Shouldice Hospital: Operations Assessment
Shouldice Hospital has been devoted to repairing hernias for over half a century. century. Although the Shouldice Shouldice system has led to great competitive positioning, positioning, the hospital is falling victim victim to its own success. Demand for Shouldice services is so much higher than its current capacity of 89 beds that it is in a constant state of operations backlog, which grows grows by !! patients every " months. #hus, Shouldice needs to find a solution to its single most critical $uestion % how to e&pand the hospital's capacity while simultaneously maintaining $uality control of service delivery. delivery. #he analysis below is designed to assess the current operations at the hospital, in addition to e&plaining should invest $4MM in a new unit, which will increase bed our recommendation that Shouldice should invest capacity by 50% and require its surgeons to perform Saturday surgeries . As the the financial financial analysis analysis shows, this change will allow Shouldice to capture unmet demand without compromising its uni$ue system of patient and employee employee care. (astly, (astly, our recommendation will be also )u&taposed to other other options we evaluated as potential solutions, but that neither make financial sense nor solve the current dilemma for the hospital. Hospital Overview
Shouldice Hospital is a *focused factory+ a hospital with a specific area of e&pertise that gives it competitive strength resulting resulting in lower cost, higher $uality service for its patients, and better pay for and
loyalty from its employees. Speciali-ing in e&ternal abdominal hernias, Shouldice doctors e&ecute the *Shouldice #echni$ue developed by founder Dr. dward arle Shouldice. #his precise techni$ue has resulted in early ambulation and higher success rates /greater than 9901 for Shouldice patients for over 22 years. However, what makes Shouldice so successful is that it is not )ust a hernia3healing hospital, it is an e&perience. #o the delight of patients, Shouldice is more like a country club than a hospital+ warm, inviting, and rela&ing versus cold, sterile, and frightening. #he main house, reminiscent of a mansion, is situated on a sprawling 4! acre estate outside of #oronto, 5anada. #he comprehensive patient e&perience includes orientation, evening tea, patient sociali-ing, and encouraging nurses and housekeepers. #he service continues beyond patient stays and continues at free annual check3ups and lavish patient reunions. 6atients actually get this superior techni$ue and remarkable environment for appro&imately half the cost of going elsewhere. 7verall, the Shouldice e&perience is one that patients love and tell their friends and family about, making word3of3mouth the hospital's primary marketing vehicle. Shouldice is also an e&perience for its employees. Shouldice employees are never fired, can participate in profit3sharing, and earn higher wages than union workers and other surgeons. Doctors make appro&imately 20 more than the average surgeon in 7ntario, receive monthly bonuses, and are able to work regular hours leaving them time for personal lives and families. #hese human resource practices have led to e&tremely low turnover, which supports the administration's goal of having very e&perienced staff that can properly and effectively e&ecute the hospital's practices and procedures. #he Shouldice competitive advantage boils down to keys to success, which are the following+ Distinctive techni$ue &perienced staff 5omprehensive patient e&perience #houghtful employee policies
#hese elements work in unison See !ppendi" # Shouldice !dvantage at Shouldice to promote healthy and happy patients, in addition to content and loyal staff. As the hospital itself states, *Shouldice Hospital is a total environment. Bottleneck Analysis See !ppendi" & !nalysis !ssumptions
'rocess (low
*ncomin! +atients
Bottlenec k
#ay $
42 Exams
4 Sent Home
33 Sur!eries
3 Sur!ery "andidates
( Beds Availa)le
#ay 2
Bottlenec k
$$' Extended Stay
#ay 2%&
#ischar!ed
#ay 4%&
)ottle nec * Shouldice has the capacity to perform e&aminations per afternoon and send 48 eligible patients to the ope rat ion roo ms. Howeve r, it onl y performs 44 operations per day, so the bottle nec k b etween these p rocesses is the number of operations being per formed per day.
Shouldice performs 44 operations per day, which generate daily bed demand of " on :ednesday and #hursday, and 99 on #uesday / See !ppendi" + Shouldice"ls 1, all e&ceeding the current bedding capacity of 89. So between these processes, the number of available beds is the bottle nec k. 7verall, the bottleneck for Shouldice is the number of available beds. #he hospital has to increase its bed capacity by 4!0 ;/"3891orning operations+ /
!ct ual ope ration capacity 5onsider morning operations between 8+4!A> to +4! 6> 3 Available slots per room @ /1?/"! min1 #otal operation capacity per morning @ /!1/21 @ 2
#herefore, total operation capacity per day e$uals 48
4
As we established above, the current bottleneck lies in the room capacity of 89 and that an increase in the number of rooms will fi& this bottleneck. #he ne&t $uestion then becomes % how many rooms should be addedC #o answer this, we asked ourselves how many operations the hospital could perform if the current 89 room capacity did not e&ist. n analy-ing the *ne&t bottleneck, we found that the number of operating rooms would be the ne&t constraining resource. 5urrently there are 4! to 4" operations performed daily at the clinic, for an average of 44 operations. Spread across the 2 e&isting operating rooms, this averages out to "." operations per room, per day, with some rooms having E operations per day and some rooms having only ". Froken down to the specific hours of the day, assuming that there are operations performed in each room during the morning hours /from E+4! A> to +4! 6>1, a total of ! operations are performed before lunch each day at the clinic. After lunch, the remaining 4 operations are performed. :e believe that this represents an opportunity for improvement. Since each of the normal operations take hour, and there are 2 hours available during the morning, 2 operations could be scheduled in each operating room from E+4! A> to +4! 6>. #his would represent an increase of operation per room, or a total of 2 across the 2 operating rooms per day at the hospital. 5urrently we do not see any opportunity for improvement during the afternoon session, as there are only 4 hours available in each room and a small amount of slack must be built in to the model to allow for a small percentage of the procedures that take 9! minutes. #he resulting model would have 2 operations performed each morning and 4 performed each afternoon, for a total of 48 operations each day. A comparison of the current model and the revised model is shown in the diagram below+
#he new model of 48 procedures per day, when scheduled across a 2 day week, results in a schedule that re$uires at least 44 rooms be available during peak days of the week. #he diagram below illustrates the revised hospital admittance schedule and resulting peak day capacities+
#he new need for 44 rooms represents a 2!0 increase in capacity when compared to the current capacity of 89 rooms. ,ecommendation Analysis See !ppendi" 4 !lternative, .on/(easible ecommendations
ec ommendati on Shouldice should invest G>> in a new unit, which will increase bed capacity by 2!0 and re$uire its surgeons to perform Saturday surgeries. )ottle nec * Since Saturday operations do not re$uire higher bedding capacity, the result is the following+ Fed capacity will increase to /891?/2!01 @ 44, which e&ceeds the number of beds currently needed /"1 thus eliminating bedding capacity as the bottleneck. :ith 44 beds available, 48 new patients can be accommodated per day, thus 48 operations can be performed per day. #he daily e&amination capacity, daily operation capacity, and number of beds available all line up perfectly, with no individual factor as bottleneck.
-ost1evenue 5urrent profit per operation @ G2E See !ppendi" + Shouldice"ls Bumber of added operations per year @ /E"!!<441 ?/481?/ !013 /E"!!1 @ 9! 6rofit increase @ /G2E1?/9!1 @ G,"2",E
"onclusion
Fased on the $ualitative and $uantitative analysis provided herein, our recommendation is that Shouldice should invest G>> in a new unit that will increase the hospital bed capacity b y 2!0 and re$uire its surgeons to perform Saturda y surgeries. :ith this plan, the throughput rate increases to 480 /9!
2
Appendix $: Shouldice Advanta!e
Distinctive Technique
Comprehensive Patient Experience
Thoughtful Employee Policies
Experienced Staff
"
Appendix 2: Analysis Assumptions
2nown . . 4. . 2.
facts #here are " e&am rooms. ach e&amination takes ! minutes. #here are 2 operation rooms. #here are total of 89 beds for patient accommodation. Bo surgeries on Saturday or Sunday.
!ssumptio ns . Surgeons e&amine incoming patients from +4! 6> to +!! 6> /2! minutes1 Sunday through #hursday. . !0 of patients e&amined in the facility are sent back home. 4. 44 operations are performed each day >onday through riday. . 6rimary operations take 2 minutes to finish, recurrence operations take 9! minutes to finish. 2. !0 of all the operations are recurrence operations. ". Assistant surgeons, nurses and house keeping staff have no impact on the overall capacity. E. Average patient hospital stay is 4.2 nights. 8. Adding number of operations doesn't change net profit per operation. 9. 7nly operation process and financial performance are analy-ed, human factor is not considered in this part of the analysis. !. new unit is included in analysis as an additional room, rather than separating room for renovation and room for a new unit. . Saturday surgeries will not increase surgeon's weekly hours at the hospital. -alculations >a&imum e&ams per room+ /2!1a&imum e&ams per day+ /E1?/"1 @ >a&imum number of patients eligible for operation per day+ /1?/9!01 @ 48 Surgeon utili-ation in the morning+ /21
E
Appendix 3: Shouldice-xls
)ed -apacity
Daily Admit Iate Bumber of Feds Stay (ength
nputs 33 ( 3
Saturday Surgery
.o
>onday #uesday :ednesday #hursday riday Saturday Sunday 0otal .um)er in Hospital
*nputs: Admit rate, Bumber of Feds, Bights of stay, Saturday surgeries Outputs: Bumber of beds used each night
.i!hts
Arrived on >onda
>onday 33 ! ! ! ! ! 44
#uesday 44 33 ! ! ! ! 44
:ednesday 44 44 33 ! ! ! !
#hursday ! 44 44 33 ! ! !
riday ! ! 44 44 / ! !
Saturday ! ! ! 44 ! / !
Sunday ! ! ! ! ! ! 33
''
((
((
((
''
33
33
'rofit !nalysis +rocess #otal 7perations
E"!! 44 89
Bud!et Hospital 5linic #otal 5ost per operation 7perations per doctor
82!!!!! 42!!!!! !!!!!! 2E9 E"!
,evenue Ioom 5harge for 4.2 nights Surgery 5harge/all surgery1 #otal 5harge per 7peration #otal revenue for operations Ievenue for general anesthesia 7verall revenue Ievenue per operation #otal 6rofit 6rofit per 7peration
! "2! !9! 288!!! 2"!!! "4!!!! 2! 4!!!! 2E
8
Appendix 4: Alternative1 .on%easi)le ,ecommendations Additional Bedsloor "ost
High+ G>>
"omplexity
High+ 6lanning, construction, etc.
Saturday Sur!eries
(ow+ Small increase in doctor's salaries (ow+ 7nly impacts doctor's schedules
High+ >oderate+ "apacity%Buildin! Directly addresses the bottleneck 5apacity !0 but does not +otential J increases beds by 2!0 address the bottleneck
"onstituent *mpact
Allows more patients to be serviced K Shouldice Has minimal impact on staff
5hair of the Foard J 5hief Surgeon opposed along w<!0 of older doctors 5ould create wedge between young J old in environment where e&perience is key
ranchisin!
>oderate
>oderate (ow+ Does not address capacity issues at current facility Difficult to control $uality of service Frand e$uity potentially compromised >ay take some business from current facility
!ltern ative ec ommendation 3# nvest G>> in a new unit to increase bed capacity by 2!0. )ottle nec * Fed capacity will increase to /891?/2!01 @ 44, which e&ceeds the number of beds currently needed /"1 thus eliminating bedding capacity as the bottleneck. :ith 44 beds available, 48 new patients can be accommodated per day, thus 48 operations can be performed per day. n this scenario, the daily e&amination capacity, daily operation capacity, and number of beds available all line up perfectly, with no individual factor as bottleneck.
-ost1evenue 5urrent profit per operation @ G2E See !ppendi" + Shouldice"ls 6rofit increase after increasing bedding capacity and number of operations is /G2E1?/E"!!<44?483E"!!1 @ G"2E,22
-onclusion Bo. 7perations+ 20 Fottleneck+ liminated nvestment 6ayback+ " years
!ltern ative ec ommendation 3& 6erform Saturday surgeries without making other facility changes. )ottle nec *
9
>a&imum number of beds needed remains the same at ", but number of days that bed ding n eeds e&ceed bedding capac ity inc reases fro m 4 /#ues, :ed, and #hur s1 to / #ues, :ed, #hurs, and ri1.
-ost1evenue 5urrently profit per operation @ G2E See !ppendi" + Shouldice"ls 6rofit increase after adding operations @ /G2E1?/E"!!1?/!01 @ G8"8,!!!
-onclusion Bo. 7perations+ !0 Fottleneck+ Aggravated Bo Lpfront nvestment, profit increase !0
!lternative ecommendation 3+ ranchise additional, off3site locations to e&pand operational capacity. )ottle nec * Bo initia l b ottlen ecks would e&ist at fra nchised loc ations, but that will not las t
-ost1evenue qualitative Iapid e&pansion % domestic and international % increases revenue flow Iemove management and operational burden at main facility Iemove potential conflict between older and younger doctors (essens threat of disrupting corporate culture >eet competitive threat
-onclusion Muality of service
!
