Shouldice Hospital – A Cut Above

CASE FACTS

 Shouldice Hospital in Canada is widely known for hernia operations

 Over the past two decades, the small 90-bed hospital has averaged 7,000 operations
annually and performed nearly 7,500 operations in the previous year
 Shouldice’s service delivery system’s winning features:
o Shouldice accepts only patients with the uncomplicated external hernias
o Patients are subject to early ambulation, which promotes healing
o Its country club atmosphere, gregarious nursing staff, and built-in socialising
make a surprisingly pleasant experience
o All patients are paired up with a roommate with similar background and interests.

THE PRODUCTION SYSTEM

 The medical facilities at Shouldice consist of 5 operating rooms, 1 patient recovery room,
1 laboratory and 6 six examination rooms.
 Shouldice performs, on average, 150 operations per week, with patients generally staying
at the hospital for three days.
 The nurse to patient ratio is 1:15 while the industry standard being 1:4
 12 full-time surgeons, 7 part-time assistant surgeons, 2 anaesthetists form the team
 Operating team has 1 surgeon, 1 assistant surgeon, 1 scrub nurse & 1 circulating nurse
 30-36 operations are performed per day with a surgeon handling 3-4 surgeries per day
 The surgeons’ day ends at 4 P.M., although they can expect to be on call every 14th night
and every 10th weekend.

CASE QUESTIONS

1- What is the market for the service? How successful is Shouldice Hospital?
  The target demographic comprises of mostly males as they are more prone to a hernia.
Moreover, It is ensured that the complex cases are refused for operations
 In a year, almost 1,000,000 operations were performed in US in 2000. So, it was a
lucrative market to grab a considerable market share
 Shouldice Hospital performance in year 2004 –

Number of operating days- 365-52*2= 261 with 30-36 operations per day

7830 – 9396 operations per year by Shouldice hospital

Demand (2004)- 10230 – 11796 operations

Backlog operations- 2400 with 200 backlog operations increasing every year

There is a clear demand and supply gap in case of Shouldice Hospital

Reasons For High Demand

 Hospital relied on word of mouth recommendations, fast-tracked by free annual checkups

for alumni and reunion featuring dinner and floor show attended by 1000 former patients
 Hospital also relied on the wealthy as well as low-income group( or financially
challenged) of patients
 Hospital stay costs –

$ 320 per day or $1280 for 4 days ; Surgical fee -$650 ; General anesthesia fee - $300
(20% cases); Travel fare -$200-$600

Total costs- $2430 - $2830 (comparison value - $5240), 45.99% - 53.6% lesser cost

 Relaxing enclosed environment also enhances the reception of supplementary services an

increases satisfaction in both service encounter and post-purchase stage

2- Define the service model of Shouldice. How does each of its elements
contribute to the hospital's success?

Shouldice Hospital comprised of the following key elements in its service model to perform
Hernia operations-
Customers: Diagnosis by mail was performed

Patient’s activities were predefined, and patients stayed relaxed

Service: Shouldice Method was stringently applied, and only external abdominal hernias
were performed

Facility: Mixed canteen, all carpet flooring, multiple operating rooms facilitated the
whole process

No TVs telephones were provided to enhance patient to patient interaction

Employees: 12 full-time surgeons, 2 part-time surgeons and 2 anaesthetists comprised of the

Shouldice team

Further the following enhanced the sustainability of the model:

 Low turnover rates resulting in lower costs

 Same doctors were assigned for reoccurring hernias
 Continuous training of employees ensured updating of their skills
 Doctors were paid relatively higher which provided for their motivation
 The maximum degree of customer participation was ensured hence reduced costs
 Minimized hospital feeling and homely feeling in return expedited the recovery
 Operating rooms were located in a semicircle
 Hospital was located near the airport, and hence convenience for patients was high
 Patients were screened to avoid any kind of complexity in the operations

3- As doctor Shouldice, what actions if any, would you recommend for

hospital’s capacity expansion

Hospital Capacity:

 It is assumed that they are operating at the “best operating level.”

 To increase their output and maintain their quality they would need to increase they size
of the plant where the service is provided.
 This involves large capital investments and considerable time
  Construction would also disrupt the quality and country club atmosphere of the hospital.
 The staff also has limited flexibility. Surgeons and surgeons’ assistants are specialized
fields that have limited desire to be cross-trained.

Alternatives available-

a- Add Saturday operations

Advantages: No investment is needed

Can still maintain quality

Disadvantages: Require to schedule 23-25 operations on Saturday

Six surgeons and a supervising surgeon have to work on Saturdays

Violates the implied contract that Shouldice has with its surgeons,
strong opposition by the senior doctors

b- Add a new floor (45 more hospital beds)

Advantages: Easy to control and maintain quality

Retain the culture and environment

Disadvantages: Require to schedule doctors to the full capacity of 5 days per week

The further staggering of meal hours for patients

Disruption during construction, Moderate Investment & Increasing

workload on all

c- Establish a new facility for a hernia

Advantages: New location close to the customers, say the USA

Improve its competitive position and increase its profits

Operate in a less restrictive environment; New Opportunities

Transfer of knowledge and expertise to the new facilities

Disadvantages: Requires a significant investment.

 Control of quality

It is difficult to create the same culture and atmosphere

Potential competition with the existing facility

Recommendation

Start operations on Saturdays

• No fresh investment required.

• Can maintain quality.

• New surgeons not required

LEARNINGS FROM THE CASE

 It is crucial to decide your target segment and the type of service you want to provide
 Word of mouth is a big contributor when it comes to advertisement and needs the least
amount of investment. Ensuring a good word of mouth is all one needs to increase
awareness about his services.
 Giving the best service to your customers can also be ensured by having customer
participation in the service itself. It reduces cost and increases customer satisfaction
 In the case of expanding your service infrastructure, it should be ensured that current
offerings aren’t diluted in the process. A lost customer is a big threat to the future of any
service provider