Executive Summary:

Shouldice hospital is a specialized hospital for the treatment of external

abdominal hernias in Canada. The hospital was established by Dr. Shouldice the

founder of a new and superior surgical technique, now known as the Shouldice

method, which yields better medical results as well as a significantly shorter

recovery time. Shouldice is operating at its best level of 6850 operations in the

year 1982. Over the years the capacity of the hospital is increased from 36 beds

to 89 beds. Backlog of scheduled operations of 1200 is a cause of concern even

always. Options of Saturday working, increasing an additional floor or new

facilities at USA are worked out rigorously and recommended to work on

Saturdays (only in peak periods).

Total Number of words used : 120

Situation Analysis:

Shouldice is a private hospital founded by Dr. Earle Shouldice in Toronto in July

1945. The hospital started out as a six-room nursing home in downtown Toronto.

Shouldice offers a new technique to cure the hernia, which is the protrusion of an

organ through a weakness in the abdominal wall; this technique was invented by

the founder during the World War II. This technique allows the patient to go back

to their routine very quickly. Just after four hours of operation patients are

encouraged to start walking around the place and feel more comfortable. The

typical recurrence rate for the hernia approaches 10%, the gross recurrence rate

for all operations performed at Shouldice was only 0.8%. The advantages of

Shouldice method is enclosed in exhibit 1.This method proved to be a big

success. As demand increased for hernia operations, Shouldice expanded the

facilities from 36-beds to 89-beds in the mid 1960’s.

The Problem:

The hospital is having a successful run but there is a huge backlog of

1200 patients needs to be operated. Because of an increasing backlog,

patients may tend to go to other hospitals which may result in losing the

potential market.

The next chief surgeon after Dr.Obney, who is due to retire soon, has to

be selected, at the same time retaining the existing talent pool of doctors

is also a primary issue.

The Objective:

The objective of the study is

To clear the backlog of patients to be operated

To select a successor for Dr.Obney who is retiring soon

To sustain quality in services, ensuring good patient experience

To remain the leader in the field of hernia operations

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The options:

Three different options were thought of to clear the backlog of patients.

A) Add another floor of rooms to the hospital and expand the number of beds

by 50% (i.e) addition of 45 more beds (Expanding facility).

B) Opening a new hospital in US (New facility in US)

C) Operations to be carried out on Saturday (Saturday working)

Criteria for Evaluation:

Cost feasibility to the organization

Retain the quality, culture and environment

Working staffs (Doctor’s, Nurses & others) comfort

Evaluation of Options:

A) In expanding facility option, the increase in number of bed by 50% , would

be the best option to maintain the quality, culture and environment. This

option proves to be costly and the details are enclosed in exhibit 2 & 3.

This option would not be advisable unless addition of more doctors and

surgery rooms because the existing capacity and number of doctors could

not ful-fill an addition of 45 beds. Increase in work load on admissions,

kitchen, laundry, housekeeping and accounting are the cause of concerns

in this option. Expanding option can cause some kind of disruption to the

patients hospitalized during construction. The meal hours of the patients to

be staggered to accommodate the increase in beds/patients.

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B) The new facility/hospital in US option takes care of certain problems

faced by the hospital. The need for the hospital to increase the working

hours of the employees, as was the case in the earlier option, does not

exist since the new hospital would need new employees. Since 42% of

Shouldice patients belong to US, it also reduces the load on the present

setup. The hospital will be able to handle the problems of patients going to

unqualified doctors since it will give such patients the option of coming

directly to them. The quality, culture and environment of this new facility

will not be maintained as in the case of Toronto campus. The well

experienced surgeons and other staffs are required to be recruited in this

new campus which is a herculean task. A very well planned induction

training programme is to be conducted to all the new staffs to simulate the

Toronto campus culture & environment. The development of new facility

will require huge investment and time to complete. Also, this new facility

will lead to underutilization of facility at Toronto campus as patients from

US may not be interest to come to Canada. Hence this may not be a good

option to solve the short term objective of reducing the backlog of patients.

C) Adding an additional operating day on Saturday is also a valid

consideration. It would utilize ideal hospital capacity. The cost incurred

will be the least among all other options. In this option the existing facilities

are maintained at status quo and utilized to offer more services. In this

option there is no additional investment is required. The culture and the

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environment of the hospital can be very well maintained in this option.

There is a little possibility of deterioration in quality as the doctors /nurses

& other staffs are given additional work load only for a maximum period of

8 weeks.

The additional work load for the staff will be as follows:

Surgeons and assistant surgeons : To do the operation on

Saturdays & examination/diagnosis on Friday. To take care of

additional 28 patients on Friday, Saturday and Sunday.

Nurses/ Admission staffs are also required to take more work on

Friday & Saturday.

All of the above increases are well within the maximum capacity of

facilities. Hence in-order to avoid staff resistance they shall be given

specific incentives to take up the additional work load on these days.

Exhibit 4 shows the cost incurred and net profit of this proposal.

Recommendations:

From the three different options analysed,

It is recommended to adopt Saturday working option with some minor

modifications. The existing procedure needs to be synchronized with

the various activities and to be well planned. Only in the peak period

(like in September) to reduce backlog, Saturdays to be made working

days. During the peak periods (Usually September) of operations, the

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fourteen additional rooms located in the third floor to be used for

patients stay.

It is recommended to look for a successor for the chief Dr.Obney, from

the available well experienced doctors in the same campus.

As such marketing for getting more patients is not that important,

because Shouldice hospital is already well established. The recent

reunion function was attended by 1400 alumni itself is a proven

evidence.

Action Plan:

1. Perform Saturday operations only in the peak period of backlog

(September- Max of 4- 8 weeks)

2. Admission of patients to be made on Sundays with the available

administrative staff.

3. During the peak period of operations, use the 14 hostel rooms available in

the third floor for accommodating the patients.

4. Incentives to doctors, nurses and other staffs for the Saturday working

days to be paid twice that of normal days.

5. Successor for Dr.Obney from the existing experienced doctors to be done

within six months.

Total Number of words used : 1,112

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EXHIBITS

Sl. No DescriptionHernia Treatment

General Treatment Shouldice Technique

1 Period of bed rest A week time needed Immediately after 4 hours

2 Required Period of Rest2 to 8 weeks 1 to 4 weeks

3 Cost of Treatment

(operation)Approx. $2,000-4,000

Approx. $900 (excluding

travel)

Exhibit 1 Advantageous of Shouldice Technique

Sun Mon Tue Wed Thu Fri Sat

Admitted 30 30 30 30 30

Operated 30 30 30 30 30

In observation 30 30 30 30 30

No. of beds for accommodation 30 60 90 90 90 60 30

Exhibit 2 Current accommodation facility usage pattern

Total No.of operations can be performed = 5 days x 30 Operations = 150

Total number of operations performed = 6850(in the year 1982)Annual average operations per week = 6850 / 50*

= 137Max number of operations in a year / week = 165 (September month)

Annual avg.operations per week < Existing capacity of operations per week < Max. Number of operations (only for two months)

Note: * Hospital closed for two weeks in December

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Exhibit 3 Option A) Expanding the facilities/beds

Investment (Fixed Cost) =$ 2 Million (Budget costs estimated per year for clinic were $2 million as per 1983)

Revenue per patient=$510

($450 surgical fees, $60 of assistant surgeon fees)No. of Operations in a week(Assumed 50 % of 30 operations = 15 Nos) =15 Nos x 5days

= 75No.of weeks operations performed beyond existing capacity

= 8 weeks(It is assumed that Peak of 165 operations, performed only for one month (September 4 weeks) beyond the annual average of 137. Assuming a factor of safety of 2, the total no.of weeks 4 weeks x 2= 8 weeks)Revenue from hospital

= 45 beds x 8 weeks x 5days x $111

= $199,800Revenue from clinic

= 75 operation x 8weeks x $510

=$306,800Total revenue from clinic & hospital / year

= $505,800

Time for recovery of costs =$2,000,000/505,800 =3.95years=4 years

(It is assumed that there is no additional doctors, surgeons, nurses, other staffs and their costs are included)

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Exhibit 4

Option C) Saturday working

Revenue per patient=$510

($450 surgical fees, $60 of assistant surgeon fees)

No. of Operations in a week(It is assumed that Peak of 165 operations, performed only for two months (8 weeks) beyond the annual average of 137. Hence 165-137 = 28 to be performed on Saturday)

=28 Nos x 1day

No.of weeks operations performed beyond existing capacity= 8 weeks

(It is assumed that Peak of 165 operations, performed only for one month (September 4 weeks) beyond the annual average of 137. Assuming a factor of safety of 2, the total no.of weeks 4 weeks x 2= 8 weeks)

Revenue from hospital(28 Operations x (8 weeksx1saturday) days X 3days per operation x $111)

= $74,592Revenue from clinic (28 operation x (8weeks x1saturday) x $510

=$114,240Total revenue from clinic & hospital / year

= $188,832

Cost to hospital

Surgeon salary = $50,000/365 =$137 / dayAsst Surgeon salary =$ 63 / dayNurses & admin staff salary =$100 / dayMisc expenses =$100 / dayTotal cost =$400 / day

To perform additional 28 operations, assuming the same team (12 nos) has towork for an additional day (per week) for eight weeks, the total cost incurred =$400x 12 x 8 days

=$38,400By giving incentives twice of the normal day, the cost incurred = $38,400 x 2

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= $76,800

Net additional Profit = $188,832 - $76,800

= $112,032

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