OPERATIONS MANAGEMENT

CASE STUDY REPORT

SHOULDICE HOSPITAL LIMITED

GROUP 8 -- SECTION C

Davneva PhiraRamya A

Vivek MenonAravind A M

Suman Mondal

About The Company

The Shouldice Hospital Ltd started as a six room nursing home in July

1945. The main focus of this hospital is repairing external hernia, both first time

cases and recurring ones too. As the number of patients increased, Dr Shouldice

extended his facilities by acquiring a 138-acre estate with a 17,000-square foot

main house in the suburb of Thornhill, 15 miles north of Down Town Capital,

Toronto, with a 36 bed capacity. After some years of planning he added a wing to

the house increasing the capacity to 89 beds. In 1965 Dr Shouldice passed away

and Dr Nicholas Obney, his long-term associate, became the surgeon-in-chief

and the chairman of Shouldice Hospital Limited. By then they started operating

both the hospital and clinical facilities. By 1982, the volume of activities had

increased to 6850 operations per annum.

Differentiating Factors

The hospital had a narrow focus. The doctors used innovative “Shouldice

methods”. Under this technique the recurrence rate reported was very low. Due

to this technique early post-operation ambulation was possible. The whole

operation took only 4 days on an average so the patients could go back to work

in 2-8 weeks. Also an important factor is that the cost of operations and the fee

charged were much competitive in comparison to competitors.

Customer satisfaction was of immense importance and this was ensured

by counseling provided by nurses throughout their stay in the hospital,

recreational activities organized for the patients and high socializing among the

patients.

Out-of-town patients were diagnosed online using the medical information

questionnaire, saving $200-$400. The ambience of the hospital was such that

patients felt at home. The employees were efficient in cross-functional activities.

The only form of advertising was through word-of-mouth. The average time taken

to recover by a patient post operation was much lesser compared to other

hospitals.

How successful is the Shouldice Hospital?

Dr. Earle Shouldice started off this venture with a sole mission of providing a

painless hernia operation and a fast recovery at an affordable cost. By 1983, the

hospital had achieved exactly that and has delivered on all the aspects of its

founder’s vision. The hospital charges about $1030 for a hernia operation which

is very less when compared to the $2000 - $ 4000 charged elsewhere. Also the

patients were discharged much sooner than the other hospitals. The patients

with lighter jobs could get back to work in a week. Ambulation was possible

immediately after the operation and this allowed interaction amongst the patients.

The annual alumni meet of its patients increased its reputation by word of mouth

which resulted in a huge demand. Considering that the hospital did not need any

advertising, it was a significant achievement.

The doctors at Shouldice take a keen interest in every patient and in spite of

so many patients and operations every day, the patients were provided with

personalized care. The success of the process is evident from the fact that the

competitors emulated the same. Not only the local patients, people from outside

Canada visited this hospital for their medical needs. This does indeed prove that

Shouldice Hospital is a success.

How do you account for its performance?

The service system at Shouldice hospital consists of four stages, the initial stage

of identifying the illness, the preparation process for the specific patient, the main

process of operating on the patient and the final steps are the post operative

procedures which involve the recovery of the patient. The hospital has been able

to carry out a smooth process flow which results in the patients being attended

on time and aids in their fast recovery. From the time a mail is sent out to the

prospective patient to the final operation and the patient being discharged, the

doctors, the nurses and the employees at Shouldice ensure a hassle free and

swift response action plan.

Shouldice was able to standardize the hernia operation as it treated only the

external types of abdominal hernias. This way it was able to standardize the

equipment to be used and also train its doctors and nurses in a routine manner

without having to bother about specialization in other fields of medicine. This

saved a lot of operating costs for the hospital.

The first of the four stages includes the patient learning about the hospital

from doctors and previous patients, the fact that the hospital kept the operation

simple was not viewed as the final solution and hence was not recommended by

the doctors. However, most of the patients first got a diagnostic done from the

doctor or by themselves and then got in touch with the hospital. The out of town

patients were contacted via mail and a medical questionnaire was sent to them.

This way the hospital had already started the first process of diagnosing the

patient even before he had reached the place. This gives more first hand

information to the doctors and saves a lot of time about the medical situation of

the patient. After the contact and the medical questionnaire has been filled, the

patient is diagnosed by the hospital and then an appointment is fixed with the

hospital for the surgery.

The second stage comprises of the preparatory procedures for the

operation. The process flow that takes place when a patient arrives at the

hospital is as shown.

The third stage deals with preparing the patient for the operation which

includes preparing the patient, administering the anesthetic, and finally the

operation which lasts for about 45 minutes. The hospital is able to complete an

operation in such a short time as everything is pre planned and the doctors are

aware of the number of patients he/she is going to operate on today. There is no

sudden demand of doctors nor there is any emergency cases coming in.

After the operation, the patient is taken for the post operative exercises

and then by the end of day 4 the stitches are removed and the patient is free to

go home and begin working again.

Process Flow

Arrival 1-3 PM

20 Mins

Prelim Exam 15 mns

Dinner

Blood n Urine 5-10 mins

15 mins

Check In+Orientation

Insurance 10 mins

Interaction

Bed @ 9 30

Process Flow

The following characteristics are important in the context of Shouldice as it

explains the smooth functioning of the process.

The service system is consistent with operating focus which is fast and effective.

Every step of the process is geared for maximum efficiency. The process is also

very much customer friendly as the patients are allowed to be with the kids.

The entire process as a whole is completely structured form the time of the

patient’s arrival to his departure, there is a time constraint on every activity and

also a lot of leeway is there for the activity to be completed in that time. The front

office and the back office operations are in perfect synchrony to enhance the

smooth flow of the process and have been merged effectively.

The entire process is extremely cost effective and the delivery promise of

the hospital to put its patients back on their feet within a week is also very much

honored. Though there is a small flaw in the system in case of higher demand at

which the system cannot cope with the available resources. Hence the hospital

has to chalk out action plans in order to retain the business and attend to the

growing demand.

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

As Dr. Shouldice, I would execute the following actions to increase the capacity

of the hospital:-

1. Work on Saturdays

2. Additional Floor

Cost Facts:-

Budget for operating costs= $ 4.8 million

Hospital costs-$2.8 million

Clinic costs -$2 million.

Operations per year = 6850.

Hence average cost per patient borne by the hospital =$4.8million/6850 = $701.

Amount collected fro m the patients =$1029.

1) 4 days of hospital stay=4*$111

2) Surgical fee=$450

3) Fee for the assisting surgeon=$60

The net profit earned =$1029-$701=$328.

How would you implement changes you propose

Option 1

Work on Saturdays

This option would naturally increase the working days by 52.

Given number of operations=6850

No of working day (without Saturday and Sunday) =261

(Assuming 365 days in 1 year)

Therefore, number of operations per day = 6850/261=27

Net profit = $ 0.46million

Also an important factor is that a day (Saturday) in hospital will not be wasted.

Hence, patients staying over the weekend would be discharged a day earlier and

new patients could be admitted hence increasing the capacity.

This option would give immediate results so it can be a short term solution.

Action Plan

Part-time doctors and nurses can be appointed for the Saturday

operations, as some of the current staff are unhappy with this idea.

Doctors who can work on Saturdays can be given off on weekdays.

OPTION 2

Additional Floor

An additional floor would increase the capacity to accommodate more patients.

Assuming a floor can accommodate 60 beds the profit of the hospital would

increase even with the consideration of the cost associated with it. As I consider

the welfare of the patients to be as important as earning increased profits.

However, this option will be a long term solution.

Action Plan

Since 60 beds are proposed to be added, 13 doctors have to be recruited.

(19 doctors for 89 beds).

Similarly, 26 nurses have to be recruited for this capacity.