Shouldice Hospital case report

Team members: Group 7

 Rajat Abrol (1916001)
 Jatin Maniya (1916035)
 Gulam Nabi (1916040)
 Vinay Rao (1916041)
 Pusparghya Pakrasi (1916043)

Q1/ How successful is Shouldice Hospital?

We feel that Shouldice Hospital is a very successful hospital because of the

following reasons >
1/ It maintains a focused service delivery system that allows it to keep costs
low and remain profitable
2/ It enjoys a high success rate with its surgeries
3/ Has low employee turnover
4/ Has consistently demonstrated the ability to maintain high quality
standards

Most of its strengths can be attributed to the following reasons >

1/ stringent policies of staff training in the Shouldice surgical method
2/ the preservation of a communal atmosphere amongst the staff and
patients
3/ the implementation of efficient and cost-effective facility operations
4/ and high demand for operations

Some of its less successful aspects that would have made it more successful
are >
1/ an inability to serve growing demand, as it is operating at near-full-
capacity in its present facility
2/ limited marketing efforts
3/ an inability to prevent proliferation of its surgical techniques
 Hospital Profit & Loss Statement
No of Days of Hospital Stay(Average) 4
Hospital Stay per day 111
No of patients operated(1982) 6850
Hospital Revenues 3041400
Operating Cost 2800000
Profit 241400
*From the case: 6850 patients were operated in 1982

Clinic Profit & Loss Statement

Particulars With Anesthetics Without Anesthetic Average %age
Surgical Fee 450 450
Assistant Surgeon Fee 60 60
Anesthetic Fee 75 0
Total Charges 585 510
No of patients operated(1982) 6850 6850
Clinic Revenues 4007250 3493500 3750375
Operating Cost 2000000 2000000 2000000
Profit 2007250 1493500 1750375 47%
Total Revenue 7048650 6534900 6791775
Operating Cost 4800000 4800000 4800000
Profit 2248650 1734900 1991775 29%

Q2/ What accounts for Shouldice's performance?

a/ Operating techniques that are unique to Shouldice

Shouldice has vertically integrated all operational functions to tightly control
its distinctive techniques for performing hernia operations (including
processes for pre- and post-operative patient care). The hospital has been
remarkably successful in its ability to provide its patients with a super-quick,
high-quality, low-cost surgery in an environment that is comfortable and
caring. This has allowed Shouldice to enjoy an operation success rate of
nearly 99%, compared with the industry average of approximately 92%.
b/ Delightful Customer Care
Providing excellent customer care is a characteristic feature of the Shouldice
experience. The surgery is designed to not only be quicker than standard
hernia operations but also allows for faster recovery. Much of the success of
the Shouldice Hospital revolves around its dedication to a patient's mental
attitude, as Dr. Shouldice
believed that a less-stark and more friendly environment reduces anxiety
and
speeds recovery. The personal care displayed by the entire staff and the
hospital's policy of not charging clergy members or the parents of the minor
patients are representative of the hospital's exceptional and large-hearted
service philosophy.

The design of the entire hospital is based around being receptive to

customer needs and Dr. Shouldice's ideals of early ambulation following
surgery. Patients are assigned rooms with someone who may have a similar
professional background or who shares the same hobbies as them. Phones
and television sets are located only in communal areas, which helps keep
patients out of their beds, walking around, socializing and meeting others.

Furthermore, the patients are encouraged to enjoy their meals in the

common cafeteria in order to interact with other patients and with doctors.
To speed the healing process, Dr Shouldice's post-operative technique
encourages patients to begin walking immediately following their operations.
Most importantly, the willful participation of patients in their own recovery
process cuts Shouldice's costs for additional expenses like service-to-rooms
and one-on-one physiotherapy.
 Total Cost to Patients
Particulars Shouldice Other Hospitals
Cost of Typical operation 992 3000
Transportation to and from Hospital 400
Away from work while at hospital(in days) 4 7
Away from work while recovering 5 10
Patient expected salary 350 350
Value of time away from work 3150 5950
Total Cost to Patients 4542 8950
Savings for Shouldice Patients 4409

Assumptions:

1. For Shouldice the general anesthetic expense is considered for 50% of

the patients (CAD 954 is for patients who don’t need anesthetic and
CAD 1,029 is cost to patients who need anesthetic. Taking an average
of that yields CAD 992 as average cost of typical operation
2. For other hospitals the average cost of a typical operation is assumed
to be $3000.
3. It is assumed that the patient is losing his salary for the number of
days he is admitted in hospital and recovering post operation.
4. Expected salary of the patients is assumed at $350 per day

Also, recurrence rate of hernia in Shouldice hospital is as low as 0.8% while

similar operations in outside hospitals has recurrence as high as 10% (as per
case)

Q.3 As Dr. Shouldice, what actions, if any, would you take to expand the
hospital capacity?

List of alternatives courses of actions

1. Going for 6-day operations – including Saturday: Increase in

capacity by 20%
2. Investment of 2 Million – Add another floor of rooms to the
hospital (Increase in beds by 50%)
 3. Establish another hospital outside Canada
4. Diversify at other locations into other specialties offering
similar opportunities

We have considered the first two cases and evaluated the impact of the
same on the profits from hospital and clinic. Rejecting options 3 and 4
because this doesn’t align with Focused strategy approach that is the
primary reason for its success. Also, option 4 is a new territory for Shouldice
hospital and it doesn’t have expertise in operation outside of external hernia
operation. Hence, rejecting options 3 & 4

Case 1: 6 Day Operations (Including Saturday)

No of Days of Hospital Stay(Average) 4

Hospital Stay per day 111
No of patients operated(1982) 8,220
Hospital Revenues 36,49,680
Operating Cost 28,00,000
Profit 8,49,680

Particulars With Anesthetics Without Anesthetic Average %age

Surgical Fee 450 450
Assistant Surgeon Fee 60 60
Anesthetic Fee 75 -
Total Charges 585 510
No of patients operated(1982) 8,220 8,220
Clinic Revenues 48,08,700 41,92,200 45,00,450
Operating Cost 24,36,280 24,36,280 24,36,280
Profit 23,72,420 17,55,920 20,64,170 46%
Total Revenue 84,58,380 78,41,880 81,50,130
Operating Cost 52,36,280 52,36,280 52,36,280
Note: Patient count is increasing by 20%
Profit 32,22,100 26,05,600 29,13,850 36%
 Additions to Operating cost:
1. Assuming 6 surgeons required on Saturdays and each surgeon earning
CAD 250 additional on Saturday,
2. Assuming 5 Assistant Surgeons are required and 30 patients on average
are treated on Saturday, and Anaesthetist cost on Saturdays,
3. Assuming 20 nurses required on Saturdays & they need to be paid CAD
100 (little higher than weekday daily pay)

Case 2: $ 2 Million investment in New Floor & 50% increase in bed

capacity

No of Days of Hospital Stay(Average) 4

Hospital Stay per day 111
No of patients operated(1982) 10,275
Hospital Revenues 45,62,100
Operating Cost 28,00,000
Profit 17,62,100

Particulars With Anesthetics Without Anesthetic Average %age

Surgical Fee 450 450
Assistant Surgeon Fee 60 60
Anesthetic Fee 75 -
Total Charges 585 510
No of patients operated(1982) 10,275 10,275
Clinic Revenues 60,10,875 52,40,250 56,25,563

Operating Cost 40,00,000 40,00,000 40,00,000 71%

Profit 20,10,875 12,40,250 16,25,563 29%

Total Revenue 1,05,72,975 98,02,350 1,01,87,663
Operating Cost 68,00,000 68,00,000 68,00,000 67%
Profit 37,72,975 30,02,350 33,87,663 33%
Assumptions:
1. Assuming 50% increase in patients from current 6850
2. Additional investment of 2 million on top of initial 2 million operating
cost.

Conclusion:

Base Saturday working 2Mn investment & new

Options case week floor
Profit% 29% 36% 33%

We would recommend the option of 6 day working week as the

profit is maximum in that case. This is based on profit analysis only,
there are other soft factors that need to be addressed to go ahead
with this strategy

Q4. How would you implement changes you propose?

1. Prepare a manpower plan or a duty roaster specifically for Saturday.

2. Prepare an incentive plan for staff coming on Saturday
3. Communicate the incentive for coming on Saturday to the hospital
staff
4. Identify the surgeons, assistants and nurses who are willing to come on
Saturday
5. If senior surgeons are not opting to come on Saturday, avoid complex
surgeries for the weekends