Shouldice Hos

7/27/2019 Shouldice Hos

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I really enjoyed my time at Shouldice. It was like ahernia holiday

I was actually sad to leave, we had so much fun...


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HISTORY

Dr. Edward Earle Shouldice graduated from the University ofToronto 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 neededsurgical treatment to repair their hernias before they could bepronounced 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 methodof 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 andwere awaiting surgery.

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

hospital.


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CONT..

Hospital specializes in hernia repair surgeryCurrently facilitates 7,000 surgeries peryear

Effective operations with quick turn-a-roundPatients subject to early ambulation, whichpromotes healing

Hospital only accepts patients with uncomplicated

external hernias, in otherwise good health.


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CASETALKSABOUT Our Patient Care

A unique program of care and recovery A welcoming, supportive atmosphere

A relaxing, resort-like setting

A lifetime of care and support

Worlds largest database on hernia repair

Our People Our Doctors

Surgical training

Our nurses

Our support staff

A total environment Diet counselling

Massage therapy

Annual follow-up examinations

Doing a single procedure and repeating it with high frequency allows you tobecome a perfectionist.
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SHOULDICE BUSINESS PROCESS:

4 DAY LEAD TIME

30/36Arrivals13 pm

If OK:Check-in &

admin

Dinnerat 6 pm

Check byMD

(15 mins)

Tea &cookiesat 9 pm

Bloodtest

Day 1

Day 2

Explainprocesssteps

Localanaesthesia(-20mins)

Surgery(40 mins)

Rest in room(2-3hrs)

Starteating &moving

Dinnerat 6 pm

Tea &cookie9

pm

Day 3

Loosenstitches

Walk, play, & eatwith your buddies

If not OK

Dinnerat 6 pm

Tea &cookie 9

pm

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


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HOW SUCCESSFULIS 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 Herniaoperation imitated by competitor

Low recurrence rate, 0.80% vs 10%

High degree of employee satisfaction


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COST COMPARISON:

SHOULDICESVS. OTHER HOSPITALS

Shouldice Others

Costs of typical operations $954 (p9) $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 $750-7500

Total before Allowance

for recurrence $1604-6054 $2750-11500

Probability of Recurrence 0.80% 10.00%Expected Cost of Recurrence $13-48 $275-1150

Total cost to patient, employee

and insurer $1,617-6,102 $3,025-12,650


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HOW ABOUTTHE PROFITABILITYOF

SHOULDICE HOSPITAL?

Hospital:

Revenues

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

Cost 2,800,000

Profit: 241,400Clinic:

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

Profit 1,596,250

Total Profit 1,837,650


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RETURN

ON

EQUITY

Total Depreciated Assets: $5 mil

Return on Asset:

1,837,650/5,000,000 = 37%

What is the return on Asset if they expand thecapacity by 50% at the cost of $2 mil?

1,837,650 x 1.50 / 7,000,000 = 40%


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THE DREAM WORLD

Shoudice is offering:

High quality service at low price

Shodice is having Highly satisfied customers

Happy Employees Shouldice is also

Making high profit


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HOWISALLOFTHISACHIEVED?WHATARETHEMAJORREASONSFORTHE

SUCCESS?

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


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WHATISTHE 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


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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

A Focus Strategy


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OPERATING CONCEPT

Shouldicce achieves outstanding results as a low priceand at a high profit because:

Everything done by the hospital is designed to maximize thedifference between perceived quality and the value of theservice provided patients on one hand and

the cost of providing the service on the other.


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HOWDIDTHEYDOTHAT?

Patients are carefully screenedPatients are active participants in the service

delivery process

The avoidance of general anesthestics allows a

wide range of involvement of patientsStaff is freed from much disagreeable work

Reducing the cost of nursing, housekeepingand laundry

Structure hospital jobs that involves morecounseling and positive interaction with thepatients


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HOWDIDTHEYDOTHAT?

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 andadvise one another

Peer group pressure that leads to higher level ofself-control of quality

A conscious effort is made to make Shouldice afamilyexperience


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THEELEMENTSINTHESERVICESYSTEMTO

SUPPORTTHESERVICE CONCEPT(MANAGERIALELEMENTS)

Service encounter

Doctors and nurses are carefully recruited

Employees trained to help / counsel patients

Communal dinning for doctors, nurses , staff andpatients

Quality

adherence to Shouldice method

opportunity for surgeon to observe & advise oneanother


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THEELEMENTSINTHESERVICESYSTEMTOSUPPORTTHE

SERVICE CONCEPT (MANAGERIALELEMENTS)

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


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THEELEMENTSINTHESERVICESYSTEMTOSUPPORTTHESERVICE CONCEPT (STRUCTURALELEMENTS)

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 disinfectantetc)

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 encouragedoctors to help each other and use the same anesthetist


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THEELEMENTSINTHESERVICESYSTEMTOSUPPORTTHESERVICE CONCEPT (STRUCTURALELEMENTS)

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


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THE CAPACITY DECISION

Where is the bottle neck?

How should they increase the

capacity?How should they implement that

change?


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SHOUDICE HOSPITAL LIMITED: ANALYSISOFCAPACITY

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) = 270patients /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)/(10min/patient)=240 patients /week


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SHOUDICE HOSPITAL LIMITED: ANALYSISOFCAPACITY 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 = 178patients/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 forconvalescence, 3.5 days average stay, and use of 14 hostelrooms for two nights each week)


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HOWTOEXPANDTHECAPACITY?

Aim : increase capacity & maintain control of servicequality

Alternatives: Add Saturday operations

Add a new floor (45 more hospital beds)

Establish a new facility for hernia

Expand to other types of operations

Others?


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ADDINANEWFLOOR (45 BEDS)

Total Number of Rooms: 89 +45= 134

Total number of patents per week = 193

137 current throughput/148 theoretical

= x / 193 theoretical New throughput = 193 x (137/148)= 179 patients / week

Additional patients per year=(179-137) x 50=2100

additional revenue for the clinic

= 2100 x (450+0.20 x 75) = $976,500

Less cost 176,500

Return on investment = 800,000/2,000,000=40%


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ADDINANEWFLOOR (45 BEDS)

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 dinningroom)

Disruption during construction

Advantages

Easy to control and maintain quality Retain the culture and environment


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SCHEDULE SATURDAYASAN OPERATINGDAY

Use 89 + 14 rooms, 3.5 average stay Total number of patents per week = 180

137 current throughput/148 theoretical

= x / 180 theoretical

New throughput = 180 x (137/148)= 167 patients / weekAdditional patients per year=(167-137) x 50= 1450

additional revenue for the clinic

= 1450 x (450+0.20 x 75) = $674,250

Less cost 124,250 Net increase in profit: 550,000 for no additional

investment


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SCHEDULE SATURDAYASAN OPERATINGDAY

Disadvantages Require to schedule 23-25 operations on Saturday

Six surgeons and a supervising surgeon have to workon Saturdays

Additional other personnel Violates the implied contract that Shouldice has with

its surgeons, strong opposition by the senior doctors

Operating close the the theoretical capacity of the

facilityAdvantages

No investment is needed

Can still maintain quality


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A SECOND FACILITYFOR 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 and Dr. Shoudices time

Control of quality

It is difficult to create the same culture and atmosphere

Potential competition with the existing facility


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SHOUDICE HOSPITALS SERVICEPACKAGE

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 afteroperations 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 sameanesthetist

Located to a large city: Toronto, access to worldwidemarket, large local population to fill up cancelledbookings

.

S H S


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Facilitating Goods:

Medical supplies

Food, medicine etc.

Explicit Services Quality hernia surgery using the Shouldice method, low

recurrence

Very experienced doctors


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Implicit Services

Peace of mind/low risk

Independence/Dignity/Control

Social experience, fraternity

Excused absence from work without guilt

A vocation


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SHOUDICE HOSPITALS DISTINCTIVECHARACTERISTICS

Customer Part ic ipat ion in the Service Process

Simultaneity

Intangibi l i ty

Perishabi l i ty

Heterogeneity


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ENDThank You

Documents

Shouldice Hos