,
increasing capacity sometimes may reduce quality of the service
provided. Thus, management has to make sure that service quality will
maintain on the same level or better than before.
RECOMMENDATION

Option
number
Option1
Option2
Option3
Option4
Present
scenario

Evaluation of options
Utilization
Utilizatio
of
n of beds operation
(%)
rooms (%)
85.7
75
63.5
75
76.2
100
85.7
93.8
71.4

75

Utilization
of
surgeons
(%)
62.5
83.3
83.3
93.8
62.5

Shouldice Hospital to implement option3 or option 4 as they will serve the

maximum possible patients.
Option 1 leads to only improvement of utilization of beds.
Option 2 does not lead to an increase in utilization of operating rooms
Option 3 and 4 lead to an increase in all 3 parameters, but this has to be
backed by financial costs and profit maximization. The option which leads
to more profit and NPV should also be chosen.
Finally, Service quality has to be maintained on the same level of the
current situation or it has to be improved if possible.
Furthermore, from patients feedback we believe that the hospitals
process is very good so there is no need to change the process in this
moment.
Another factor that should be considered is resistance of doctors to work
on Saturdays, hence employees should also be aligned to the expansion
plans.

Ankit Anand (B15071) | Ashima Aggarwal (B15138) | Pushpak Shukla

(B15159)