Management report on

capacity and expansion

plans for an orthopedic
surgery
Martin Andreev
ext. 51183

email m.andreev@lancaster.ac.uk

Page 1 of 8

March 2011
1. Introduction
This report has been written on request of David Christopher, the owner of a private
orthopedic surgery clinic in the North West of England. In order to differentiate from NHS
teaching hospitals, the clinic strives to reduce the waiting time for orthopedic procedures. It
also specializes in a wide range of procedures. The clinic has two orthopedic surgeons (Dr.
Christopher and one other doctor) and twelve support personnel at its disposal.
However, the clinic has reached the point where the two orthopedic surgeons are working
long hours, which raised the question whether more surgeons are needed. But hiring more
surgeons means extra costs. Therefore, the aim of this report is to help Dr. Christopher decide
whether to hire more surgeons.

Page 2 of 8

2. Characterising the Operation

First, I will characterise the operation by using several appropriate concepts. The first concept
I am going to use is the product-service continuum. Some operations produce just products
and others just services, but most operations produce a mixture of the two (Slack, 2006). The
clinic provides services that are largely intangible because they change the physiological
condition, feelings and behaviour of patients. For example, a surgery cannot be physically
touched. Moreover, musculoskeletal problems may arise even after a surgeons operation.
Therefore, the clinics services may have comparatively short life.
The second concept I will focus on to describe the nature of the operation is the
transformation process model (also known as the INTRO model). According to this
model, operations consist of input resources, which are used to transform something, or are
transformed themselves, into outputs of products and services (Slack, 2006). The clinic
transforms the customers (the patients) themselves, but it is also concerned (although not to
such an extent) with processing inputs of materials (e.g. surgical instruments) and information
(e.g. information about diagnosis of the patients and doctors appointments). The transforming
resources of the clinic are facilities and staff. Facilities are the hospital building and the
available equipment in the hospital, while the staff are the two expert surgeons and the twelve
support personnel.
Finally, I will use the concept of the 4Vs. All operations differ in terms of the volume and
variety of their output, the variation in demand with which they have to cope and the degree
of visibility or customer contact they have (Slack, 2006).

Figure 1 - 4Vs: A typology of the operation

Page 3 of 8

As seen from the table, the clinic has relatively low volume of output because it is a small
clinic which provides treatments to about 20 patients per week. Each member of the staff
performs more of a job, e.g. surgeon A and surgeon B (surgeon A performs 5 different surgery
procedures, while surgeon B performs 7 different surgeries on a typical week). The clinic
performs all sorts of orthopedic surgery except spinal surgery which means there is low
repetition of the tasks and less systematization. Thus, it follows that the cost per treatment is
likely to be high, but high costs are also due to the fact that this is a private clinic and
treatments are expected to be expensive. The clinic has a high variety of output because it is
flexible in terms of surgery hours (all surgeries are performed from 7am to 12 noon, four
times a week) and matches customer needs. The variation is demand is comparatively low,
there are between 0 and 4 patients per week and staff can be scheduled in a routine and
predictable manner. There are two surgeons and consequently low recruitment costs, but there
are also no overtime costs because surgeons have a weekly timetable and dont work
overtime. However, the clinic is growing very fast and the demand is gradually increasing.
Finally, the clinic is high-visibility operation because doctors need to have an eye contact with
their patients. In addition, patients have relatively short waiting tolerance.

Page 4 of 8

2. Capacity constrains and workload

Next, I believe the analysis of the clinics existing capacity constrains and workload is crucial
for the performance of the operation. First of all, I have calculated the clinic design and
effective capacity. 11 hours is a typical working day in the clinic and surgeons work 4 days a
week. So,
Design capacity = 11*4 = 44 hours, which is 2640 minutes (44*60=2640 mins)
Effective capacity = Design capacity planned loss
Planned loss = (the sum of surgeon changeover times required for each surgery procedure
multiplied by the number of patients scheduled weekly for each procedure) + the sum of
lunch breaks for the 4 working days (one lunch break is 1 hour or 60 mins). Thus,
Planned loss = (15*2+15*1+15*1+20*3+20*4+20*0+20*2+20*1+60*2+60*3+60*1+45*0) +
+4*60 = 620 + 240 = 860 mins
Consequently, effective capacity = 2640 860 = 1780 minutes (29.67 hours)
Now, lets focus on the calculation of the clinics current actual weekly workload (or output).
Actual output = the sum of surgery times of each surgery procedure multiplied by the number
of patients scheduled weekly for each procedure
Actual output = 45*2 + 30*1 + 60*1 + 30*3 + 60*4 + 90*0 + 75*2 + 90*1 + 150*2 + 120*3
+ 180*1 + 90*0 = 1590 minutes (26.5 hours)
I have also calculated the clinics current utilization and efficiency.
Utilization = actual output/design capacity = 1590/2640 = 0.602 (60%)
Efficiency = actual output/effective capacity = 1590/1780 = 0.893 (89%)

Page 5 of 8

3. Different ways to increase the clinics amount of

workload
The clinic is growing very quickly and you will not be able to handle the large amount of
work with only one surgeon at your disposal. There are several ways in which the clinic can
increase its amount of workload to handle the rise in demand.
The chase demand approach is probably the best plan that can be used to adjust capacity.
Capacity depends on the size of the workforce, so the obvious way to adjust it is to adjust the
size of the workforce by hiring extra staff. But hiring extra staff for permanent periods of time
will significantly increase costs. Therefore, it is a good idea to hire more surgeons during
periods of high demand and to lay them off as demand decreases. This is known as hire and
fire approach, but there are still temporary costs associated with recruitment and costs of low
productivity during the learning process, and some ethical implications that should be taken
into consideration (Slack, 2006). A variation of this approach is to hire part-time staff which
can work fewer hours than the normal working day. Another option is to use subcontracting - other operations will perform surgeries for the clinic. However, the main
problem with this approach is that the clinic cannot be sure that the sub-contractor will deliver
the services on time and in the same level of quality that was provided before.
An alternative approach to increase the amount of workload would be to utilize the existing
resources (the two full-time doctors) better. The best way to do this is to increase the
productive hours worked by the two surgeons. For example, you can lengthen the working
time from 11 hours with a lunch break to 12 hours again with one hour off for lunch. In
addition, you can work 5 days a week (instead of 4 days) and rest only Saturday and Sunday.
However, this approach may have two essential drawbacks. The first one is that the extra
hours worked would impact on the energy levels the surgeons and this may have a negative
impact on their performance and doctor-patient relationship. The second disadvantage would
be the fact that the surgeons can work overtime on days when there is low demand of
customers, which can lead to idle time and extra payment to staff in vain. Therefore, working
overtime can be effective only if annual hours work approach is used. According to this
approach, staff in the clinic can be available to work any time in the year when there is high
demand because the staff are contracted to work a definite number of hours per year.

Page 6 of 8

4. Overall recommendations
To summarise, I have made two recommendations which in my view would be useful for
maximising patient throughput and surgeries, and thus revenue, without having negative
impact on patient care.

In my opinion, you should hire several part-time surgeons that can work on request. It
would be better if they are paid annually using annualized hours approach. Thus, you
will only slightly increase your costs (but you will raise even more money later!)
because the extra surgeons will only work on part-time basis. Furthermore, you will
have several surgeons available at any time during the year and it is not necessary to
pay them until the end of the year. In addition, the operation will become very flexible
and can respond quickly to changes in demand, which will increase revenue.
Working overtime should be optional for the two full-time surgeons already employed
by the clinic. For example, if demand of service increases at the end of the day, the
two doctors may stay several extra hours examining patients or giving them treatment.
This will be only of your benefit because you can raise more money by working
overtime, e.g. several times a month. However, the doctors should be mindful of
working long hours because this can affect the quality of their service.

Page 7 of 8

5. References
Slides from MSCI 102 course lectures
Slack, N., Chambers, S. & Johnson, R (2006) Operations Management, 5th Edition (Financial
Times/ Prentice Hall)

Page 8 of 8