Shouldice Hospital

Introduction Shouldice Hospital, set up in 1945 by Dr. Earl Shouldice, is located near Toronto. It follows the business model of focus on a single standardised service for a narrow target of consumers, rather than to provide customised solution (as in a general clinic or hospital). It focuses on providing quick, convenient, and reliable cure for external types of abdominal hernias. The Hospital uses its own technique, called the Shouldice Method. It is famous for a relatively short post-operative recovery period. Description 1. Shouldice Hospital provides low-cost medical service in its area of specialization.

Use of the Shouldice Method allows patients to recuperate fast (patients get discharged within 3 days of operation). The Hospital optimises the use of its available resources, like surgeons, nurses, medical infrastructure, administration and maintenance facilities. It also manages to keep operating costs low by keeping capital investment in rooms and equipments very low. 2. About 82% of all surgeries at the Hospital are primaries. The remaining 18% involve recurrence of hernias repaired elsewhere. These are more complex, 3. The Hospital has a capacity of 89 beds.

There are 5 operating rooms where 33 to 36 operations are performed on an average day. The Hospital follows a 5 day week. It employs 12 full-time surgeons, 7 part-time assistant surgeons, and one anaesthetist. The nursing staff consists of 22 full-time and 18 part-time members. An operating team consists of a surgeon, an assistant surgeon, a scrub nurse, and a circulating nurse. A surgeon’s typical day begins at 7:30 A. M. and ends by 4:00 P. M. Each surgeon typically performs 3 to 4 operations each day. 4. Training of a new surgeon in the Shouldice technique is important because the procedure is highly standardised.

There is time-based rotation of teams and frequent consultations among doctors. 5. A patient at Shouldice requires minimal post-operative care. Immediately after an operation, patients are encouraged to move about and carry on their day-to-day activities with minimal physical assistance. 6. Employees at the Shouldice have very competitive pay scales. The remuneration has both fixed and bonus components. There is no organization chart, and administrative employees are cross-trained to take over each other’s work if required. Nobody is fired. 7. The Hospital relies entirely on word-of-mouth advertising.

It performs 145-165 operations per week. In spite of this, there is a backlog of scheduled operations that is as large as 1200 in 1982. 8. Approximately 42% of patients come from the United States. A typical surgery at the Shouldice costs approximately $1029. Operating Costs for the hospital and clinic are close to a total of $4. 8 million. Revenues are close to $6. 8 million. Thus, operating profits are close to $2 million annually. Unique Characteristics 1. High Volume Focused Service – only external types of abdominal hernia repaired and mostly primaries; 6850 operations performed in a year in 1982. 2. Unique Surgical Technique ?

Shouldice Method: separation of muscle layers, more sutures and no screens/meshes 3. Lower Operating Time – 45 minutes for first-time repairs (primaries) and 90 minutes for repairing recurrences 4. Lower cost of operating patients – $640 vis-a-vis $2000-$4000 elsewhere 5. Lower duration of post-operative stay for patients – 3 days as compared to 5-7 days for other hospitals 6. Lower Recurrence – Gross recurrence rate of recurrence for operations performed at Shouldice is 0. 8% based on 30 years data, as compared to 10% in general for the USA 7. Lower Surgeon to Operation (per-day) Ratio (0. 4) 8. Lower Nurse to Patient Ratio (0. 44).

9. Low employee turnover ? high remuneration with performance based bonuses, negligible hierarchy 10. Efficient and low cost housekeeping – since patients are always encouraged to ambulate, less soiling of linen and better utilization, only 2 employees run housekeeping. 11. Free Annual check-ups during annual reunion 12. Free Service to clergy and family members 13. Out-of-town patients were diagnosed online using the medical information questionnaire, saving $200-$400 14. Recovery time for patients is 1-4 weeks, as compared to 2-8 weeks in other hospitals Process Flow Diagram Process Analysis using Cost and Capacity A: Cost Analysis

Budget for the Hospital: $ 2. 8 million Budget for the clinic: $2 million Therefore, Total Budget = Budget for the Hospital+ Budget for the clinic = $2. 8 million + $2 million = $ 4. 8 million Number of operations per year = 6850 (considering the same as for the year, 1982) Therefore average cost per operation = $4. 8 million/6850 = $701 Total charge to the patient = Hospital stay + Surgical fee + Assistant surgeon fee + Anesthetic fee = 111*4 + 450 + 60 +75 = $1029 Net profit per patient = $(1029-701) = $328 B: Capacity Analysis The critical resources in this case are: ?Number of operation theatres ?Number of hospital beds ?Number of staff (including surgeons, assistant surgeons and nurses)

These resources are tabulated as under: Resource nameAvailabilityMax. capacity per week Operation Theatre5185 Number of beds117152 Number of surgeons12357 For details of calculation of the maximum capacity, please refer to points 1, 2 and 3 below. 1. Average number of operations per day = 27(See Appendix A above) Number of critical operations performed = 18% of total operations =1125 ~ 5 per day Total number of operation theatres (OT) available = 5 Number of hours OT’s are available = 8 hours [7:30-12:30 and 1:00 – 4:00]

Time taken for a normal operation = 1hr Time taken for a critical operation = 1 to 1:30 hour = 1:30 hour (keeping max value) Scheduling critical operations in one and normal in the rest for most efficient OT utilization: Number of normal operations in this way = 8 x 4 = 32 Number of critical operations in this way = 5 Total = 37 operations per day = 185 operations per week DayMondayTuesdayWednesdayThursdayFridaySaturdaySundayTotal Day 035193528–35152 Day 13535193528–152 Day 2-3535193528-152 Day 3–3535193535159 Total patients7089117117826270607 2. Number of beds =89+28 (14 waiting rooms) = 117 Therefore:

Maximum capacity of day 1 = Maximum no. of operations = 152 Total capacity = 607 Note: ?Day 0 indicates the day of admission to the patient and day 1 is the day of operation ? No patients can be admitted on Friday and Saturday, since operations are not performed on Saturday and Sunday ? Maximum capacity of beds = 117 Max number of patients intake on Tuesday = 19 (if more are taken, there wont be any bed left for them on Wednesday) More patients can be taken on Wednesday, since patients admitted on Sunday will be discharged on Thursday, and so beds shall be available for them the next day. 3.

Number of surgeon-hours available = 8*7 = 56 Considering 1 recurrent (90 min) and 3 normal operations (1 hour each) in a day, we get maximum number of operations = 51 per day Options and their analysis Option 1: Work on Saturday Increase in number of days, if Saturday is made functioning = 52 Number of working days = 365-104(weekends)-10(holidays) = 251 Therefore, Number of operations per day on an average = Total number of operations / Number of working days = 6850/261 ~ 27 Hence increase in net profit per year = Incr . No. of days *operations* profit per patient = 51 * 27 * 328 = $451656 ~ $.

45 million As can be seen from the above table, this option generates an additional profit of 0. 46 million. However, it might be difficult to implement because of possible opposition by doctors as it would cut their free time which they spend with their families. Also, medical profession is one, where we cannot afford stressed out doctors. Option 2: Expansion of capacity by 50% DayMonTuesWedThursFriSatSunTotal Day 037373714+2314+23–185 Day 1-3737373737-185 Day 2–3737373737185 Day 337–37373737185 Total patients747411114814811174 Therefore: Maximum capacity of day 1 = Maximum no.

of operations = 185 Total capacity = 740 Increase in number of operations: 33 per week Number of weeks is 50 Increase in revenue by above option: $ 1. 697 million (1029*33*50) Cost of expansion: $2 million Recommendation Option 2 is more viable. The reasons are mentioned as below: 1. Option 2 does not lead to doctors being stressed. Option 1 may lead to excessive pressure on doctors, and hence poor performance in service delivery. In medical field, it is necessary to allow the doctors to perform accurately on a consistent basis. 2. Option 2 has long term sustainability.

It involves a one term expense, and provides revenues for the foreseeable future. Conclusion 1. Shouldice Hospital is successful in its objective of providing high quality, low cost, and focussed health care. It is popular even without any major advertising efforts. 2. Shouldice’s performance is based on the highly standardised and effective Shouldice method, and a culture that promotes employee ownership. There is extensive training for the new employees to increase their versatility. 3. The changes suggested can be implemented by investing $2 million, which is around 30% of the hospital’s current revenues.