OPERATIONS MANAGEMENT

CASE STUDY REPORT

SHOULDICE HOSPITAL LIMITED

GROUP 8 -- SECTION C

Davneva Phira
Ramya A
Vivek Menon
Aravind A M
Suman Mondal
About The Company
The Shouldice Hospital Ltd started as a six room nursing home in
July 1945. The main focus of this hospital is repairing external hernia, both
first time cases and recurring ones too. As the number of patients increased,
Dr Shouldice extended his facilities by acquiring a 138-acre estate with a
17,000-square foot main house in the suburb of Thornhill, 15 miles north of
Down Town Capital, Toronto, with a 36 bed capacity. After some years of
planning he added a wing to the house increasing the capacity to 89 beds.
In 1965 Dr Shouldice passed away and Dr Nicholas Obney, his long-term
associate, became the surgeon-in-chief and the chairman of Shouldice
Hospital Limited. By then they started operating both the hospital and clinical
facilities. By 1982, the volume of activities had increased to 6850 operations
per annum.

Differentiating Factors
The hospital had a narrow focus. The doctors used innovative “Shouldice
methods”. Under this technique the recurrence rate reported was very low.
Due to this technique early post-operation ambulation was possible. The
whole operation took only 4 days on an average so the patients could go
back to work in 2-8 weeks. Also an important factor is that the cost of
operations and the fee charged were much competitive in comparison to
competitors.
Customer satisfaction was of immense importance and this was
ensured by counseling provided by nurses throughout their stay in the
hospital, recreational activities organized for the patients and high socializing
among the patients.
 Out-of-town patients were diagnosed online using the medical
information questionnaire, saving $200-$400. The ambience of the hospital
was such that patients felt at home. The employees were efficient in cross-
functional activities.
The only form of advertising was through word-of-mouth. The average time
taken to recover by a patient post operation was much lesser compared to
other hospitals.
• How successful is the Shouldice Hospital?
Dr. Earle Shouldice started off this venture with a sole mission of providing a
painless hernia operation and a fast recovery at an affordable cost. By 1983,
the hospital had achieved exactly that and has delivered on all the aspects
of its founder’s vision. The hospital charges about $1030 for a hernia
operation which is very less when compared to the $2000 - $ 4000 charged
elsewhere. Also the patients were discharged much sooner than the other
hospitals. The patients with lighter jobs could get back to work in a week.
Ambulation was possible immediately after the operation and this allowed
interaction amongst the patients. The annual alumni meet of its patients
increased its reputation by word of mouth which resulted in a huge demand.
Considering that the hospital did not need any advertising, it was a
significant achievement.
The doctors at Shouldice take a keen interest in every patient and in
spite of so many patients and operations every day, the patients were
provided with personalized care. The success of the process is evident from
the fact that the competitors emulated the same. Not only the local patients,
people from outside Canada visited this hospital for their medical needs.
This does indeed prove that Shouldice Hospital is a success.

• How do you account for its performance?

The service system at Shouldice hospital consists of four stages, the initial
stage of identifying the illness, the preparation process for the specific
patient, the main process of operating on the patient and the final steps are
the post operative procedures which involve the recovery of the patient. The
hospital has been able to carry out a smooth process flow which results in
the patients being attended on time and aids in their fast recovery. From the
time a mail is sent out to the prospective patient to the final operation and
the patient being discharged, the doctors, the nurses and the employees at
Shouldice ensure a hassle free and swift response action plan.

Shouldice was able to standardize the hernia operation as it treated only the
external types of abdominal hernias. This way it was able to standardize the
equipment to be used and also train its doctors and nurses in a routine
manner without having to bother about specialization in other fields of
medicine. This saved a lot of operating costs for the hospital.
The first of the four stages includes the patient learning about the
hospital from doctors and previous patients, the fact that the hospital kept
the operation simple was not viewed as the final solution and hence was not
recommended by the doctors. However, most of the patients first got a
diagnostic done from the doctor or by themselves and then got in touch with
the hospital. The out of town patients were contacted via mail and a medical
questionnaire was sent to them. This way the hospital had already started
the first process of diagnosing the patient even before he had reached the
place. This gives more first hand information to the doctors and saves a lot
of time about the medical situation of the patient. After the contact and the
medical questionnaire has been filled, the patient is diagnosed by the
hospital and then an appointment is fixed with the hospital for the surgery.
The second stage comprises of the preparatory procedures for the
operation. The process flow that takes place when a patient arrives at the
hospital is as shown.
The third stage deals with preparing the patient for the operation
which includes preparing the patient, administering the anesthetic, and
finally the operation which lasts for about 45 minutes. The hospital is able to
complete an operation in such a short time as everything is pre planned and
the doctors are aware of the number of patients he/she is going to operate
on today. There is no sudden demand of doctors nor there is any emergency
cases coming in.
After the operation, the patient is taken for the post operative
exercises and then by the end of day 4 the stitches are removed and the
patient is free to go home and begin working again.

Process Flow

Arrival 1-3 PM

20 Mins

Prelim Exam 15 mns

Process Flow
15 mins

Insurance 10 mins

Blood n Urine 5-10

mins

Check In+
Orientation

Dinner

Interaction
 Bed @ 9 30

The following characteristics are important in the context of Shouldice as it

explains the smooth functioning of the process.

The service system is consistent with operating focus which is fast and
effective. Every step of the process is geared for maximum efficiency. The
process is also very much customer friendly as the patients are allowed to
be with the kids.
The entire process as a whole is completely structured form the time of the
patient’s arrival to his departure, there is a time constraint on every activity
and also a lot of leeway is there for the activity to be completed in that time.
The front office and the back office operations are in perfect synchrony to
enhance the smooth flow of the process and have been merged effectively.
The entire process is extremely cost effective and the delivery
promise of the hospital to put its patients back on their feet within a week is
also very much honored. Though there is a small flaw in the system in case
of higher demand at which the system cannot cope with the available
resources. Hence the hospital has to chalk out action plans in order to retain
the business and attend to the growing demand.

As Dr. Shouldice, what actions, if any, would you take to expand the
hospital’s capacity?

As Dr. Shouldice, I would execute the following actions to increase the

capacity of the hospital:-

1. Work on Saturdays
 2. Additional Floor

Cost Facts:-
Budget for operating costs= $ 4.8 million
Hospital costs-$2.8 million
Clinic costs -$2 million.
Operations per year = 6850.
Hence average cost per patient borne by the hospital =$4.8million/6850 =
$701. Amount collected fro m the patients =$1029.
1) 4 days of hospital stay=4*$111
2) Surgical fee=$450
3) Fee for the assisting surgeon=$60

The net profit earned =$1029-$701=$328.

How would you implement changes you propose

Option 1
Work on Saturdays
This option would naturally increase the working days by 52.
Given number of operations=6850
No of working day (without Saturday and Sunday) =261
(Assuming 365 days in 1 year)
Therefore, number of operations per day = 6850/261=27
Net profit = $ 0.46million
Also an important factor is that a day (Saturday) in hospital will not be
wasted. Hence, patients staying over the weekend would be discharged a
day earlier and new patients could be admitted hence increasing the
capacity.
This option would give immediate results so it can be a short term solution.
Action Plan
• Part-time doctors and nurses can be appointed for the Saturday
operations, as some of the current staff are unhappy with this idea.
• Doctors who can work on Saturdays can be given off on weekdays.

OPTION 2

Additional Floor
An additional floor would increase the capacity to accommodate more
patients. Assuming a floor can accommodate 60 beds the profit of the
hospital would increase even with the consideration of the cost associated
with it. As I consider the welfare of the patients to be as important as earning
increased profits. However, this option will be a long term solution.

Action Plan
• Since 60 beds are proposed to be added, 13 doctors have to be
recruited. (19 doctors for 89 beds).
• Similarly, 26 nurses have to be recruited for this capacity.