1. Shouldic
e
Hospital
Case
Section B Group 6
Anshuman Jaiswal
G09051
Devendra Gondane
G09056
Milind Khadke
G09066
Sridhar
Thiagarajan
G09089

2. XLRI GMP 2009-10 Section B Group 6
1. What is the core service, funding mechanism, employee management
system and customer management system for shouldice?
Core service of Shouldice Hospital
We think the hospital’s core service is the experience the patient gets
during his treatment for a hernia. The Hospital has specialized in treating
patients of external hernia using a special technique performed under local
anesthesia and sedation. This allowed the patients to be ambulatory
immediately after the surgery and reduced the length of stay of the patient
in the hospital as well as the cost of surgery and stay at the hospital. The
patients were mobilized immediately after the surgery, right from the
operation table, which gave them confidence to be active the whole day
after that. The patients operated on a particular day interacted with the
patients to be operated the other day, thus motivating them and allaying
their anxiety about the surgery. The patients were also allowed to interact
with the staff members over lunch and constantly kept moving out to have
recreation or make calls to their loved ones. The hospital floors were
carpeted which not only gave the patients a feeling different from other
typical hospitals but also protected them in cases of accidental fall. They
were discharged immediately on the morning of the fourth day. Thus the
core service provided by the hospital was an experience which the
patients of hernia had before, during and after their surgery in the hospital
in a highly interactive and motivating environment.
Funding Mechanism
The hospital performed around 7600 surgeries in a year and would charge
the patient just $970 for the surgery and the room rent of $320 for a day.
Thus the four day stay of the patient and the surgery would cost the
patient just (320*3 + 970) = $1930 and an additional $300 if general
anesthesia is required (20% of the total cases). Thus the hospital worked
on the principle of attracting volume and giving standardized care to all
patients. Every year it made a profit of approximately $3 million-
calculations shown below
3 days
Stay
Number of surgeries 7600
Revenue per patient 1930
additional revenue from
anesthesia charges 300
146680
Total revenue from surgeries 00
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3. XLRI GMP 2009-10 Section B Group 6
Revenue from anesthesia (20%) 456000
151240
Total revenue 00
850000
Operating cost of hospital 0
350000
Operating cost of clinics 0
120000
Total Cost 00
312400
Profit per year 0
Thus the hospital has self funding and sustainable.
Employee management
The hospital has maintained the service profit chain by keeping its
employees happy and satisfied and gaining the employee engagement.
Good work environment and professional satisfaction of the employees
guaranteed their professional loyalty which in turn resulted in high quality
service. This was valued by the client and thus resulted in patient
satisfaction and thus profits to the hospital. Also the word of mouth effect
on the hospital popularity was very high.
Doctors: There are 10 full time doctors and 8 part-time assistant surgeons
with two anesthetists in the hospital. Each doctor performed 3-4 surgeries
a day and worked five days a week with very few weekend calls and still
getting much more salaries than their counterparts in any other hospital in
Toronto. Moreover, they could spend sufficient time with their families as
their day at work ended at just 4 pm. They also shared hospital profits in
the form of bonus.
Surgeons had to follow the same technique for every surgery and could
get help of seniors in difficult cases. The cases of recurrences of hernia in
operated patients were assigned to the same doctor who operated him
previously to allow them to learn from their mistakes.
Nurses- Nurses also enjoyed working at Shouldice as their main job was to
counsel and motivate the patients rather than providing bed pans. Due to
this the hospital is able to manage the operations with only 34 nurses,
though there is a big waiting list of nurses wanting to be hired.
Housekeeping staff is also required to change the linens once in four days
and played a major role in mobilizing the patients. The patients had their
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4. XLRI GMP 2009-10 Section B Group 6
meals in the cafeteria and no room service personnel had to be employed.
All the administrative and support staff received higher pay scales than
other comparable jobs and shared the profit of the hospital. So they were
all satisfied and loyal. Also multitasking is encouraged in the hospital so
that emergencies can be tackled efficiently.
Customer management system
Around 10% of the patients came from United States and 60% from outside
Toronto. The diagnosis of hernia was done on the basis of questionnaire
and the patients are given the date for surgery. In this way the patient
need not visit the hospital twice for diagnosis and treatment. After their
arrival, the patients were motivated to interact with those who had already
been operated on the same day. The anesthesia was limited to local
anesthesia and sedation so that the patient can be mobilized right from
the operating table after the surgery. The nursing and housekeeping staff
kept motivating the patients to move around. The patients could move
freely inside the hospital, make new friends and enjoy the recreation
facilities inside the hospital. On the fourth day morning the patient could go
home. The pricing pattern of the hospital was same for all the patients and
allowed the patient to save at least $3000 from the surgery. Thus, the
customers were managed in a very different way than other hospitals
which made them so happy that the hospital relied entirely on word of
mouth advertizing.
2. The Hospital is severely constrained for space. Could you make a
throughput analysis?
Throughput analysis
Patient is first diagnosed of hernia through a questionnaire that is mailed to
the patient, following which a date for surgery is given. From the day of his
arrival the patient undergoes the following-
Day-1
1pm-3pm Arrival at the hospital and check up by surgeons
3pm-4.30pm Occupy their allotted rooms
4.30 pm Nurses' orientation
Evening Dinner
9pm Tea and cookies with recreation and interaction with
patients operated on same morning
Day-2
5.30am Sedation tablet given
7.30am First patient for surgery
patient walks to the recovery room straight from the
8.30 am operation table
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5. XLRI GMP 2009-10 Section B Group 6
Evening Dinner
Tea and cookies and interaction with newly admitted
9pm patients
Day-3
Whole day Making new friends and recreation.
Day-4
Morning Discharge
A patient is released on 4th day morning and hence cycle time is 3 days.
In a year 7600 patients are operated. Daily 30-35 patients are operated.
Thus daily 30-35 patients are discharged in the morning and another
30-35 patients are admitted in the afternoon. Total capacity of the hospital
is 89. In 250 working days in the year (excluding Saturday and Sunday) 30
patients are changed every day. Each patient stays for 3 days so the total
turnover of patients per year is 30*250=7500 (app.).
There is a total waiting list of 2400 patients and the waiting list is
increasing by 100 every six months. If the patient is discharged
immediately on the next day after the surgery then the total patients that
can be treated by the hospital in a year will be approximately 11000. This
will have an effect in decreasing the waiting list as well as increasing the
revenues.
3 days 2 day
Stay Stay
Number of surgeries 7600 11350
Revenue per patient 1930 1610
additional revenue from
anesthesia charges 300 300
146680 182735
Total revenue from surgeries 00 00
Revenue from anesthesia (20%) 456000 681000
151240 189545
Total revenue 00 00
850000 935000
Operating cost of hospital 0 0
350000 385000
Operating cost of clinics 0 0
120000 132000
Total Cost 00 00
312400 575450
Profit per year 0 0
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6. XLRI GMP 2009-10 Section B Group 6
25.33
Increase in revenues %
84.20
Increase in Profits %
3. The hospital is considering increase in capacity and has 3 options
A. addition of a floor
b. Make Saturday Working
c. Open another Hospital
You need to evaluate each of the options from funding mechanism;
customer management and employee management
a. Addition of Floor – Hospital campus is spread over 130 acres and building is
17000 sq ft big. This is big enough space for operating 89 bed hospital.
Addition of another floor would he an easy option as compared to other
options as service delivery and culture of Hospital can easily be preserved
but there is uncertainty over Government Regulations and it is not clear
whether it applies to expansion of existing facility. It would perhaps be
cheaper as compared to opening another hospital.
b. Make Saturday Working - Making Saturday working is less preferable option as it
would increase the capacity by 20% because of divide in opinion among
older and younger doctors. Also, current chief Surgeon, Dr Degani is
against Saturday working. Although this seems to be a minor issue, but in
reality it has a big impact on Doctor’s experience. A doctor repeatedly
follows a standard procedure and misses on variety but enjoy better pay
and more time for family. Hence, Making Saturday working leads to
dissatisfaction among doctors and internal staff, which very crucial in
maintaining the excellence in service delivery.
c. Open another Hospital - A new hospital could be started in Toronto, any other
Canadian city or in US as 10% of customers come from US. There are some
regulations which are casting doubts in considering this option. Opening
hospital in other Canadian cities or US poses a tremendous challenge in
terms of replicating the Doctor-Patient-Nurse –Experience. The unique
procedure, staff motivation, doctors dedication is not easily transferrable
and hence, chance of brand dilution and service compromise is huge. If we
open another 45 bed hospital(50% expansion) we can perform incremental
3800 operations/ year or 315 operations per month and hence would be
able to clear backlog in 8 months and would carry surplus capacity
thereafter as growth of patients is 2% per year and hence would require
extensive marketing and advertising to consume the surplus created. This
option is market oriented but sophistication involved in replication of
services would make it non preferable choice. Since, Hospital is profitable,
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7. XLRI GMP 2009-10 Section B Group 6
it can fund $4mn but creating same customer management levels and
employee management would be a challenge.
Among the three options, Addition of floor or expansion of existing hospital is preferred but there
is another option which could be considered and we think is most optimized solution.
Another Option:
Currently, the patient stays for 2.5 days and is discharged on the 4th day. If
we notice the patient is active the very day of operation and hence extra
day of stay could be avoided. Hence if we cut down the stay from 2.5 to 1.5
days and start discharging on 3rd day morning instead of 4th day morning,
we can create additional capacity as follows:
Current procedure takes 2.5 days and hence 100 units of operations in 250
days (Sat and sun are off) in a year. Hence, if we reduce the unit of
operation by one day, we should create extra 30 free beds for patients to
occupy on alternate days which means if add doctors and nursing staff and
expand capacity to 60 from 30 operations per day, we could boost the
capacity by internal productivity
Incremental
Current System Proposed system operations
1st
day admit 30 admit 60 0
2nd operate 30, admit 30, operate 60, admit 30,
day free 30 beds free bed =0 30
3rd relax 30, admit 30, admit 60, operate 30,
day operate 30 free bed =0 0
4th operate 60, admit 30,
day free bed =0 30
This means we will able to operate 30 extra operations on every alternate day
translating into 125 days * 30 = 3750 incremental operations per year. This can
clear waitlist in 7 months. This is alternative solutions which could be considered.
This model is based upon using the internal capacities to fullest and is based on
fact that early ambulation and discharge seems to be possible the very next day
of operation.
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8. XLRI GMP 2009-10 Section B Group 6
4. This is a typical case which discusses "Reach" versus “Richness" concept.
Could you draw up a positioning map of the hospitals/ Medical Services/
Doctors you know on these parameters?
R
I Clinic owned by
Doctor(s) and ?
C Standalone
Hospital like
H Hospital
N Chains such
Doctors as Apollo
E practicing Governmen
Alternate t Hospitals
S
S
R E A C H
Based on concepts of Rich versus Reach, we can position various medical
service providers as shown above.
Medical service providers
1. Limited Reach, and Highly Rich/custom service
a. Clinic Owned by one Doctor
b. Clinic Owned by group of Doctors
c. Standalone Hospital
2. Medium Reach, and Medium Rich/custom service
a. Hospital Chains such as Fortis and Apollo
3. High on Reach, and Low on Rich/custom service
a. Government Hospital in Indian Context
4. Low on Reach and Rich/custom service
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9. XLRI GMP 2009-10 Section B Group 6
a. Doctors practicing alternate medicines
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