Shouldice Hospital – A Cut Above
CASE FACTS
Shouldice Hospital in Canada is widely known for hernia operations
Over the past two decades, the small 90-bed hospital has averaged 7,000 operations
annually and performed nearly 7,500 operations in the previous year
Shouldice’s service delivery system’s winning features:
o Shouldice accepts only patients with the uncomplicated external hernias
o Patients are subject to early ambulation, which promotes healing
o Its country club atmosphere, gregarious nursing staff, and built-in socialising
make a surprisingly pleasant experience
o All patients are paired up with a roommate with similar background and interests.
THE PRODUCTION SYSTEM
The medical facilities at Shouldice consist of 5 operating rooms, 1 patient recovery room,
1 laboratory and 6 six examination rooms.
Shouldice performs, on average, 150 operations per week, with patients generally staying
at the hospital for three days.
The nurse to patient ratio is 1:15 while the industry standard being 1:4
12 full-time surgeons, 7 part-time assistant surgeons, 2 anaesthetists form the team
Operating team has 1 surgeon, 1 assistant surgeon, 1 scrub nurse & 1 circulating nurse
30-36 operations are performed per day with a surgeon handling 3-4 surgeries per day
The surgeons’ day ends at 4 P.M., although they can expect to be on call every 14th night
and every 10th weekend.
CASE QUESTIONS
1- What is the market for the service? How successful is Shouldice Hospital?
The target demographic comprises of mostly males as they are more prone to a hernia.
Moreover, It is ensured that the complex cases are refused for operations
In a year, almost 1,000,000 operations were performed in US in 2000. So, it was a
lucrative market to grab a considerable market share
Shouldice Hospital performance in year 2004 –
Number of operating days- 365-52*2= 261 with 30-36 operations per day
7830 – 9396 operations per year by Shouldice hospital
Demand (2004)- 10230 – 11796 operations
Backlog operations- 2400 with 200 backlog operations increasing every year
There is a clear demand and supply gap in case of Shouldice Hospital
Reasons For High Demand
Hospital relied on word of mouth recommendations, fast-tracked by free annual checkups
for alumni and reunion featuring dinner and floor show attended by 1000 former patients
Hospital also relied on the wealthy as well as low-income group( or financially
challenged) of patients
Hospital stay costs –
$ 320 per day or $1280 for 4 days ; Surgical fee -$650 ; General anesthesia fee - $300
(20% cases); Travel fare -$200-$600
Total costs- $2430 - $2830 (comparison value - $5240), 45.99% - 53.6% lesser cost
Relaxing enclosed environment also enhances the reception of supplementary services an
increases satisfaction in both service encounter and post-purchase stage
2- Define the service model of Shouldice. How does each of its elements
contribute to the hospital's success?
Shouldice Hospital comprised of the following key elements in its service model to perform
Hernia operations-
Customers: Diagnosis by mail was performed
Patient’s activities were predefined, and patients stayed relaxed
Service: Shouldice Method was stringently applied, and only external abdominal hernias
were performed
Facility: Mixed canteen, all carpet flooring, multiple operating rooms facilitated the
whole process
No TVs telephones were provided to enhance patient to patient interaction
Employees: 12 full-time surgeons, 2 part-time surgeons and 2 anaesthetists comprised of the
Shouldice team
Further the following enhanced the sustainability of the model:
Low turnover rates resulting in lower costs
Same doctors were assigned for reoccurring hernias
Continuous training of employees ensured updating of their skills
Doctors were paid relatively higher which provided for their motivation
The maximum degree of customer participation was ensured hence reduced costs
Minimized hospital feeling and homely feeling in return expedited the recovery
Operating rooms were located in a semicircle
Hospital was located near the airport, and hence convenience for patients was high
Patients were screened to avoid any kind of complexity in the operations
3- As doctor Shouldice, what actions if any, would you recommend for
hospital’s capacity expansion
Hospital Capacity:
It is assumed that they are operating at the “best operating level.”
To increase their output and maintain their quality they would need to increase they size
of the plant where the service is provided.
This involves large capital investments and considerable time
Construction would also disrupt the quality and country club atmosphere of the hospital.
The staff also has limited flexibility. Surgeons and surgeons’ assistants are specialized
fields that have limited desire to be cross-trained.
Alternatives available-
a- Add Saturday operations
Advantages: No investment is needed
Can still maintain quality
Disadvantages: Require to schedule 23-25 operations on Saturday
Six surgeons and a supervising surgeon have to work on Saturdays
Violates the implied contract that Shouldice has with its surgeons,
strong opposition by the senior doctors
b- Add a new floor (45 more hospital beds)
Advantages: Easy to control and maintain quality
Retain the culture and environment
Disadvantages: Require to schedule doctors to the full capacity of 5 days per week
The further staggering of meal hours for patients
Disruption during construction, Moderate Investment & Increasing
workload on all
c- Establish a new facility for a hernia
Advantages: New location close to the customers, say the USA
Improve its competitive position and increase its profits
Operate in a less restrictive environment; New Opportunities
Transfer of knowledge and expertise to the new facilities
Disadvantages: Requires a significant investment.
Control of quality
It is difficult to create the same culture and atmosphere
Potential competition with the existing facility
Recommendation
Start operations on Saturdays
• No fresh investment required.
• Can maintain quality.
• New surgeons not required
LEARNINGS FROM THE CASE
It is crucial to decide your target segment and the type of service you want to provide
Word of mouth is a big contributor when it comes to advertisement and needs the least
amount of investment. Ensuring a good word of mouth is all one needs to increase
awareness about his services.
Giving the best service to your customers can also be ensured by having customer
participation in the service itself. It reduces cost and increases customer satisfaction
In the case of expanding your service infrastructure, it should be ensured that current
offerings aren’t diluted in the process. A lost customer is a big threat to the future of any
service provider
