1. SHOULDICE HOSPITAL
Presentation submitted by Group 8

2. Agenda
• History of Shouldice Hospital
• Market served
• Service at Shouldice
• Process structure
• Evidence of success of Shouldice Hospital
• Patients
• Profitability
• Cost to patients
• Operational Concept
• Service delivery system
• Causes of service success
• Options to expand

3. History
• Dr. Edward Earle Shouldice
• Performed his first postmorterm of cow at age of 12
• graduated from the University of Toronto in 1916.
• During World War II, he pioneered in pernicious anemia,
intestinal obstruction, hydrocephalic cases etc.
• July 1945:
• First hospital was formed on request of civilians who
wanted to get their hernias operated
• 6 room nursing home
• Later grew to 130 acre estate, at Thornhill.
• Dr. Nicholas Obney
• Surgeon in chief and chairman of board of Shouldice
hospital after death of Dr. Shouldice (1965)

4. Market Served
• focus on a narrow segment of potential patients who have hernia
• they are predominantly male,
• older in age,
• essentially in good health
• large market potential: 600,000 operations in US in 1979

5. Focus Segment
Responsiveness
Shouldice
high
operations frontier
One general
facility
World-class
General
low
Hospital
Low High
Variety

6. Service at Shouldice
What is the service concept of the hospital?
• To the patient:
• Peace of mind
• A holiday experience
• New friends – a fraternity
• You are special but treatment is standard
• To the employee:
• A direct professional contribution
• A team and a place in the team

7. Process Structure:
Potential Patients
REJECTS REJECTS
ROOM
Questionaire Diagnosis
Waiting List Waiting Room
30 days max. wait
Billing
Waiting Room
20 min Examinations 5/10 minutes
Less than 10 min.
ROOM
Orientation Dinner Tea & cookie
Socialization
7

8. Service success at Shouldice
Evidence of service success:
• The reunion
• The recommendation to others
• The extended orderbook
• The position of potential expansion
• The profitability of the hospital
• The value to patients
• The motivation of the employees

9. Profitabilityat Shouldice
Evidence of profitability
• For the Hospital:
Revenues: 4 days x $111 x 6850 patients = $3,040,000
Costs (pg.10) = $2,800,000
Profit = $ 240,000
• For the Clinic:
Revenues: $510 x 6850 + 20% anaesthetic ($75 x 6850) = $3,596,000
Cost (pg.10) = $2,000,000
Profit = $1,596,000

10. Cost to patient at Shouldice
Shouldice Other hospitals
Operating cost (pg.13) $95 $2000 – 4000
Transportation 200 – 600
Time lost from work at Hospital 5 days 10 days
(pg. 07)
Time lost from work recovering 5 days 10 days
Value @ 50 to 500 / day $1,600 - $6050 $2,250 - $11,500
Recurrence 0.8% 10%
Weighted cost $15 – 20 $275 – $1,150
Total all costs $1,615 - $6,100 $3,025 - $12,650

11. Operating Concept
• Shouldicce achieves outstanding results as a low price and at a
high profit because:
• Everything done by the hospital is designed to maximize the difference
between perceived quality and the value of the service provided patients
on one hand and
• the cost of providing the service on the other.

12. Service delivery system at
Shouldice
• Standardisation: screening of patients
• Participation: patients do much of the work
• Work environment: staff freed from usual disagreeable work
• Economics: sharing of expensive services
• Best practice: interaction of surgeons
• Motivation: all employees interface with the customer
Facilities for patients:
• Avoidance of hospital atmosphere
• Use of TVs, ‘phones
• The Schedule and Programme (keep moving!)
• Stairways
• Operating rooms in semi-circle

13. Explaining Service success of
Shouldice
• Every employee has a role
• Every employee interfaces with ‘customer’
• Control of customer input
• Necessary flexibility to keep to schedule
• Small enough to work;
big enough to be known

14. Future expansion options
• Capacity at present:
6850 operations/50 weeks = 137 patients/week
Examination Room 270 patients / week
Admitting Procedure 240 patients / week
Nurses’ Station 240 patients / week
Operating Room 188 patients / week
Doctors 178 patients / week
Rooms 89 = 134 patients / week
103 = 148 patients / week
 Bottleneck: number of rooms

15. Future expansion options
• Add a floor (45 more beds)
• 29% increase, $930,000/year, i.e. 45% return on investment
• Add a Saturday shift
• 148 to 177 patients/week = $627,000 /year
• Develop another facility
• Replicate Shouldice on new specialty
• BUT: when will service system break down?
• for patients
• for individual employees
• for team and concept

16. Thank You