You are on page 1of 20

The report presents a case analysis on the success of

Shouldice Hospital as a service organization. It details the


reasons behind high patient and employee engagement. The
analysis also evaluates the options for Shouldice growth
strategy and makes a recommendation

Group 3
Deepesh Gupta
Jitendra Kumar Singh
Smruti Ranjan Panda
Soumya Ranjan Sahoo

(1511319)
(1511325)
(1511362)
(1511364)

Rakshith K N (1511346)

1.

INTRODUCTION

Shouldice Hospital Limited is a healthcare facility located in the suburbs of


Toronto, Canada. The 17,000 square foot facility is housed on a sprawling
130 acre estate and specializes in repairing external abdominal hernias. It
has 89 beds and 6,850 operations are performed on patients (in year 1982)
from all across the United States and Canada. Founded by Dr. Earle Shouldice
in 1940, the organization enjoys a reputation for effectively using a unique
surgical technique to repair external hernias that is considered superior to all
others. The procedure includes early ambulation following surgery for rapid
and effective recovery. The organization takes great pride in its patient as
boss philosophy of service.

2.

BUSINESS PERFORMANCE

Shouldice hospital has been successful in different aspects ranging from


employee satisfaction to customer satisfaction to efficiency and quality of
service offerings. One can gauge the success of the business by looking at
the oversubscription rate in spite of lack of advertisement. The performance
can be measured quantitatively (in terms of profit margins, capacity
utilization etc.) as well as qualitatively (in terms of patients and physician
satisfaction).

2.1 Qualitative performance measurement


For any service business, such as Shouldice hospital is, it must get below
four elements right to deliver service excellence consistently:

Service offerings
Employee management
Customer management

Each of the above elements have been evaluated in detail in the below
sections.
2.1.1 Service offerings
For product based companies, the focus is on the characteristics of the
product that customer will value. However, for service based companies, the
focus is on customer experience. The companies cannot fair well in every
aspect of business, there is always a trade-off involved and the trick lies in
the choice to perform badly in some minor aspects of business in order to
excel at other things.

Shouldice was able to establish short treatment regime at a high quality


level. Patients were able to returns to their job within 1-2 weeks as compared
to 2-8 weeks in other hospitals.
2.1.1.1 Quality control

Shouldice Hospital has managed to maintain high quality in its operation and
post-operations activities. Some of the quality control is reflected in the
below scenarios.
1) The recruitment process is rigorous in order to make sure Shouldice
hire experience physicians who are flexible i.e. ready to adopt
Shouldice method of operation. One of the important parameters is to
understand the motivation of the physician to work at Shouldice.
Generally, physicians value work-life balance (as they are married )
and are relatively less ambitious
2) There is a low recurrent rate of external Hernia based on the Shouldice
operations method. This is an indication of the high quality of operation
by highly skilled surgeons
3) The food is prepared in house to ensure the quality control. The control
on the quality is internal and there is no dependency on the external
contractor
Hence with high quality control, Shouldice has been able to improve patients
experience as well as control the costs.
2.1.1.2 Efficient and cost effective process flow

Apart from quality control, there has been other initiatives that Shouldice has
undertaken to reduce the overall cost for the patients and maintain an
efficient flow for operations.
1. Each secretary is trained to do others work in case of an emergency
situation
2. The productivity is high due to highly trained physicians. Their
recruitment policies are related to the focused strategy of Shouldice
3. There is a low nurse to patient ratio as compared to typical hospital.
This is because
a. The estimated cost to furnish an operating room is less than
$30,000
b. Shouldice allowed parents to accompany the children as the
nursing costs were higher than the patients room and board.
c. Skilled surgeons at Shouldice led to a reduced operational cost
as there were no mistakes/quality issue while operations
d. Since Shouldice focused on exercise and patient care, hence the
resources required to take care of the patients are relatively less

e. The questionnaires sent to the patients for initial diagnosis also


reduced the initial check-up costs. The patients were instructed
to reduce the weight in case they were overweight
2.1.2 Employee management
As Shouldice hospital is focussed on a niche services (i.e. providing
operations for external hernia), it has been imperative for the hospital to
maintain high level of expertise. Hence, Shouldice hospital has focussed on
its employee related strategies in order to retain the talent and maintain its
point of differentiation.
The excellence in employee management is reflected in the extremely low
employee turnover as compared to the other hospitals. This is due to
multiple employee friendly policies.
1. Nobody is fired. This allows employee the freedom at the work place
and gives more sense of responsibility
2. Shouldice maintain higher pay scale for its staff than the union pay
scale for comparable jobs in the area
3. Profits are shared among physicians and staff. For example, surgeons
received a bonus of $500,000 in the recent years and staff received
$65,000 as the employee dividends
4. Shouldice allow a good work-life balance for the surgeons. Surgeons
day gets over at 4 pm after which they can spend time with their
family
5. Surgeons are provided opportunity to learn by allocating the patients
with Hernia recurrences to the same doctor who treated the patient
earlier
6. Shouldice encourage group learning. Collaboration is encouraged
7. The workload of surgeons is moderate with 3-4 operations per day as
compared to the schedule of surgeons in other hospitals
Although surgeons tend to do similar kind of operation throughout their life,
the recruitment policy is made such that the doctors recruited are fine with
this kind of environment. Doctors with families are recruited which would like
to have work-life balance rather than more ambitious doctors.
2.1.3 Customer management
Shouldice Hospital has excelled in providing patients with home-like
environment with a collaborative culture and intentionally avoided to provide
hospital-like feel to the patients. This is due to the culture Shouldice has
decided to build in the hospital.
Patients are encouraged to interact and socialize among each other. This way
of treatment has been so successful that patients demand for one extra day

of stay at the hospital. The facilities in the hospital are not traditional
hospital like but given a very friendly feel with addition of lounges and
recreational areas. Every square foot area in the hospital is carpeted to
reduce hospital like feeling. Below are specific behaviors encouraged by
Shouldice that has led to the prevalent culture.
1. Patients are encouraged to talk to the already operated patients in
order to listen to their experience that could potentially lead to
reduction of anxiety
2. Parents accompanying the children are allowed to stay for free. Apart
from reducing the nursing cost, this makes both child and parent
happier as they are always near each other
3. After operations, patients were encouraged to walk to the wheel chair,
they can start exercising the same day, even climb stairs. All these
were done to reduce the feeling of patient and instill the feeling that
patients have control over his life and is not control of the disease. This
shaped patients attitude
Shouldice also hosts alumni dinners for patients operated at Shouldice. Most
of the patients in the alumni reunion seems to be mention that Shouldice
experience did not feel like a hospital. This is an evidence for a great patient
friendly hospital that has led to its success. Patients have been very willing
to refer other patients to Shouldice and this has in turn made the marketing
redundant.

2.2 Quantitative performance measurement


The quantitative performance of Shouldice can be measure in terms of
profile margin, capacity utilization and comparison with other hospitals.
2.2.1 Profit Margin
The annual profit margin is elaborately calculated in the below table.

Total income from surgeries per year (USD)


Activity

Details

Calculations

Total ($)

Hospital stay

4 days @
$111/Day

111*4

444

Surgical fee

$450 per
surgery

450*1

450

Assistant Surgeon fee

$60 fee

60

60

Total normal operation


charges

954

Anaesthetic charges
(special case)

$75 per surgery

Total charges for critical


operation

Normal charges
+ anaesthetic

Average no. of
operations/day

Average of 30
to 36

No. of critical operations per


day

75*1

75
1029

0.5*(30+36)

33

Assume5 % of
total operations

0.05*33

1.65

No. of regular operations


per day

95% of total
operations

0.95*33

31.35

AVERAGE TOTAL INCOME


PER DAY

weighted avg.
regular and
critical

954*1.65 +
1029*31.35

33,833.25

No of Working Days Per


Month

5 days/week
currently

5*4

20

TOTAL YEARLY REVENUE

Daily
income*Total
days

33833.25*20*
12

8.12 Million

Total salaries paid per year (USD)


Employee

Details

Calculations

Total
($)

Full Time
Surgeons

12 @ $50k salary + 500k


bonus pool

12*50k+500k

1,100,00
0

Part Time
Surgeons

51% of $60/surgery; 33
operations/day; 20
days/month, 12 months/year

0.51*60*33*20
*12

242,352

Nurses

40 nurses @20k salary


(average)

40*20k

800,000

Anesthetic

$300/day 20days/month 12

300*20*12

72,000

Charge

month

Bonuses
Distributed

65k

TOTAL

65,000
2.28Mn

ANNUAL OPERATING EXPENSES


(USD)
Hospital

2.8Mn

Clinic

2Mn

Total

4.8Mn

Current annual operating profit = 8.12 - 4.8 =


3.32Mn.(A)
From the above analysis, it can be said that the hospital is having good
profit.
2.2.2 Capacity Utilization
We will calculate capacity utilization of full time surgeons and operation
theatre
2.2.2.1 Full time surgeons

No of hours the full time surgeons are available for service/day = 12*8 = 96
No of usable hours of full time surgeons/day = Operating hours per day +
Consulting hours/day*no of surgeons
= (33*1) + (6*2)
= 45 hours
(assumed 30 operations per day, duration of 1 operation considered 1 hr as
given in case; assumed 6 doctors consulting from 1 pm to 3 pm every day,
total usable hours for consultancy is 12 hours)
Capacity
utilization
of
doctors=
46.87%............................................................... (B)

45/96

2.2.2.2 Operation theatre:

No of operations that can be performed at full capacity= No of operation


theatres * (No of working hours/Duration of each operation) = 5*(8/1) = 40

Capacity
utilization
of
operation
82.5%...............................................(C)

theatres

33/40

2.2.3 Comparison of Shouldice vs. other hospitals


Focussed approach of Shouldice hospital has been one of reasons behind its
success. It has not expanded its focus to other operations/surgeries even if
external hernia is the one of the easy surgeries to perform. Its strategy has
been to focus on the niche with limited capacity (and not expand, till now).
Below elements substantiates how narrow focus has allowed Shouldice to
achieve better efficiency and quality.
1. The narrow focus on operating external Hernia has allowed Shouldice
to gain expertise in that area and focus on holistic care of the patients.
2. They train the incoming physicians to follow a specific approach to
operate external Hernias
3. Theory of swift even flow suggests that the productivity for any process
be it labor productivity, machine productivity, materials productivity,
or total factor productivityrises with the speed by which materials (or
information) flow through the process, and it falls with increases in the
variability associated with the flow, be that variability associated with
quality, quantities, or timing. This is applicable for Shouldice hospital
as it focus on niche strategy (with less variability) and quality, hence
its process flow is efficient.

2.3 Challenges
In the current scenario, the main problem of Shouldice hospital is whether to
increase its capacity or not. And if yes, which way should it do. It has
following five options to expand the capacity:
1.
2.
3.
4.
5.

Scenario
Scenario
Scenario
Scenario
Scenario

1:
2:
3:
4:
5:

Expand with additional floor and one operating theatre


Possibility of introducing 3 days treatment for patients
Make Saturday a working day
Opening a new facility in different location, in US
Diversifying services

The analysis for all the four scenarios has been done below and a final
recommendation is provided for the growth strategy of the Shouldice.

2.4 Analysis
2.4.1 Scenario 1: Expand with an additional floor
Assumption

One new operation theatre


Operating theatre to be included in the new floor built without reducing
the increase in number of beds

In this solution, the capacity utilization of Shouldice hospital has been


considered. There are many resources used in Shouldice hospital which
comprises of a fixed cost and variable cost. The resources responsible for
variable cost are doctors, assistant doctors, anaesthetist, nurses, house
keepers, other employees etc. The total operating cost of the hospital in year
1983 was 4.8 million collectively for both hospital and clinic.
As from our earlier analysis, from (B) and (C), we know that the capacity
utilization of working hours of full time surgeons and operating theatre is
46.87% and 82.5% respectively.
The profit margin as calculated in (A) is $3.32 million.
Proposed solution:
The number of beds in the hospital currently is 89. Approximating the
number to 90 ( for calculation ease), and considering the fact that every
patient is discharged on 4th day morning, at any given time the maximum
bed occupied will be 90 if, every day at an average 30 patients are operated.
With increasing in the number of beds by 50%, total number of beds will be
= 90*1.5 = 145
Additional fixed cost incurred= $2000000
(1)
No of patients to be operated on daily basis = 145/3 = 48.33 =
approximately 48
Hence there has to be increase in no of operating theatre by 1 number,
making it total of 6 theatres operating 8 hours a day, hence total no of
operations = 48
In case of any emergency or issue in any operation theatre, and additional
operation theatre can be built to share the operating load.
Therefore, increase in fixed cost due to 2 additional operation theatre =
2*$30000

= $60000
(2)
Increase in salary of employees for the new set up:
No of surgeries per day= 48
Total no of surgeries per year in 50 weeks = (48*5*50) = 12000
Taking average number of surgeries as per previous capacity per day = 33
Total no of surgeries per year as per previous set up in full capacity =
33*5*50 = 8250
Patient registration on 1st day:
With the new set up, the maximum number of patient registration has to be
increased from 36 to 48, i.e further increase in (12*(20/60)) hours of usable
time of full time surgeons. i.e 3.6 hours
(Assumption: The increase in no of registration is accommodated by shifting
some of the patient registration to morning shift without incurring any
additional cost)
Full time surgeons:
There is no requirement of increasing no of full time surgeons. Total usable
time of full time surgeons = no of operating hours * no of consulting hours
48 + (no of patients*consulting time in hours)
= 48 + (48*(20/60) hours) = 64 hours
Capacity utilization of full time surgeons = 64/96 = 66.67 %
With a total of 7 assistant surgeons and 6 operating theatres, at any given
time, there is an assistant surgeon available for surgery. Capacity utilization
of assistant surgeons =
No. of operating hours/ no of hours of availability
= 48/56
= 85.71%
As assistant surgeons are paid according to number of surgeries done,
increase in cost incurred by the hospital to accommodate their salary =
(12000-8250)*$60*0.51= 11475
(3)
No of nurses at present = 17, no additional nurses required with increase in 1
operating theatre.

(Assumption: The same anesthetist is able to supply at the same price per
day)
Profitability calculations:
Additional Cost incurred per year:
Additional Fixed Cost = $2000000 + $ 60000 = $ 2060000 (Assumption:
depreciated with zero residual value over 20 years)
Depreciating the fixed cost over 5 years, cost incurred in 1 year =
$2060000/5= $ 412000
Additional variable cost per year for assistant surgeons = $ 114750
Total cost= $ 526750
Additional revenue incurred per year:
Increase in number of surgeries per year= (48-33)*50*5= 3750
Revenue from additional 3750 surgeries= (3750/8250)*8120000= $
3690000
Net additional profit = $3690000-526750 = $3163250
Profit increases by almost 100%.
Hence this solution is profitable, and the fixed cost can be recovered within 1
year of operation.
Pros and Cons of the solution:
PROS

CONS

1) Bed capacity increased by


50%

1) Assistant surgeon over burdened

2) No requirement of Saturday
working

2) Surgeons may be overburdened


compared to current work load

3) No additional surgeon
required. Very less increase in
annual variable coat

3) During morning registration of


patients, things might get messy
due to discharging of patients in
the morning

4) High profit margin

4) If the demand doesnt increase,


the hospital might incur a loss
due to low revenue

2.4.2 Scenario 2: Possibility of introducing 3 days treatment for


patients
As mentioned in the previous cases that Shouldice hospital is not utilising its
full capacity. The main reason of this is that the beds available are limited i.e.
89 in numbers. Hence in the present scenario, we cant accommodate more
than 89 patient. To increase the number of the patient being treated we can
increase the number of beds available for the treatment, or we can reduce
the process cycle by one day.
It is mentioned in the case that many patients come to the hospital for
treatment from the different regions of the world, especially from U.S.A.
However, there are a large number of patients who come from the nearby
regions. If we can target those patients, then we can reduce the cycle time
by one day. Some patients are well aware of the process. They know what to
do and how to do. Even if they dont know anything about the procedure, we
can provide them necessary information on our website with the help of few
tutorial videos. So we dont have to provide them that amount of the
training which we are giving to the patient right now.
As it is mentioned earlier that usually a patient comes in between 1 pm to 3
pm. Then after long formalities like checking the current medical condition of
the patient, his blood sample, insurance papers, etc., we provide them
accommodation. Then in the evening nurse gives them instruction regarding
the operation procedure. She also tells them about the important does and
dont things. Then at night they take their dinner and finally they have teasnacks with the patients who have already undergone the operation
procedure. After that, they go to the bed.
Now, in this scenario patients are occupying the bed, even when on the first
day they are not undergoing any major medical treatment. We are also
aware of the fact that currently the doctors are underutilized. So we can use
them to examine the patients who have the willingness to arrive in the
morning. As they are well aware of the procedure, hence they will
take essential precaution in their home itself. Moreover, it is mentioned in the
due to the anxiety many of the patients who arrived at 1 pm at 3 pm, dont
remember the procedure told by the nurse.
The same standard procedure can be performed in the morning session in
between 8 am to 10 pm. So all the medical and administrative work can be
completed before the lunch. In the afternoon, these patients can go to
operation theatre, where all the operations will be performed. In this way, we
can save one productive day, which can cause tremendous economic benefit
to the organisation and as well as to the patient. Here we are making an
assumption that it is medically feasible and viable. As there will be no need
to stay in the hospital for four days, it will be economical to the patients and

they can go to their work one day early. So it will create an enormous
demand of the service among the patient. Hence we have to run two shift of
6 doctors each.
7:30 am-12:30
pm

1:00-4:00
pm

Shift A

Operation

Consulting

Shift B

Consulting

Operation

Lets check the feasibility of the option. Suppose there are around 15
patients per day who are willing to choose the option. Then we can arrange
the patient in such a way that we can maximise the utilisation of the beds.
For example, if on Friday the total patients who have undergone treatment is
55 and for we are taking admission of 20 new patients for regular treatment.
Then the number of patients which can be accommodated for two days
treatment will be 15. Similarly, based on the maximisation of the admission,
we have prepared a timetable as shown below.
Bed Used for 3 days by patient
Check in

Mond
ay

Monday

Tuesd
ay

20

Tuesday

Wednes
day

Thurs
day

Frid
ay

Satur
day

20

20

20

20

20

20

20

20

20

20

20

60

20

Wednesd
ay
Thursday

Sund
ay

Friday
Saturday
Sunday

20

20
20

Total

40

60

60

60

Bed Used for 2 days by patient


Check

Mon

Tues

Wedne

Thurs

Frid Satur

Sun

in

day

Monday

15

Tuesday

day

sday

day

ay

day

day

15
15

Wednes
day

15
15

Thursda
y

15
15

Friday

15
15

15

Saturda
y
Sunday
Total

15

30

30

30

30

15

Grant

55

90

90

90

90

35

In this way, we can accommodate 195 patients per week, which is 30% more
than the current patients. The calculation of the increased revenue is as
follows

Hospital
Revenue
For 4 days accommodation (4x111x5200 per year) = 2308800
For 3 days accommodation (3x111x3900 per year) = 1298700
Cost
Profit

= 2800000
= 807500

Clinic
Revenue (450+60+75x0.2) x 9100

= 4777500

Cost

= 2800000

Profit

= 2777500

Net Profit

= 3585000

So it has enormous potential to expand our services. But one may argue that
the first day can help the patient to become comfortable with the procedure.
As they interact with other patients who have been already undergone the
operation. So reducing the first day may decrease their comfort. However,
we can also arrange the interaction between the patients during the day
itself. When the new patients are waiting for their sequence, then they can
interact with the other patients. So we can take care of this factor also.
There is possibility that it will be difficult to schedule the doctors as per their
patients. For example, if we change the shift of the doctors then it will be
difficult for them to follow up with their patients. However, it can be
minimized by increasing interaction between the doctors. So that they can
know about their patient in case of shift change. Also, we can change their
shift in a phased manner. Like if there are 6 doctors in the shift A, then in
next week we can shift 2 doctors from shift B to A and vice-versa.
Pros and Cons:

Pros

Cons

1. It can increase the scale of

operations by 16.67%. So the


revenue will also increase.

1) It can increase the work load to

the doctors
2) It unconventional to the existing

1. Patient can go home in 3

days. Hence there will be


huge demand of the service.
2. Maximum utilization of the

beds
3. As the capacity of the

hospital increases, hence less


patients will go to other
inefficient hospitals, and
image of the hospital will
improve.

work culture of the hospital.


Hence it may affect the
perception of the patients about
the hospital.
3) Maintaining the schedule of the

doctors will be difficult.

2.4.3 Scenario 3: Make Saturday a working day


As from our earlier analysis, from (B) and (C), we know that the capacity
utilization of working hours of full time surgeons and operating theatre is
46.87% and 82.5% respectively.
The profit margin as calculated in (A) is $3.32 million.
Adding one more working day will increase capacity by 20%.
Thus surgery income increases by 20%
Total income from surgery with Saturday as working day = 1.2*8.12
= 9.744Mn
This will also lead to increase in salaries and operating expense. We assume
that 50% of the non-salary cost is variable and varies linearly with
expansion.
Current non-salary expense = Total Operating expense Salaries
= 4.8 2.28 = 2.52Mn
Current variable cost = 2.52*0.5 = 1.26Mn
With 20% expansion this 1.26Mn increases to 1.512Mn (1.26*1.2). And nonsalary expense increases to 1.26+1.512 = 2.772Mn
Salary expense also increases by 20%
New salary expense = 2.28*1.2 = 2.736Mn
Total operating expense (with Saturday as working day) = Salary + Nonsalary expense
Total operating expense (with Saturday as working day) = 2.736 +
2.772 = 5.508Mn
Annual operating profit (with Saturday as working day) = 9.744
5.508 = 4.236Mn(D)
From (A) and (D) we conclude that with Saturday as a working day our net
operating profit increase from 3.32Mn to 4.236Mn i.e. profit increased by
27.59%
Thus we can observe that adding one more working day in the week, we achieve
capacity expansion by 20% and profit increases by 27.59%. The advantages of this
solution is that no immediate investment or government approval is required. We
achieve capacity expansion (thus reduced waitlist) without building new floors or
hiring new people. This translates to better control and management. However the
major disadvantage of this method is that surgeons and all other employees will be
required to work one more day. Although they will all receive an immediate

increment of 20%, this wont be enough to compensate current surgeons who


prefer spending more time with their family and kids.

2.4.4 Scenario 4: Opening a new facility in different location, in US


Impacts:
1. 42% of current Shouldice patients are from USA.
Total patients = No of working days * Average operations per day
No operations on Saturday and Sunday. Hospital is closed for 2 weeks in
late December.
No of working days = 365 (52 * 2) (5 * 2) = 251days
Average operations per day = 32 (30-35 operations)
Total patients = 250 * 32 = 8000
Hence, US patients = 0.42 * 8000 = 3360
Thus, Shouldice hospital can expand its availability of service to 3360
additional Canadian patients at its Toronto facility per year.
2. Reduction in travel expense.
Net travel expense = Round trip fare * No of patients from US
Round trip fare = $200 to $600 => Average fare = $400
Net Travel Expense = 400 * 3360 = 1,344,000 ~ $1.35 million.

PROS

Nearer to patients location in


USA, travel to Canada just for
Hernia
operation
can
be
avoided.
With reduction in 42% of
patients from US, it can serve
more patients (~3360 patients)
in Canada, and can start
advertising. Thus can avoid
misuse of Shouldice name
(Shouldice operation technique)
by its competitors.
Expanding their unique service

CONS
The new establishment requires
significant capital. This requires
site of about 17000-square foot,
to bring up new facility.
Remunerations for doctors and
nurses would amount to $1.23
million.
Quality
of
The
Shouldice
method of operating Hernia
may be hampered. Monitoring
and controlling its quality would
be highly challenging.
It would be really difficult to

to larger section of people, at


lower
cost
than
their
competitors in US, as Shouldice
Hospital work on non-profit
basis.
Reduces travel expense around
$1.35million, thus service is
available at a much lower cost
for US patients.
As, travel to Toronto in midwinter
season
is
often
discouraged, patients seeking
immediate medical attention
can be treated in US only.
This will be a new opportunity
for existing personnel to work
with new experts at US and can
benefit from the transfer of
knowledge and culture. Also can
improve
on
the
existing
successful procedure.

Sl
no

Designation

No of
employees

establish a similar atmosphere


and culture in US. Thus the
patients experience would not
be as good as at Toronto facility.

Total Salary of all employees


per annum

Full time
surgeons

12

$600000

Assistant
surgeons

$209610 (51% of $60 fee for 6850


operations

Operating
Nurse

17 (Exhibit 2)

$340000

Anaesthetist

$75000( $300 per day for 50


weeks)

Total salary

$1,221,610

Solution 5: Diversifying services.


Proposal: To diversify and extend the services to Eye surgery, Varicose veins,
Haemorrhoids etc.

Pros

Serve more people, and


provide additional facilities
at one place on non-profit
basis, which is a great social
contribution.
Increases profits.

Cons

Difficult to maintain proper


control over quality of individual
services and administration
becomes more complex, as
Shouldices expertise is limited
to Hernia operations.
Requires new specialist
surgeons, to drive new services.
Thus, it is difficult to hire new
experts who would render their
service for non-profitable cause.
Requires new investment for
setting up facilities and
promotional activities.
Advertisements are needed to
bring awareness about the
additional services available at
Shouldice.
The existing staff has limited
flexibility, hence surgeons may
not show interest to be cross
trained in new specializations.

Recommendation:
Based on the above analysis, it is recommended that Shouldice hospital can either
go with Scenario 1 or Scenario 2 for expansion. In scenario 1, though there is a huge
capital investment, the money can be recovered within 1 year with an approximate
additional 100% profit without reducing quality of services. In scenario 2, the
service can be expanded without any additional resource requirement. Though in
this case there may be an issue with the quality of service as the number of days for
treatment is proposed to reduce by 1 day. In this case we have assumed that
reduction in number of days wont reduce the service quality level.
We dont recommend to adopt scenario 3 i.e converting Saturday into a working
day, as surgeons dont seem to be interested in this proposal. Implementing it
might affect the performance of the surgeons and thus the quality of services
provided will get degraded.
Scenario 4 is discarded as huge amount of capital cost is required. Secondly,
maintaining the same work culture and service level at a far off place will be a big
challenge.
Scenario 5 is not recommended as with increase in the number of health services,
there is a greater chance that the quality of service will reduce as Shouldice hospital
staffs and surgeons dont have enough expertise in these fields.