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Discussion of Shouldice Hospital Limited Case

HISTORY
Shouldice Hospital was established in 1945 by Dr. Edward Earle Shouldice (18901965). Dr. Shouldice developed his innovative technique during World War II, to help young men who were unable to enlist in the military because of their hernias. His unique repair method improved surgical results and reduced recovery time, quickly restoring the young recruits to physical fitness for military training.

Shouldice Hospital Foundation


Shouldice Hospital opened with a single operating room and a waiting list of 300 eager patients. Working with only a nurse, secretary and cook for support, Dr. Shouldice repaired two hernias a day. In 1953, Dr. Shouldice purchased a beautiful country estate in Thornhill, Ontario, just minutes from downtown, which eventually became the hospitals new home

World class Institution


With the support and guidance of the founders son and daughter and their respective families, Shouldice has developed into a modern, 89-bed facility, with five specialized operating suites, an expert team of hernia surgeons and nurses, and a dedicated staff of about 150 people, all working to meet the needs of patients with hernias.

What is Hernia
A Hernia may develop when there is a weak spot or opening in the wall of muscle and connective tissue that supports youre abdomen. Once you have a weakness in your abdominal wall, anything that increases the pressure in your abdomen may cause hernia to develop. When the tissues or organs inside your abdomen bulge through a weakness in your abdominal wall, it is called a hernia.

How Hernia is repaired


If someone have a hernia, they will probably need an operation to repair the weak spot in their abdominal wall. A hernia that is not repaired can get bigger and may lead to more serious health problems.

How is Shouldice different from other Hospitals?

Patients do not feel that that are staying in hospital Patients are taking a vacation This is a club Focused

How Successful is Shouldice Hospital?


140,000 highly satisfied Alumni(past patients) 1,200 backlog of scheduled operations Demand appears to expand with supply Superior quality Shouldice Method of Hernia operation imitated by competitor

Cost Comparison: Shouldices vs. Other Hospitals


Shouldice Costs of typical operations $954 Transportation $200-600 Time Lost from work in Hospital 4 days Time lost from work while recovering 5 days Value of time lost (ranging from $50 to 500 per day)$450-4500 Total before Allowance for recurrence $1604-6054 Probability of Recurrence 0.80% Expected Cost of Recurrence $13-48 Total cost to patient, employee and insurer $1,617-6,102 Others $2000-4000 5 days 10 days

$750-7500 $2750-11500 10.00% $275-1150 $3,025-12,650

How About the Profitability of Shouldice Hospital?


Hospital: Revenues (4 days X $111/day x 6,850 patients/year) Cost Profit: Clinic: Revenues Cost Profit Total Profit 3,041,400 2,800,000 241,400 3,596,250 2,000,000 1,596,250 1,837,650

Important features:
A unique program of care and recovery A welcoming, supportive atmosphere A relaxing, resort-like setting A lifetime of care and support

Continuation
Shouldice is offering: high quality service at low price Shouldice is having Highly satisfied customers Happy Employees Shouldice is also making high profit

How is all of this achieved?


What are the major reasons for the success?

Maximizing the difference between perceived quality and value to the patient on one hand and the cost of supplying services on the other.

A Focus Strategy
Market Focus focus on a narrow segment of potential patients who have hernia and they are predominantly male, older in age, essentially in good health large market potential: 600,000 operations in U.S. in 1979 Internal Focus Doctors: Dedicated to quality of shoudice method, tolerance for boredom, family oriented Nurses: people oriented, assist patients Staff: flexible, team oriented

Operating Concept
Shouldice achieves outstanding results as a low price and at a high profit because:
Everything done by the hospital is designed to maximize the difference between perceived quality and the value of the service provided patients on one hand and the cost of providing the service on the other.

How did they do that?


Patients are carefully screened Patients are active participants in the service delivery process The avoidance of general anesthestics allows a wide range of involvement of patients Staff is freed from much disagreeable work Reducing the cost of nursing, housekeeping and laundry Structure hospital jobs that involves more counseling and positive interaction with the patients

How did they do that?


The Clinic is a focused factory resulting in: Highly productive surgeon:
300 hernia/yr Vs. 30 by less focused surgeon

Sharing of expensive services such as anesthetist Short and relatively regular hours for surgeon Opportunities for surgeons to observe and and advise one another Peer group pressure that leads to higher level of self-control of quality A conscious effort is made to make Shouldice a familyexperience

The elements in the service system to support the service Concept (managerial elements)
Service encounter
Doctors and nurses are carefully recruited Employees trained to help / counsel patients Communal dinning for doctors, nurses , staff and patients

Quality
adherence to Shouldice method opportunity for surgeon to observe & advise one another

The elements in the service system to support the service Concept


Managing capacity & demand Admission by appointment: scheduled service Screening patients: easier to estimate the service time walk-in patients or local residents on waiting list to make up cancelled reservation Information Medical Information questionnaire Free annual check-up -> unique data base on the result of the surgery Annual reunion to keep alumni informed and gather customer feedbacks-> loyal customer base -> effective word-of-mouth

(managerial elements)

Delivery system Maximum degree of customer participation Efficient and low cost Avoid a typical hospital atmosphere Facility design Acres of gardens to encourage exercise & rapid recovery minimize hospital feeling (carpeting and odorless disinfectant etc) Stairways are designed for patients to use right after operations No TVs and Telephones in rooms to encourage walking Operating rooms are located in semicircle to encourage doctors to help each other and use the

The elements in the service system to support the service Concept (structural elements)

The elements in the service system to support the service Concept (structural elements) Location large city near air port -> access to worldwide market large local population to fill up cancelled bookings Capacity planning Elective procedures -> scheduled operations Balancing Capacity and improving capacity utilization Needs to increase capacity

Incoming Patients

Day 1 38 Surgery Candidates

Bottleneck

Day 2

42 Exams

33 Surgeries

4 Sent Home

89 Beds Available

Bottlenec k

116 Extended Stay

Discharged

Day 2-5

Day 4-5

PROCESS FLOW

Shouldice Hospital Limited: Analysis of Capacity


Current Throughput
6,850 Operations/50 weeks = 137 operations/week ( with a peak of 165/week)

Capabilities
Examination Rooms: (6 rooms x 3 hrs (1-4 PM) x 5 days x 60 min/hr) / (20 min / exam) = 270 patients /week Admitting Procedure: (2 people x 4 hrs (1-5 PM) x 5 days/week x 60 min/hr) / (10min/patient) = 240 patients/week Nursing Station: (2 stations x 4 hrs (1-5 PM) x 5 days/week x 60min/hr)/(10 min/patient)=240 patients /week

Shouldice Hospital Limited: Analysis of Capacity Capabilities


Operating Rooms: (5 rooms x 8.5 hrs/room/day x 1.1 hrs/patient x 5 days/week)/ = 188 patients /week Surgeons: 11 surgeons x 3.5 operations /day x 5 days = 178 patients/week Hospital rooms: (see transparency) 89 rooms = 134 patients per week (assuming use of weekends for convalescence and 3.5 days average stay) 103 rooms = 148 patients (assuming use of weekend for convalescence, 3.5 days average stay, and use of 14 hostel rooms for two nights each week)

Distinctive Technique

Comprehensive Patient Experience

Thoughtful Employee Policies

Experienced Staff

Shouldice Advantage

Shouldice Hospitals Service Package


Supporting Facility
Acres of gardens to encourage exercise & rapid recovery Carpeting and odorless disinfectant etc to minimize hospital feeling Stairways are designed for patients to use right after operations No TVs and Telephones in rooms to encourage walking Operating rooms are located in semicircle to encourage doctors to help each other and use the same anesthetist Located to a large city: Toronto, access to worldwide market, large local population to fill up cancelled bookings .

Shouldice Hospitals Service Package Facilitating Goods:


Medical supplies Food, medicine etc.

Explicit Services
Quality hernia surgery using the Shouldice method, low recurrence Very experienced doctors

Shouldice Hospitals Service Package


Implicit Services
Peace of mind/low risk Independence/Dignity/Control Social experience, fraternity Excused absence from work without guilt A vocation

Shouldice Hospitals Distinctive Characteristics


Customer Participation in the Service Process Simultaneity Intangibility Heterogeneity

SWOT ANALYSIS
Strengths: 1.Unique surgical techniques. 2.Up-to-date equipment. 3.Educated and experienced stuff. 4.Excellent service and nursery. 5.Huge demand for operations

Weaknesses: 1) Limited number of beds. 2)No usage of mobile and tv. Threat: 1.Competition

Opportunities: 1)Related diversification of surgery operation services. 2)Open days can be Saturday or even Sunday. 3)Introducing of new location (inside Canada and in another countries). 4)Increasing of a number of patients.

Alternative Strategies
1)To stay at a present level and continue to do as they are currently doing. 2)To add additional day by operating on Sundays. 3)To increase number of beds. 4)To meet unmet market demand with external capacity.

Evaluation of alternatives
1)Their reputation and existing system set them as market leader, so they can do nothing to improve this fact. 2)Adding Saturday as operating day is also reasonable, because they easily can increase number of patients (but this can slightly decrease the quality of service-so they need to hire additional staff). 3)Increasing number of beds is not a good idea, because in this case they also will need to add more doctors and surgery rooms. 4)They can look on another facilities, there their doctors can implement theirs skills.

Additional Beds/Floor Cost High: $4MM High: Planning, construction, etc.

Saturday Surgeries Low: Small increase in doctors salaries Low: Only impacts doctors schedules

Franchising Moderate

Complexity

Moderate

CapacityBuilding Potential Constituent Impact

High: Moderate: Low: Directly addresses the Capacity +20% but does Does not address capacity bottleneck & increases beds not address the bottleneck issues at current facility by 50% Allows more patients to be Chair of the Board & Chief Difficult to control quality serviced @ Shouldice Surgeon opposed along of service Has minimal impact on w/40% of older doctors Brand equity potentially staff Could create wedge compromised between young & old in May take some business environment where from current facility experience is key

Alternative,Non-Feasible Recommendations to improve the Service

Primary staffs
Byrnes Shouldice, co-owner, president, chairman, former surgeon at the facility Germaine Urquhart, co-owner, vice president Daryl Urquhart, director of business development and grandson of the founder SHelley Shouldice, program coordinator, grandaughter of the founder Dr. Cassim T. Degani, MB, BS, MS, FRCSC, FACS, * Dr. Claude Joseph Burul, MD Dr. Ram K. Singal, MB, BS, FRCSC Dr. Earle Byrnes Shouldice, MD Dr. Michael A. Alexander, MB, BS, FRCSC, FACS Chief Surgeon, Shouldice Hospital Dr. Chin K. Chan, BS(Hon), MD, CM, CSPQ, DABS, FRCSC Dr. Richard T. Sang, MD Dr. Keith Slater, MD Dr. Rasheed. A. Affifi, MB, ChB, FRCSC Dr. N. Ross, MD Dr. Dr. Ash Maharaj, MD Dr. Dr. Robert Palmer , MD, FRCSC Dr. Alberto De La Rocha, MD, FRCSC Dr. Peter Kalman, MD, FRCSC, FACS Dr. Claude Burul, MD, FRCSC, Assistant Chief Surgeon, Shouldice Hospital

Thank you