A CASE STUDY ON SHOULDICE HOSPITAL

ADMINISTRATIVE INFORMATION

• Corporate Name: Shouldice Hospital Limited • Established: 1945 • Location: 7750 Bayview Avenue, Thornhill

Ontario, Canada, L3T 4A3 • Telephone: (905)889-1125 • Fax: (905)889-4216 • Toll Free: 1-800-291-7750 • Specialty: Abdominal Wall Hernia Repairs

HISTORY

• Dr. Edward Earle Shouldice graduated from the University of Toronto in 1916.

• During World War II, he was called to serve on the Medical Examining Board.

• Dr. Shouldice, a major in the army, found that many young men willing to serve their country had to be denied enlistment. These men needed surgical treatment to repair their hernias before they could be pronounced physically fit for military training.

• In 1940, hospital space and doctors were scarce, especially for this non-emergency surgery

• Contributing his services at no fee, he performed an innovative method of surgery on seventy of these men.

• The delighted recruits soon made known their success stories and by the war's end, more than 200 civilians had contacted the doctor and were awaiting surgery.

• The scarcity of hospitals beds however, created a major problem. There was only one solution; Dr. Shouldice decided to open his own hospital.

• Location: The hospital was located in Toronto in the southern part of Canada.

BOOKING A SURGERY• Patients living within 100 km (60 miles) from the hospital

should come to the office for a personal examination.

• Examination Hours are:

Monday to Friday :

WALK IN CLINIC, NO APPOINTMENT NECESSARY

from 9:30 am to 3:30 pm

Saturday :

BY APPOINTMENT ONLY from 10:00 am to 2:00 pm

• For patients living at a greater distance who wish to arrange an examination, admission and operation all in one visit, please complete Questionnaires 1 and 2 by taking the following steps:

• Step 1. Click on Medical Information , and print the questionnaire on your printer.

• Step 2.Return to the Booking for Surgery page, click on Insurance Information, and print it on your printer.

• Step 3. Complete all documents as required and forward by fax (905-889-4216) or regular mail to our office.

• Upon receipt of your completed documents, a surgeon will review the information, and office will make the necessary arrangements to schedule you for surgery.

• Please allow two to three business days for processing

SHULDICE UNIQUE OPERATING METHOD

• There is no use of foreign bodies such as synthetic screens or meshes, except in extremely rare cases where there has been destruction of the tissue usually due to previous surgery.

• The vast majority of our hernia repairs are done with a sedative (sleeping pill), analgesic (pain relief pill) and local anesthesia. If necessary, additional medication is administered.

• The youngest patient to date was a child of 4 months, while the oldest was a man of 100 years.

Shouldice Business Process: 4 Day Lead Time

30/36 Arrivals1–3 pm

If OK:Check-in & admin

Dinnerat 6 pm

Check by MD

(15 mins)

Tea & cookiesat 9 pm

Blood test

Day 1

Day 2

Explain process steps

Local anaesthesia

(-20mins)

Surgery (40 mins)

Rest in room

(2-3hrs)

Start eating & moving

Dinnerat 6 pm

Tea & cookiesat 9 pm

Day 3

Loosen stitches

Walk, play, & eat with your buddies

If not OK…

Dinnerat 6 pm

Tea & cookiesat 9 pm

Day 4: Remove stitches, walk, play, eat, check out

WHAT IS THE UNIQUE SERVICE CONCEPT?

• What does Shouldice hospital offer to its customers?

• The hernia surgery (the Shouldice method)• Peace of mind/low risk/Low Recurrence• Independence/Dignity/Control• Social experience, fraternity• Excused absence from work without guilt

• A vocation

THE NURSES’ EXPERIENCE

• Shouldice appoints 34 full time equivalent nurses for a 24 hour period.

• During non-operating only 6 full time equivalent nurses were present in the premises.

• Performed counseling activities.

THE DOCTORS’ EXPERIENCE

• 12 full time surgeons

• 8 part time assistant surgeons.

• Each operating team required :• A surgeon• An assistant surgeon• A scrub nurse• A circulating nurse

WORK LOAD

• A total of 30 to 36 operations were conducted per day.

• Each surgeon performed three or four operations a day.

• A surgeon’s day ended by 4 p.m.

THE FACALITY AT SHOULDICE HOSPITAL

• Two facilities in one building

• Hospital• clinic

Level 3 Additional patient rooms & recreational areas

Level 2 Lounge area, admission office, patient rooms

Level 1 Kitchen & Dinning rooms

• The patients at the Shouldice center take some of care of themselves.

• In Shouldice, all the patients were encouraged to walk up and down the halls and to get in dialog with the other patients and the surgeons. In thought of encouraging the patients, the steps between the floors are constructed with a smooth inclination,

• there are not TV’s at the bedrooms and the rooms were designed as if it were a home instead of a hospital.

• Every square foot of facility is carpeted to reduce the hospital feeling and the possibility of a fall.

• Patients and staff are served food prepared in the same kitchen.

PATIENT SATISFACTION

“Never did I think that I would write to a hospital and tell them how much I enjoyed my visit, but I find myself doing that very thing. It took me a year to get the courage to have my hernia repaired, but my fears were all unfounded. And the food was excellent."

Robert C. Cole-Rochester, New York

Cost Comparison: Shouldice vs. Other Hospitals

Costs of typical operations $954 $2000-4000Transportation $200-600 $0

Time Lost from work in Hospital 4 days 5 days

Time lost from work while recovering 5 days 10 days

Value of time lost (ranging from $50 to 500 per day) $450-4500 $750-7500Total before Allowancefor recurrence $1604-6054 $2750-11500Probability of Recurrence 0.80% 10.00%Expected Cost of Recurrence $13-48 $275-1150Total cost to patient, employee and insurer $1,617-6,102 $3,025-12,650

ABOUT THE PROFITABILITY OF SHOULDICE HOSPITAL

Hospital:

Revenues ( in $ )

(4 days X $111/day x 6,850 patients/year) 3,041,400

Cost 2,800,000

Profit: 241,400

Clinic:Revenues (($450+ 60 + 75 X 0.20) X6,850) 3,596,250Cost 2,000,000

Profit 1,596,250

Total Profit 1,837,650

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

– 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– high compensation ($50,000 + $40,000)– Opportunities for surgeons to observe 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

“family”experience

THE UNIQUE SELLING POINT OF THE HOSPITAL

“There is No Substitute for Experience”

Shouldice Hospital has been dedicated to the repair of hernias for over 55 years. The trained team of Shouldice Hospital surgeons have repaired more than 300,000 hernias with a greater than 99% success rate. Surgeons at Shouldice Hospital have a virtual 100% success rate performing primary inguinal indirect hernia repairs. Shouldice Hospital has offered its Medical Guarantee for more than 55 years. Shouldice’s strategic service concept

MARKETING STRETEGY

• The three important aspects of services marketing triangle are the employees, customers and the company itself.

• Shouldice keeps its staff happy through profit sharing policy, wherein the employees are paid a part of the profit in addition to their fixed salaries.

• This sharing is done based on their contribution towards the success of the firm. This entices them to work hard and put in more efforts. From the management point of view, they have given their staff a lesser working load and weekends off.

• This enables people to spend time with their family and this in term keeps them contented and in the long run reduces the attrition rate

• This is internal marketing for the company.

PROBLLEMSAND

PLANS

INCRESE CAPACITY ??

• The problem is that Shouldice is facing a paradox of change. Shouldice is operating at its “best operating level” for a service company with limited flexibility in its plant, a specialized work force but are failing to meet all the demand for its chosen market niche. Adding additional capacity to meet the unmet market need may upset the existing work force and lower service quality. Failing to meet the market demand may invite competition that could eventually cause Shouldice to loss market share and end up with excess capacity.

PROBLEM JUSTIFICATION

• There is limited operating facts presented in the case so assumptions have made based on the information that was presented.

• It is assumed that they are operating at the “best operating level” because the way the case describes how efficiently the hospital is ran and how the patients appear to be pleased with there treatment.

• Because it is a service they can not store there product. To increase their output and maintain their quality they would need to increase they size of the plant where the service is provided. This involves large capital investments and considerable time. Construction would also cause a disruption to the quality and country club atmosphere of the hospital. Therefore the plant has limited flexibility.

• The staff also has limited flexibility. Surgeons and surgeons’ assistants are specialized fields that have limited desire to be cross trained.

LIST OF ALTERNATIVE COURSES OF ACTION

– Add Saturday operations

– Add a new floor (45 more hospital beds)

– Establish a new facility for hernia

– Expand to other types of operations

EVALUATION OF ALTERNATIVESSchedule Saturday as an Operating Day

• Advantages– No investment is needed– Can still maintain quality

• Disadvantages– Require to schedule 23-25 operations on Saturday– Six surgeons and a supervising surgeon have to work

on Saturdays– Additional other personnel – Violates the implied contract that Shouldice has with

its surgeons, strong opposition by the senior doctors

Add in a new floor (45 beds)

Total Number of Rooms: 89 +45= 134

• Advantages– Easy to control and maintain quality– Retain the culture and environment

• Disadvantages– Require to schedule doctors to the full capacity of five

days per week– Increase work load on admissions, kitchen, laundry,

housekeeping and accounting– Further staggering of meal hours for patients (100

seat dinning room)– Disruption during construction

A Second Facility for Treating Hernia• Advantages

– New location close to the customers, say USA– Improve its competitive position and increase its profits– Operate in a less restrictive environment– New Opportunities for existing personnel– Transfer of knowledge and expertise to the new facilities

• Disadvantages– Requires a significant investment.– Control of quality– It is difficult to create the same culture and atmosphere– Potential competition with the existing facility

BEST ALTERNATIVE

Start operations on Saturdays

• No fresh investment required.

• Can maintain quality.

• New surgeons not required.

Case Presenters :Tarun Khandelwal Abhinav KaliaKaran Kaushik Sunny GuptaAnkit Singhal Gaurav Gupta

Neeraj Kumar