JANUARY 9, 2019

Case: Shouldice Hospital

Group 3, Section A
Arpit Varshney P39012
Bhruguraj Pandya P39015
Dinesh P39017
Divyang Parmar P39018
Gaurav Singh P39020
CURRENT SCENARIO
The management of Shouldice hospital has to decide the next course of action for increasing
the capacity of hospital.

Shouldice is located in Thornhill, Canada. It is well-known for Hernia operations. The average
daily load of operations is 30-36. The demand for hernia operations in the vicinity is high.
Annually, there are 6,00,000 such operations carried out in the United States.

Currently, 12 full-time surgeons, seven part-time assistant surgeons and one general
anaesthetist are employed in the hospitals. The surgeons finished three to four operations in a
day. The average duration for each operation is 45 minutes. Their day starts at 7.30 A.M. and
ends at 4.00 P.M. The nursing staff comprises of 22 full-time and 18 part-time members.

The hospital has two basic facilities: Hospital and Clinic. The clinic building consists of three
floors. The total capacity is 89 beds. The patients stay in the hospital for three days. On the
second day, they are operated. After being operated the patients can have a run of the hospital.
They walk, play, exercise and eat with their fellow patients. On the fourth day, they check-out.

Shouldice management is considering some alternatives for increasing their capacity. The
quality of the service delivered by Shouldice should not be compromised while increasing the
capacity.

ALTERNATIVES
One alternative is to start operating on Saturdays. Currently, the hospital is operating five days
a week. Second alternative is to increase the number of beds by 50%. Another floor of rooms
will be added; investment of approximately $2 million is required in the project. The third
alternative is to open hospital with similar design outside Canada, preferably US. A major
portion of the customers was from the US. Here treatment for eye surgery, varicose veins, or
haemorrhoids shall also be provided.

The management of Shouldice hospital has to decide the next course of action for increasing
the capacity of hospital. Simultaneously, the quality of the service delivered by Shouldice
should not be compromised.
EVALUATION OF ALTERNATIVES
Alternative 1: Adding Saturday operations
As a first alternative, we are evaluating to add operations on Saturdays. Difference in capacity
utilization has been shown in the table below:

Present operations

Days Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Monday 27 27 27
Tuesday 27 27 27
Wednesday 27 27 27
Thursday 27 27 27
Friday
Saturday
Sunday 27 27 27
Beds occupied
54 81 81 81 54 27 27
per day
Utilization 60.7% 91.0% 91.0% 91.0% 60.7% 30.3% 30.3%

Operations = 6850/year, Operations/week = 6850/50 = 137/week = 27/day

Capacity Utilization (Week) = 65%

Operations after addition of Saturday

Days Monday Tuesday Wednesday Thursday Friday Saturday Sunday
Monday 27 27 27
Tuesday 27 27 27
Wednesday 27 27 27
Thursday 27 27 27
Friday 27 27 27
Saturday
Sunday 27 27 27
Beds occupied
54 81 81 81 81 54 54
per day
Utilization 60.7% 91.0% 91.0% 91.0% 91.0% 60.7% 60.7%

Capacity Utilization (Week) = 78%

Normally, the capacity utilization of the beds available is 65%. After increasing a day of
operation i.e. Saturday, patients would be admitted on Friday also. This would increase
capacity utilization to 78%.
Bottleneck Analysis
Bottleneck is defined as the slowest sub process or smallest capacity process in the whole
process. The speed or productivity of the bottleneck is the speed of the whole process.

In below three tables, we have calculated the capacities of different resources available with
the hospital. We have calculated the bottlenecks in following situations:
i) Current Scenario
ii) After starting to operate on Saturdays
iii) After increasing bed capacity by 50%

Present Operations
Work done Capacity
Particulars Number Days per day (per week)
Surgeons 12 5 3 180
Nurse 17 5 3 255
Beds 29 5 1 145
Operating Rooms 5 5 7 175
Examination
Room 6 5 9 270

After adding Saturday operations

Capacity
Particulars Number Days Work done per day (per week)

Surgeons 12 6 3 216

Nurse 17 6 3 306

Beds 29 6 1 174

Operating Rooms 5 6 7 210

Examination
Room 6 6 9 324
After 50% increase in capacity (number of beds)

Work done per Capacity

Particulars Number Days day (per week)

Surgeons 12 5 3 180

Nurse 17 5 3 255

Beds 43 5 1 215
Operating
Rooms 5 5 7 175

Examination
Room 6 5 9 270

Black circled numbers represent the bottleneck in the respective operation alternatives.
On the basis of this bottleneck analysis, we are analysing our second alternative which is
explained below.

Limitations
 This model comes with a major limitation that the experienced surgeons are not ready to
work on Saturday. So it would be hard to persuade them.
 Increasing Saturday operations might adversely affect the maintenance work. This work is
mostly being done on Saturdays.
Alternative 2: Increase one operation theatre and number of beds by 50%
Earlier, the hospital was catering approximately 137 patients per week with a capacity of 89
beds and 5 operation theatres. After increasing the bed capacity by 50% and constructing one
more operation theatre, we will be able to increase the intake capacity up to 225 operations
per week.

Scheduling of Operations:
In previous year, 18% of the total patients came who were suffering from recurrence of hernia.
It falls into critical operation category and takes 90 minutes to finish the operation. Rest 82%
are primary patients and it takes not more than 45 minutes to operate them.

The first operation in all the theatres begins at 7:30 am in the morning. OT1, OT2 and OT3
will be conducting all primary operations before tea/coffee break while very first operation of
the day in OT4, OT5 and OT6 will be critical one. Primary operations should be conducted in
all the operation theatres after the tea break. Post lunch, two primary and one critical operation
should be conducted in all the operation theatres.

We are proposing the second solution. The number of beds was found to be the main bottleneck
of the initial operations of the hospital. Additional beds should be added to the hospital.
However, when the beds are increased by 50%, another bottleneck that was realized; the
amount of operation theatres was insufficient. Hence, one more operation theatre was decided
to be constructed or furnished to match with the bedding capacity and to fully utilize the bed
capacity.

The cost analysis was carried out; it indicates that with the change in the timings and schedules
of the different operations being performed in the operation theatres, the total revenue and the
profit has increased drastically due to increased capacity.

SCHEDULE

Time OT 1 OT 2 OT 3 Time OT 4 OT 5 OT 6
7:30-8:15 OP N OP N OP N 7:30-9:00 OP C OP C OP C
8:30-9:15 OP N OP N OP N 9:15-10:00 OP N OP N OP N
9:30-10:15 OP N OP N OP N
Tea or Tea or
Coffee Coffee
10:45-11:30 OP N OP N OP N 10:45-11:30 OP N OP N OP N
11:45-12:30 OP N OP N OP N 11:45-12:30 OP N OP N OP N
Lunch Lunch
1:15-2:00 OP N OP N OP N 1:15-2:00 OP N OP N OP N
2:15-3:00 OP N OP N OP N 2:15-3:00 OP N OP N OP N
3:15-4:45 OP C OP C OP C 3:15-4:45 OP C OP C OP C
 Particulars Before After
Budget of the hospital $28,00,000 $42,00,000
Budget of the clinic $20,00,000 $30,00,000
Total Cost $48,00,000 $72,00,000
Total Operations 6,850 11,250
Cost per operation $700.73 $640
Payment per patient $954 $954
Total revenue generated $65,34,900 $1,07,32,500
Profit Generated $17,34,900 $35,32,500

It can be seen that the revenue has been increased by 103%. Hence, it is a highly efficient and
productive setup as compared to the previous one. The total difference in the profit generated
is $35,32,500 - $17,34,900 = $17,97,600. This difference is more than the profit of the previous
operations.

Based on the amount of revenue generated and the total profit made each year, the payback
period was calculated. Here the cost of increasing the capacity of beds by 50% and furnishing
of one more operation theatre is considered. Both the costs are $2 million and $30,000
respectively. The payback period was found out to be 1.13 years. Thus, this also shows that
with the decision to go ahead with the proposed solution would be beneficial as the total
investment made would be recovered in just over one year.

Assumptions:
 For the purpose of simplicity, the operating cost has been increased by 50%. This includes
the salaries of the employees, from the surgeons to the supporting staff and also hospitality
expenses such as meal preparations.
 The system would be working at its full potential; with efficient operations, the total
number of operations performed in a day would be 43.
 The total number of working hours for a day has been increased by 60 minutes.

Limitations:
 There would be disturbances during the construction of the new facilities.
 The buffer time in case of emergencies would be reduced.

Alternative 3: Open Hospital outside Canada with similar design

In this case, it would be difficult to maintain the quality-level of service delivered by Shouldice
hospital, Canada. Also, the investment required would be high. Hence this is not a feasible
option.