Situational Analysis
Shouldice Hospital is a Toronto based Hospital known for Hernia treatment. It uses a unique method for
surgery which is cost effective as well as helps patient for a speedy recovery. Its annual profit for the year has
been $1.83 [Link] has patients from Canada as well as the USA and has 89 beds capacity at present. The patient
cycle in hospital is shown in exhibit 1. Majority of the patients are from the USA. Dr Byrnes Shouldice, the son
of Dr Earle Shouldice, the founder of Shouldice hospital, is an aspiring Entrepreneur. He faces a few
challenges:
1. Some other doctors have been practicing Hernia operations using the name of the Shouldice method
as Canadian method for their benefits. They had received complaints from some people stating their
methods ineffective when the case was they did not treat them. Such cases can damage their
reputation
2. They have a backlog of scheduled operations. They have around 1200 patients to be treated, and he
also sees a lot of growth opportunity in this market. Failing to treat these patients at the earliest may
result in losing them out to competitors who are overall rvenue of $1.16M (exhibit 3)
To tackle the above situations, Dr Byrnes Shouldice has few plans :
1. To operate on Saturday and increase efficiency by 20%.: Currently, The hospital doesn’t operate on
Saturday. Only one surgeon is assigned on a rotation basis for every ten weekends and is called to the
hospital only in case of emergency.
2. To invest $2 million and add another floor of rooms to the hospital: This investment would increase
bed capacity by 50% and allow more accommodation capacity and schedule operating rooms more
heavily.
3. To have a new hospital in the USA where along with Hernia treatment, provide treatment facilities for
eye surgery, varicose veins and haemorrohids: Looking major of its customers coming from the USA it
can be seen as a prospective market to provide the service.
Also, Dr Obney, the chairman, is 65 and is expected to retire soon. Dr Shouldice has to find someone to
succeed. Dr Obney has been hesistant to introduce changes in old practices, and Dr shouldice feels some of
the new practices could have improved efficiency.
Problem statement
To select the best proposal from the above alternatives considering long term perspective.
Options available
Start operating on Saturday
Add new floor and add more bed capacity.
Start a new hospital in the USA
Criteria for Evaluation
The core competency
The Funding mechanism
The Employee management system
Evaluation of options
Start operating on Saturday: The offerings of the hospital will not change and the hospital need not procur
any additional fund for the same. The employee management can be challenging as the present culture of
hospital fosters work-life balance allowing surgeons to have their weekend. Working on Saturday may affect
the work culture and develop dissatisfaction among the employees. The solution to address this issue can be
seen as incentivising doctors to work on Saturday or hire new doctors so that all doctors get two days off in a
week but not necessarily on Saturday. This increased capacity will increase revenue by $1.36 million. (exhibit
4)
Add new floor and add more bed capacity.: Adding new capacity will require an additional investment of $2
million which is equal to the annual operational cost of the hospital. This investment will increase bed capacity
by 50% capacity leading to 133 beds. For this additional capacity considering three day cycle, around 44
patients may have to be treated regularly. Which implies 8 to 9 operations per day from one operation
theatre, which may require surgeons to work for more hour or hire new surgeons. Also, there is no assurance
that additional capacity may be utilized, which may lead to a loss in investment. The number of treatments
from the new capacity will be 11440(exhibit 5), which is much higher than the present operations of 6850.
The offerings i.e. core competency, will not be affected.
Starting a new hospital: Staring a new hospital will require a huge investment. Also, there is no clarity about
the scope of new treatments provided. Since Shouldice has no expertise in those treatments, a failure in those
domains may affect the reputation of the Shouldice brand. Also, if things don’t work out well, the hospital can
prove out to be sunk cost. Also, the core competency of shouldice has been cost effectiveness which may or
may not be possible to be extended to other treatment methods.
Recommendation
Based on the above analysis, it is recommended to operate on Saturday.
Exhibits
Exhibits – 1
Shouldice Business Process Flow Diagram
Day – 1
Sent Back if operation is
not required/possible
5:30 –
1 -3 p.m 5:00 p.m 6:00 p.m
Blood Patients
15-20 min 5-15 min 10 min 5-10 min Nurse
Examination Waiting Checking/Discussion and Urine move to Orientation Dinner
test 9:30
their room
-10:00 9:00 p.m
p.m
Tea and
Sleep Recreation
cookies
Day – 2
Few min before 7:30 a.m 8:15-8:30 a.m
5:30 a.m 6:45 a.m operation
Taken to Walk to
Patients Administering Administering 45 min 15 min
awake
preoperating Novocain
Operation postopear
Analgesis
room ting room
2nd operation starts
at 8:30 a.m
3rd operation starts
at 9:30 a.m
4th operation starts
at 11:00 a.m
Or 60-90 min
Day – 3
Before 6 :00 a.m 7:45 – 8:15 a.m
a.m
loosening/removing
Awake Breakfast Recreation
skin clip
Day – 4
Before 6 :00 a.m 7:45 – 8:15 a.m
a.m
removing skin
Awake Breakfast Discharge
clip
Exhibit – 2
Profit=Revenue – Cost
Revenue=[ ( 111× 4 )+ ( 450+60+ 0.18× 75 ) ]×6850=$ 6.63 M
Operational cost =2.8+2.2=$ 4.8 M
Profit=6.63−4.8=$ 1.83 M
Exhibit – 3
Potential revenue that can be generated from backlog
Potential Revenue=no of patients ∈backlog× [ (111 × 4 ) + ( 450+ 60+0.18 ×75 ) ]
Potential Revenue=1200 × [ ( 111× 4 ) + ( 450+60+ 0.18 ×75 ) ] =$ 1.16 M
Exhibit – 4
Increase in capacity by operating on Saturday
Increase ∈capacity=0.2∗6850=1370 operations
Potential Revenue=Increase ∈capacity × [ (111 × 4 ) + ( 450+60+0.18 ×75 ) ]
Potential Revenue=1370 × [ ( 111× 4 ) + ( 450+60+ 0.18 ×75 ) ] =$ 1.36 M
Exhibit – 5
Increase in capacity by adding 50% beds
operations per day=0.5∗133=44
Total operation∈ year =44∗5∗52=11,440 operations
