Services Marketing

“Shouldice Hospital Limited” – Case Submission

 1. Compare the four alternatives to increase capacity based upon their
capacity utilization potential and choose the nest alternative.

The alternatives available to Shouldice hospital to increase capacity are as below:

 Saturday shift
 Expansion into USA
 Addition of one more floor
 Expansion into other services

Total patients per year 6850

Operations per day 33
No. of beds 89
Budget
Hospital $ 2,800,000
Clinic $ 2,000,000
Total $ 4,800,000
Cost per patient $ 701

Revenue
Hospital
No. of days stay 4
Per day charge $ 111
Total charge per stay $ 444
Total patients per year 6850
Total revenue $ 3,041,400
Clinic
Surgery charge $ 450
Assistant surgeon charge $ 60
Anesthesia charge $ 75
Proportion of patients availing anesthesia 30%
Total patients per year 6850
Total revenue $ 3,647,625
Hospital + Clinic
Total revenue $ 6,689,025
Revenue per operation $ 977
Analysis:
By investing an additional amount of $ 4 million on the new floor, the hospital can increase
its current bed capacity of 89 beds by 50% to 134 beds. This will remove the bottleneck of
116 beds and will enable the doctors to go for 33 more surgeries per day. The profit per
patient is $276 currently and additional beds would lead to decrease the backlog and meet the
increasing demand rate.
At the current profit rate per patient of $276, the hospital would have to perform 14,492
operations to break even the $4 million spent. This would be achieved by the hospital easily
in approx. 2.5 years at the current rate of 6850 patients per year.
 Expansion into other services:
The hospital is famous and have a positive word of mouth for the current specialization of
operating external type hernia. Any expansion into other medical services by the hospital
have to be carefully thought of as extensive trainings of doctors, nurses and surgeons are
required before entering any new medical offerings. This would lead to additional cost to the
hospital.
 Saturday shift:
The increase in number of days to 6 working days per week including Saturday would lead to
zero cost increase for the hospital. However, this would lead to increased revenue and profit
while maintain the same high-quality level.

Working days per week 6

Profit per patient $ 276
Total working weeks per year 50
Total days increased 50
operations performed per day 33
Total operations performed per year 1650
Increased profit per year $ 455,400
 2. Map the 7Ps of services marketing with Shouldice Hospital Limited.

 Product:
The hospital’s main offering included hernia operations of only eternal type. The Shouldice
method (often considered as “Bread and Butter operation”) included preoperative sedation
and analgesic plus a local anesthetic in the region of incision. The operation typically lasted
for 45 min with the complex ones requiring up to 90 min or more.

 Price:
The hospital attracted the patients mainly due to its reasonable price. Patients incurred a
savings of approx. $2360 in Shouldice over its competitors in the market pertaining to hernia
operations.

Patient expenses Patient expenses

Activity
at Shouldice at other hospital
Stay at hospital/day $ 111 x
Stay for 4 days $ 444 x
Surgical fee $ 450 x
Assistant surgeon fee $ 60 x
Anesthetic fee $ 75 x
Total operation fee $ 1,140 $ 3,500
Savings $ 2,360
 Shouldice Other hospitals
Cost per operation $ 954 $ 2,500
Transportation charges $ 400 $ -
Stay days 4 5
Time lost from work in days 5 10
Value of time lost ($50/day) $ 450 $ 750
Recurrence rate 0.80% 10%
Recuurence value $ 13 $ 275
Total cost $ 1,617 $ 3,025
 Place:
The hospital boasted of 130-acre estate with a 17,000 square foot main house in the suburb of
Thornhill, 15 miles north of downtown Toronto. Initially 36 bed capacity was increased to 89
beds capacity achieving 6850 operations in 1982. The facility included hospital and clinic.
The hospital included departments like surgery, nursing, administration, maintenance and
housekeeping.

 Promotion:
The entire marketing strategy of the hospital can be categorized into internal and external
marketing. External marketing mainly included positive word of mouth by the patients. The
hospital strived to provide state of the art services to its patients in terms of clean rooms, fast
operations, reliable surgery techniques, empathetic staffs and nurses etc. All these factors led
to positive promotion of the hospital among the patient community.
Internal marketing included profit sharing schemes with the doctors and hospital employees,
higher compensation packages, trainings and empowerment of employees etc. leading to
higher employee satisfaction and lower attrition rate.

 People:
The hospital staffs included doctors, surgeons, nurses, kitchen staffs, receptionists and
laundry staffs. The hospital employed 12 full time surgeons and 8 part time assistant
surgeons. The hospital also employed 34 full time nurses that included scrub and circulating
nurses.
  Physical Evidence:
The entire building was divided into 3 levels. The first level housed the kitchen, dining rooms
and office of the housekeeping supervisor. The second level housed the open lounge area,
patient rooms, admission offices and Florida rooms. The third level had the recreational area,
patient rooms and large lounge. The entire building was carefully designed keeping the
patients’ comfort including the small rise steps and carpeted hospital floor to reduce the
hospital feeling and have a positive outlook among the patients.

 Process:

30 – 36 arrivals Check by MD
Day 1 1 PM to 3 PM 15 min

Blood test and

Dinner at 6 PM Check in and admin
explain process

Tea and cookies Local anesthesia

9 PM Day 2
20 min

Tea and cookies Rest, eating and Surgery

9 PM moving 40 min

Day 3 Loosen stitches Rest, eat, sleep