Operation Management Case on

Shouldice
Hospital
Group 4

Niteen Kumar Singh

(1511264)

Nikhitha Bandi

(1511262)

Shah Harsh Laxmikant (1511284)

Solanki Halder

(1511286)

Sudipta Das

(1511289)

Question 1- How successful is the Shouldice Hospital?

Founded in 1945, Shouldice hospital is a global leader in Hernia operation. Operating around
7600 patients per year, it is way ahead of other hospitals in the same field. We can measure
success of Shouldice on basis of below parameters
a) Cost effectiveness and Profitability - Shouldice hospital is currently highly profitable
(26% as per Table 1) business despite charging around 63% (Table 2) less price to
majority of patients compared to other hospitals.
PARAMETER
DATA INPUT
Total operations
7600
Operations without anaesthesia (80%)
6080
Operations with anaesthesia (20%)
1520
Revenue per patient for no anaesthesia
$(320*4) +$650 = $1930
Revenue per patient with anaesthesia case
$(320*4)+$650+$300 = $2230
Total Revenue(R)
(1520*2230)+(6080*1930)= $15.12 Mn
Total Cost incurred (C)
8.5 + 3.5 = $12 Mn
Profit for the year (R-C)
$3.12 Mn
Profitability (R-C)/C
26%
Table 1
b) High Demand for Shouldice Procedure Due to the success of highly effective
operation procedure of Hernia at Shouldice, the demand is very high and it led Shouldice
to create a new facility of 130 acre estate with a 17,000 square foot main house. Despite
of this there is still a backlog of 2400 cases which is growing by 100 cases every six
months.
c) Good incentives to staffShouldice is a profitable business and some percentage of profit
is being offered as bonus to the employees, which is a good incentive. It is substantiated
with low turnover rates at Shouldice and nurses waiting to join it whereas other hospitals
are facing shortage of nurses. Shouldice doctors are getting salaries around $144,000 with
addition of monthly bonus, which is 15% higher than average income of doctors in
Ontario.
d) Word-of-Mouth Advertisement Most potential Shouldice patients learned about the
hospital from previous Shouldice patients, friends or relatives (69.77% as per case exhibit
3). It was popular as patients cared about cost effectiveness, simple procedures, low
recurrence of hernia and service (Case Exhibit 3 Nursing facility rated important by
more than 97% and 68% rated that it didnt seem like hospital). For fear of too much
demand it doesnt share brochures and this shows hospitals services are well recognized
by the general public.
e) Emulation by competitors - The operation procedure is so famous and successful that
other hospitals are also copying Shouldice and thus Shouldice can patent its existing
procedure so that other hospitals cant copy them.
Parameter
Fees Charges (4*$320+
$650)
Fees Charges (4*$320+

Shouldice
Hospital (B)
$1930

Average of other
hospitals (C)
$5240

Ratio (B/C)

$2230

$5240

0.43

0.37

$650+$300(A))
Hernia Recurrences

0.8%

$10%

0.08

Table 2
Question 2. How do you account for its performance?
Shouldice hospital is able to perform well because of various reasons which are as follows:Resource utilization:1) Beds: -If there are 29.23 operations at an average on a normal weekday, the maximum
patients that the hospital should be able to accommodate is 29.23*3 (as per exhibit 2 the
maximum patients admitted will be 3 times the number of average operations in a day)
which is ~ 88 as they are discharged on the morning of 4 th day. The hospital has 89 beds.
So the utilization of beds is 98.88% (88/89*100) which is very high. So this might
become a bottleneck if some of the patients may want to stay for an extra day and hospital
can focus on getting more beds.
2) Operation theatre: - The facility has 5 operation theatres and the maximum operations
that could be performed in a day would be 40 as per the Gantt chart (Exhibit 1). Here it is
assumed that the operation take 45 minutes and then 5 minutes are required for
operational activities and scrubbing is done parallel by the doctor who is responsible for
the next surgery. So if the average operations in a day is 29.23, the utilization is 73.08%
(29.23/40*100) which is good.
3) Doctors:- We have 10 full-time surgeons and 8 part-time assistant surgeons. One
operation needs 1 surgeon and 1 assistant. There were 7600 operations performed in year
which means roughly 29.23 operations in a day. One doctor can perform maximum 7
operations in a day (4 in morning slot and 3 in afternoon slot as per the given case) and
there are 10 doctors so in total they can do 70 operations. So the utilisation of doctors is
41.76% (29.23*100/70) which is not very good.
4) Nurses and other staff: - The ratio of nurse to patient at Shouldice was 1:15 which is
much lower than the industry standard which 1:4. As they dont have the concept of
bedpans and they encourage patients to stay out of their bed, they have reduced the
requirement of general staff. Thus they have been able to reduce the general staff
requirement in a very innovative way.
Standard Operating Procedure: - The surgeons at Shouldice are required to follow a
standard method in which they should operate a regular hernia patient. A typical surgeon may
perform roughly 25 to 50 hernia operations in a year while the surgeons at Shouldice can
perform 750 in a year. Thus the SOP helps the surgeons to complete the many operations in a
very short duration.
Higher effectiveness of operations: - The average recurrence rate of hernia is 10% while for
the patients who were operated at Shouldice, it was only 0.8%. So the effectiveness of the
operation done was very high.
Out of town patients:- The preliminary diagnosis of these patients is done over mail with the
help of medical questionnaire. Surgeons use this information to inform the patients the next
action items and this saves lot of time for the patients like travel time and wait time.
Resource pooling: - At Shouldice, anaesthetists use 2 mobile units and thus the average
furnishing cost of an operating room is very low as compared to other hospitals. So they
utilized their instruments in a better fashion.

Backlog: - Shouldice has not been able to keep up with the demand. The current backlog
count is 2400 and is increasing at a rate of 100 per six months. So they have not been able to
keep up with the demand.
Question 3: As Dr. Shouldice, what actions, if any, would you take to expand the
hospitals capacity?
We have 3 options to expand the capacity of the Shouldice Hospital.
Option 1: Increase the number of operations by operating not only on weekdays but also on
Saturdays too. This will increase the capacity by 20%.
Option 2: Increase the operational efficiency of the operating rooms and expanding the
number of beds by 50%
Option 3: Investing to open up a new hospital facility at United States.
Option 1:
Currently operations in the Hospital happens only on weekday (Monday to Friday). But it can
be extended to the 6 days (Monday to Saturday) in a week.
Beds available = 89
So maximum number of operations per day = 30 (89/3 ~ 30 as per exhibit 2)
Number of operations per week= 30*6=180
Number of operations per year=180*52= 9360 (assuming 52 weeks per year)
Current operations per year= 7600
New throughput for year= 9360
Increase in throughput in a year = 9360-7600= 1760
% increase in throughput= 1760/7600 = 23.15%
Current backlog count= 2400
%Utilization of operation theatre = 30/40*100 = 75% (assuming at max 40 operations
can be done in a day if there are 5 operating theatres as per Gantt chart in Exhibit 1)
Since increase in throughput in a year is lower than the current backlog count, Shouldice will
not be able to meet the demand in one year. Also the backlog count is increasing by 100 every
six months and four of the older doctors oppose working on Saturday. So this doesnt seem to
be a viable solution.
Option 2:
On scheduling the operating rooms heavily and also increasing the number of beds by 50%
by investing about $4million we can increase operating efficiency.
Maximum number of operations per day=40 (Exhibit 1 Gantt chart)
Number of operations per year= 40*5*52=10400
Beds required = 40*3 = 120 (Exhibit 3)
New bed capacity = 89*1.5 = 134 (so 40 operations possible)
Current operations per year= 7600
New throughput for year=10400
Operating efficiency=36.8%
Increase in throughput in a year=10400-7600=2800
Current backlog count= 2400
%Utilization of operation theatre = 40/40*100 = 100%

So by increasing the capacity by 50%, Shouldice will be able to catch-up with its previous
backlog of 2400 and another 200 which will turn-up in the next year. Also in this case they
are able to utilize the operation theatres in a better way as compared to option 1.
Option 3:
This option discusses about setting up a new hospital facility at the United States or Toronto.
Considering the high costs involved, only 10% patients from US, government regulations and
more competition in US, it is not a good option.

Conclusion:
Option 3 is ruled out due several reasons. Shouldice should opt for option 2 where hospital is
able to meet the existing demand and also able to clear the backlog, which is not possible in
option 1. Also option 2 will be a better option in long run as the utilization of operation
theatre will be better.

Question 4: How would you implement changes you propose?

Our proposal is to increase the number of operations to 40 per day (as per Table 3 and Gantt
Chart in Exhibit 1) by scheduling more number of operations. We also have to increase the
number of beds by 50% to accommodate the additional patients. Each of these operations
include 45 minutes of operational activates and post operational activities of 5 minutes. Here
the surgeon who is assigned the next operation can start scrubbing in advance and hence save
roughly 10 minutes before every operation.
Every batch of operations includes 3 operations starting immediately after the operation
theatre gets free and 2 more starting after 15 minutes as Shouldice has only 3 assistants free
at that point of time. The other 2 will need about 15 minutes for post operational activities of
previous operation and scrubbing.
In the afternoon slot (1pm to 4pm), some of the doctors are responsible to examine the
patients who would be operated on the next day and so parallel scrubbing is not possible.
Also all the recurrence or difficult operations must be scheduled in this slot as the remaining
time can be utilized in examining the patients.
Time slots
7:30 am - 8:20
am
8:20 am - 9:10
am
8:35 am - 9:25
am
9:10 am - 10:00
am
9:25 am - 10:15
am
10:00 am - 10:50
am
10:15 am - 11:05
am

Activity
First 5 regular operations
First batch of 3 regular operations
First batch of 2 regular operations
Second batch of 3 regular
operations
Second batch of 2 regular
operations
Third batch of 3 regular operations
Third batch of 2 regular operations

10.50
am
11.05
am
11.40
am
11.55
pm

am - 11.40

Fourth batch of 3 regular operations

am - 11.55

Fourth batch of 2 regular operations

am - 12.30

Fifth batch of 3 regular operations

am - 12.45

Fifth batch of 2 regular operations

13.00 pm - 14:00
pm
14:00 pm - 15.30
pm

Lunch Break
5 regular operations and scrubbing
5 recurrence or difficult operations

Table 3
Exhibit
Exhibit1:- Gantt chart

Exhibit 2:- Maximum patients possible in a week as per option 1

Day
Sunday Monday Tuesday Wednesday Thursday Friday
Patient
30
30
30
30
30
Incomin
g
Admitted
30
30
30
30
30
Patient
Patient
30
30
30
30
Leaving
Total
30
60
90
90
90
60
Exhibit 3:- Maximum patients possible in a week as per option 2
Day
Sunday Monday Tuesday Wednesday Thursday Friday

Saturday

30
30
Saturday
5

Patient
40
Incomin
g
Admitted
Patient
Patient
Leaving
Total
40

40

40

40

40

40

40

40

40

40

40

40

40

40

40

120

120

120

80

40

80

Exhibit 4:- Process Flow for hospital

Exhibit 5:- Process Flow for doctor