Shouldice Hospitals

1. How successful is Shouldice Hospital? What are some of the reasons for its
success?
Shouldice Hospital has been doing fairly good, and are currently posed with a
problem of facing excess demand, which they are unable to supply. This is a sign of
how good the company is, but the demand surplus tells us that the company is not
managing its resources in the most efficient manner.
Some of the reasons for the success of Shouldice hospital are:
 Cost Benefit for Customer: Comparative analysis of cost incurred to a
patient while choosing a Shouldice or other hospitals. (Exhibit 1). Along this
profitability
 The recurrence rate is 0.8% when compared to other hospitals.
 Quality of Work: The experience of the staff and so their efficiencies and
quality of the work are top notch. Shouldice’s unique technique that helps
their surgeons complete a surgery in about 45 minutes is a major reason
 Social Experience: The experience they give the customers, that off a resort
more than that of a hospital is altogether a very different experience for the
patients, and helps them ease their stress about the surgery, and also the post-
surgery “alumni” meets and various other activities helps them to not feel like
patients of a hospital
 Employee Satisfaction: The various employee policies, and their profit-
sharing policy ensures that the employees never feel overburdened with work,
nor that they are being underpaid, which in turn reflects on the quality of work
that they do.
Based on the above reasons Exhibit 1 also represents a high-level analysis of
annual profits of Shouldice.

2. What is the bottleneck in the current treatment process?

Bottleneck of a process is defined as that particular process that takes the most
amount of time in a line of processes that affects the flow rate. Currently in Shouldice
hospital, the bottleneck is the time taken for a particular bed to clear. Due to a high
demand, there are a number of patients that are waiting in the pipeline, who aren’t
 getting admitted nor getting their surgeries done in time because Shouldice Hospital
takes in between 30-34 patients only on a daily basis. The number of procedures they
do is curtailed by the number of beds that they currently have (90). By increasing the
number of beds, and utilising the time of the surgeons completely, they can tackle the
bottleneck in the procedure. Exhibit 2 helps us understand this situation better.

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

Dr. Shouldice’s first priority is to address the bottleneck and try reducing the time spent at
the bottleneck. This can be done by 2 possible methods.

a. Increase the amount of surgeries being done in one day, which can be
accommodated by an expansion of the hospital size

Option A

Currently 30-34 surgeries are being done on a daily basis, by utilising the time available
completely, they can do up to 40 surgeries a day.

Average time taken for a surgery (0.82*45+0.18*90) 53.1

Time taken to give updates on surgery 5
Time for other activities 1.9
Average time taken for one complete procedure 60

Current Plan Proposed Plan

7:30 AM - 12:30 PM 4 Surgeries * 5 Rooms 5 Surgeries * 5 Rooms
Lunch
1 PM - 4 PM 2 Surgeries * 5 Rooms 3 Surgeries * 5 Rooms
Total 30 40

In the current plan, we are assuming that the surgeries done in the afternoon are all those
of recurrences. And, so we have a leeway of up to 34 surgeries in a day. In the proposed
plan, while calculating time, we have taken into account the probabilities of patients that
get hernia for the first time and the ones that are getting it again and calculated
accordingly.
 As we can see, this will help in increasing number of operations from 34 to 40 on a daily
basis.

Now, increasing the number of operations means more patients in the hospital at any
given point of time, and for that we need to increase the number of beds available. The
table below gives us an idea about the number of beds that will be required.

In the table below, the Row tells us the date of joining of a patient, and the columns talk
about hoe many patients still remain in the hospital from joining on a specific date. Also,
we have taken the assumption that half the people will leave by the 3rd day, and the rest of
them by the 4th day, and hence on the 4th day only 20 people remain.

Monda Thursda Saturda

y Tuesday Wednesday y Friday y Sunday
Monday 40 40 40 20
Tuesday 40 40 40 20
Wednesday 40 40 40 20
Thursday 40 40 40 20
Friday 40 40 40
Saturday 20
Sunday 40 40 20 40
Number of Beds
Required 100 120 140 140 140 100 100

From the table we can understand that Shouldice Hospitals should increase their capacity
from 90 to 140 beds to be able to match the requirements of doing 40 surgeries on a daily
basis.

The proposed plan also has a capacity utilization of 85.71% which is significantly more
than the current utilization rate.

Option B

Another option that can be tried out by the hospital is working an extra day on Saturday,
but due to the largely negative response to this option, we are not considering this option
for immediate effect. If need arises even after increasing the number of working hours,
we can think about an extra working day.
 EXHIBITS

Exhibit 1

Comparison Assumptions/Comments Hospital Revenue

Shouldic Hospital Fees
e Others (4*111*6850) 3041400
Treatment Cost Cost 2800000
Hospital Rent 444 Profit 241400
Surgery Cost 450
Assistant Surgeon 60 Clinic
General Revenues
Anaesthesia(optional) 30 Assume 50% take anaesthesia ((450+60+75*0.2)*6850) 3596250
984 3000 Average of 2000-4000 Cost 2000000
Transportation Cost 400 0 Average of 200-600 Profit 1596250
Time spent in hospital
for Surgery (Days) 4 6 Average of 5 and 7
Average of 2 and 4 weeks, the
estimated time for recuperation of
people doing strenuous work and
Recovery Time (Weeks) 3 6 light work. Total Profit 1837650
Patient's per day income 275 275 Average of 50 and 500
Cost of recovery 6875 13200
Total Cost for a patient 7859 16200
Recurrence Rate 0.008 10%
Cost of Recurrence 62.872 1620
Final Cost 7921.872 17820

Exhibit 2