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I really enjoyed my time at Shouldice. It was like ahernia holiday
I was actually sad to leave, we had so much fun...
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HISTORY
Dr. Edward Earle Shouldice graduated from the University ofToronto in 1916.
During World War II, he was called to serve on the Medical Examining
Board. Dr. Shouldice, a major in the army, found that many young men willing
to serve their country had to be denied enlistment. These men neededsurgical treatment to repair their hernias before they could bepronounced physically fit for military training
In 1940, hospital space and doctors were scarce, especially for this non-emergency surgery
Contributing his services at no fee, he performed an innovative methodof surgery on seventy of these men. The delighted recruits soon made known their success stories and by
the war's end, more than 200 civilians had contacted the doctor andwere awaiting surgery.
The scarcity of hospitals beds however, created a major problem. Therewas only one solution; Dr. Shouldice decided to open his own
hospital.
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CONT..
Hospital specializes in hernia repair surgeryCurrently facilitates 7,000 surgeries peryear
Effective operations with quick turn-a-roundPatients subject to early ambulation, whichpromotes healing
Hospital only accepts patients with uncomplicated
external hernias, in otherwise good health.
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CASETALKSABOUT Our Patient Care
A unique program of care and recovery A welcoming, supportive atmosphere
A relaxing, resort-like setting
A lifetime of care and support
Worlds largest database on hernia repair
Our People Our Doctors
Surgical training
Our nurses
Our support staff
A total environment Diet counselling
Massage therapy
Annual follow-up examinations
Doing a single procedure and repeating it with high frequency allows you tobecome a perfectionist.
http://www.shouldice.com/patient_services.htmhttp://www.shouldice.com/patient_services.htmhttp://www.shouldice.com/patient_services.htmhttp://www.shouldice.com/patient_services.htmhttp://www.shouldice.com/patient_services.htmhttp://www.shouldice.com/patient_services.htm7/27/2019 Shouldice Hos
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SHOULDICE BUSINESS PROCESS:
4 DAY LEAD TIME
30/36Arrivals13 pm
If OK:Check-in &
admin
Dinnerat 6 pm
Check byMD
(15 mins)
Tea &cookiesat 9 pm
Bloodtest
Day 1
Day 2
Explainprocesssteps
Localanaesthesia(-20mins)
Surgery(40 mins)
Rest in room(2-3hrs)
Starteating &moving
Dinnerat 6 pm
Tea &cookie9
pm
Day 3
Loosenstitches
Walk, play, & eatwith your buddies
If not OK
Dinnerat 6 pm
Tea &cookie 9
pm
Day 4: Remove stitches, walk, play, eat, check out
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HOW SUCCESSFULIS SHOULDICE HOSPITAL?
140,000 highly satisfied Alumni(past patients)
1,200 backlog of scheduled operations
Demand appears to expand with supply
Superior quality Shouldice Method of Herniaoperation imitated by competitor
Low recurrence rate, 0.80% vs 10%
High degree of employee satisfaction
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COST COMPARISON:
SHOULDICESVS. OTHER HOSPITALS
Shouldice Others
Costs of typical operations $954 (p9) $2000-4000Transportation $200-600 $0
Time Lost from work in Hospital 4 days 5 days
Time lost from work while
recovering 5 days 10 days
Value of time lost
(ranging from $50 to 500 per day)$450-4500 $750-7500
Total before Allowance
for recurrence $1604-6054 $2750-11500
Probability of Recurrence 0.80% 10.00%Expected Cost of Recurrence $13-48 $275-1150
Total cost to patient, employee
and insurer $1,617-6,102 $3,025-12,650
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HOW ABOUTTHE PROFITABILITYOF
SHOULDICE HOSPITAL?
Hospital:
Revenues
(4 days X $111/day x 6,850 patients/year) 3,041,400
Cost 2,800,000
Profit: 241,400Clinic:
Revenues (($450+ 60 + 75 X 0.20) X6,850) 3,596,250Cost 2,000,000
Profit 1,596,250
Total Profit 1,837,650
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RETURN
ON
EQUITY
Total Depreciated Assets: $5 mil
Return on Asset:
1,837,650/5,000,000 = 37%
What is the return on Asset if they expand thecapacity by 50% at the cost of $2 mil?
1,837,650 x 1.50 / 7,000,000 = 40%
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THE DREAM WORLD
Shoudice is offering:
High quality service at low price
Shodice is having Highly satisfied customers
Happy Employees Shouldice is also
Making high profit
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HOWISALLOFTHISACHIEVED?WHATARETHEMAJORREASONSFORTHE
SUCCESS?
Maximizing the difference between perceivedquality and value to the patient on one hand andthe cost of supplying services on the other.
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WHATISTHE UNIQUE SERVICE CONCEPT?
What does Shouldice hospital offer to its customers?
The hernia surgery (the Shouldice method)
Peace of mind/low risk/Low Recurrence
Independence/Dignity/Control Social experience, fraternity
Excused absence from work without guilt
A vocation
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Market Focus focus on a narrow segment of potential patients
who have hernia and
they are predominantly male, older in age,
essentially in good health large market potential: 600,000 operations in U.S.
in 1979
Internal Focus
Doctors: Dedicated to quality of shoudice method,tolerance for boredom, family oriented
Nurses: people oriented, assist patients
Staff: flexible, team oriented
A Focus Strategy
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OPERATING CONCEPT
Shouldicce achieves outstanding results as a low priceand at a high profit because:
Everything done by the hospital is designed to maximize thedifference between perceived quality and the value of theservice provided patients on one hand and
the cost of providing the service on the other.
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HOWDIDTHEYDOTHAT?
Patients are carefully screenedPatients are active participants in the service
delivery process
The avoidance of general anesthestics allows a
wide range of involvement of patientsStaff is freed from much disagreeable work
Reducing the cost of nursing, housekeepingand laundry
Structure hospital jobs that involves morecounseling and positive interaction with thepatients
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HOWDIDTHEYDOTHAT?
The Clinic is a focused factory resulting in:
Highly productive surgeon: 300 hernia/yr Vs. 30 by less focused surgeon
Sharing of expensive services such as anesthetist
Short and relatively regular hours for surgeon high compensation ($50,000 + $40,000)
Opportunities for surgeons to observe and andadvise one another
Peer group pressure that leads to higher level ofself-control of quality
A conscious effort is made to make Shouldice afamilyexperience
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THEELEMENTSINTHESERVICESYSTEMTO
SUPPORTTHESERVICE CONCEPT(MANAGERIALELEMENTS)
Service encounter
Doctors and nurses are carefully recruited
Employees trained to help / counsel patients
Communal dinning for doctors, nurses , staff andpatients
Quality
adherence to Shouldice method
opportunity for surgeon to observe & advise oneanother
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THEELEMENTSINTHESERVICESYSTEMTOSUPPORTTHE
SERVICE CONCEPT (MANAGERIALELEMENTS)
Managing capacity & demand Admission by appointment: scheduled service Screening patients: easier to estimate the service
time walk-in patients or local residents on waiting list to
make up cancelled reservation Information
Medical Information questionnaire Free annual check-up -> unique data base on the
result of the surgery Annual reunion to keep alumni informed and
gather customer feedbacks-> loyal customer base-> effective word-of-mouth
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THEELEMENTSINTHESERVICESYSTEMTOSUPPORTTHESERVICE CONCEPT (STRUCTURALELEMENTS)
Delivery system Maximum degree of customer participation
Efficient and low cost
Avoid a typical hospital atmosphere
Facility design Acres of gardens to encourage exercise & rapid recovery
minimize hospital feeling (carpeting and odorless disinfectantetc)
Stairways are designed for patients to use right after
operations No TVs and Telephones in rooms to encourage walking
Operating rooms are located in semicircle to encouragedoctors to help each other and use the same anesthetist
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THEELEMENTSINTHESERVICESYSTEMTOSUPPORTTHESERVICE CONCEPT (STRUCTURALELEMENTS)
Location large city near air port -> access to worldwide market
large local population to fill up cancelled bookings
Capacity planning Elective procedures -> scheduled operations
Balancing Capacity and improving capacity utilization
Needs to increase capacity
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THE CAPACITY DECISION
Where is the bottle neck?
How should they increase the
capacity?How should they implement that
change?
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SHOUDICE HOSPITAL LIMITED: ANALYSISOFCAPACITY
Current Throughput
6,850 Operations/50 weeks = 137 operations/week
( with a peak of 165/week)
Capabilities
Examination Rooms:
(6 rooms x 3 hrs (1-4 PM) x 5 days x 60 min/hr) / (20 min / exam) = 270patients /week
Admitting Procedure:
(2 people x 4 hrs (1-5 PM) x 5 days/week x 60 min/hr) / (10min/patient) =
240 patients/week Nursing Station:
(2 stations x 4 hrs (1-5 PM) x 5 days/week x 60min/hr)/(10min/patient)=240 patients /week
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SHOUDICE HOSPITAL LIMITED: ANALYSISOFCAPACITY Capabilities
Operating Rooms: (5 rooms x 8.5 hrs/room/day x 1.1 hrs/patient x 5
days/week)/ = 188 patients /week Surgeons:
11 surgeons x 3.5 operations /day x 5 days = 178patients/week Hospital rooms: (see transparency) 89 rooms = 134 patients per week (assuming use of
weekends for convalescence and 3.5 days average stay)
103 rooms = 148 patients (assuming use of weekend forconvalescence, 3.5 days average stay, and use of 14 hostelrooms for two nights each week)
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HOWTOEXPANDTHECAPACITY?
Aim : increase capacity & maintain control of servicequality
Alternatives: Add Saturday operations
Add a new floor (45 more hospital beds)
Establish a new facility for hernia
Expand to other types of operations
Others?
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ADDINANEWFLOOR (45 BEDS)
Total Number of Rooms: 89 +45= 134
Total number of patents per week = 193
137 current throughput/148 theoretical
= x / 193 theoretical New throughput = 193 x (137/148)= 179 patients / week
Additional patients per year=(179-137) x 50=2100
additional revenue for the clinic
= 2100 x (450+0.20 x 75) = $976,500
Less cost 176,500
Return on investment = 800,000/2,000,000=40%
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ADDINANEWFLOOR (45 BEDS)
Disadvantages Require to schedule doctors to the full capacity of five days per
week
Increase work load on admissions, kitchen, laundry,housekeeping and accounting
Further staggering of meal hours for patients (100 seat dinningroom)
Disruption during construction
Advantages
Easy to control and maintain quality Retain the culture and environment
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SCHEDULE SATURDAYASAN OPERATINGDAY
Use 89 + 14 rooms, 3.5 average stay Total number of patents per week = 180
137 current throughput/148 theoretical
= x / 180 theoretical
New throughput = 180 x (137/148)= 167 patients / weekAdditional patients per year=(167-137) x 50= 1450
additional revenue for the clinic
= 1450 x (450+0.20 x 75) = $674,250
Less cost 124,250 Net increase in profit: 550,000 for no additional
investment
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SCHEDULE SATURDAYASAN OPERATINGDAY
Disadvantages Require to schedule 23-25 operations on Saturday
Six surgeons and a supervising surgeon have to workon Saturdays
Additional other personnel Violates the implied contract that Shouldice has with
its surgeons, strong opposition by the senior doctors
Operating close the the theoretical capacity of the
facilityAdvantages
No investment is needed
Can still maintain quality
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A SECOND FACILITYFOR TREATING HERNIA
Advantages New location close to the customers, say USA
Improve its competitive position and increase its profits
Operate in a less restrictive environment
New Opportunities for existing personnel
Transfer of knowledge and expertise to the new facilities
Disadvantages
Requires a significant investment and Dr. Shoudices time
Control of quality
It is difficult to create the same culture and atmosphere
Potential competition with the existing facility
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SHOUDICE HOSPITALS SERVICEPACKAGE
Supporting Facility Acres of gardens to encourage exercise & rapid
recovery Carpeting and odorless disinfectant etc to minimize
hospital feeling
Stairways are designed for patients to use right afteroperations No TVs and Telephones in rooms to encourage walking Operating rooms are located in semicircle to encourage
doctors to help each other and use the sameanesthetist
Located to a large city: Toronto, access to worldwidemarket, large local population to fill up cancelledbookings
.
S H S
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SHOUDICE HOSPITALS SERVICEPACKAGE
Facilitating Goods:
Medical supplies
Food, medicine etc.
Explicit Services Quality hernia surgery using the Shouldice method, low
recurrence
Very experienced doctors
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SHOUDICE HOSPITALS SERVICEPACKAGE
Implicit Services
Peace of mind/low risk
Independence/Dignity/Control
Social experience, fraternity
Excused absence from work without guilt
A vocation
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SHOUDICE HOSPITALS DISTINCTIVECHARACTERISTICS
Customer Part ic ipat ion in the Service Process
Simultaneity
Intangibi l i ty
Perishabi l i ty
Heterogeneity
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ENDThank You