Assignment on Shouldice Hospital

Submitted By: Group 3

How successful is Shouldice Hospital?

The success of Shouldice Hospital can be attributed to the following factors1. Demand is more than supply The backlog of scheduled operations gets too
large. Currently the hospital has backlog of 1200 patients.
2. Low Attrition Rate There is high degree of employee satisfaction. The pay
level was much higher as compared to the industry average. The job offered
work-life balance to the surgeons. All the employees including the surgeons,
assistant surgeon, nurses, etc. hardly leave the job.
3. Low Recurrence Rate Based on a careful tracking of its patients over more
than 30 years, it was estimated that the gross recurrence rate for all operations
performed at Shouldice hospital was 0.8% which very less than the U.S. gross
rate of 10%.
4. Superior Quality It was noted that other competitors have started imitating
the operation procedure. Also its name was been used by another physicians.
This means that the quality of operation was superior to the other procedures
currently in practice.
5. Need for expansion the issue faced by the authorities relates to the
expansion of Shouldice hospital. This is another indicator of hospitals
success.
6. Large Alumni Base The hospital had built a highly satisfied alumni base of
140,000 patients.
These all factors reflected the success of Shouldice hospital.

How do you account for its performance?

The performance of the Shouldice hospital can be seen by the below tableAttributes
Cost of operation

Shouldice Hospital
($111X4 + 450 + 60 +

Other Hospital
$ 2000 - $ 4000

Total patient stay in

75X0.20) = $ 969
4 days

5 7 days

hospital
Daily Operations
Probability of Recurrence

30 36 per day
0.80%

5 10 per day
10%

Apart from the above attributes, Shouldice hospital also excelled in following ways

The Nurse to Patient ratio was much lower than that in other hospitals. This can
be based on the fact that nurses were only involved in the consulting job.

The attribution rate also much lower than the industry rate. Only turnover of 4
nurses was seen in 1 year.

The patients enjoyed the services at the Shouldice hospital. They even asked for
one more stay at the hospital.

The profitability of hospital and clinic which is as followsRevenues

Hospital
(4 days X $111/day X 6,850

Clinic
(($450 + 60 + 75X0.20) X 6,850) = $

Costs
Profit

patients/year) = $ 3,041,400
$ 2,800,000
$ 241,400

3,596,250
$ 2,000,000
$ 1,596,250

Hence, the total profit per year was $ 1,837,650. Although the hospital paid surgeons and
other staff very high as compared to industry, and the cost of operation was also very low
as compared to other hospitals, the Shouldice hospital was still able to make profits.

What actions would you take, as Dr Shouldice, to expand the capacity?

Why?

Service quality of Shouldice Hospital is very high due to their culture of family type
atmosphere. Increasing their capacity while maintaining the same level of service is the
main challenge. Some of the actions that will expand the capacity of Shouldice hospital
are:
a) Providing Service on Saturday: additional one day of service will increase the
number of operations and thus increase the capacity of hospital.
Average number of patient serviced/week 155 (Monday to Friday operation)
Adding Saturday as working day increase number of operations by 31
operations per week.
Average number of patient serviced/week now is 186
Increase in profit due to increase in capacity 270*(186-155)*50 = $418500
Drawbacks of adding Saturday as working day
Need six surgeon and one supervisor surgeon to work on Saturday but this
will violates the policy of Shouldice that they give sufficient time to doctors to
spend with their family, four older doctors are opposing this suggestion
because of their way of working from several years
b) Adding new floor: total number of rooms with two floor are 89 so number of
rooms per floor are 45. Adding third floor will increase the capacity to 134.
Additional number of patients served 3918. This will increase profit by
270*3918=

Drawbacks
need

more

of
nurse

and

1057860

adding
surgeon

to

new
handle

45

floor
more

beds

shifting patient from basement to third floor after operation will not be so
convenient.
c) Expanding the hospital into USA. This is the most viable option since 42%
patient served by Shouldice hospital comes from USA. They have to incur

cost of travelling from USA to Toronto Canada which is around $200-$600. If

the hospital is expanded to another location, it will cater to the increasing
demand as well as will cater to the demand from the nearby areas.
Drawbacks of this option is that a lot of capital expenditure has to be made.
Along with the capex, government permissions are to be taken. This option
though is the most suitable one but it is also the most time consuming option
since selecting a site and building the facility would take years.

How would you implement the proposed changes?

Dr. Shouldice had already considered a couple of sites in the United States where private
hospitals were very common. He could be encouraged further to do research about the
following factors

Geographic location

Intensity of patients/demand in that area

Accessibility to airport

Cost of building the facility

Expected revenue from the facility

After considering the above factors, the most appropriate site can be selected and then the
facility could be constructed.