CASE ANALYSIS:

SHOULDICE HOSPITAL LIMITED

Q1. What are the competencies of Shouldice Hospital? What is the value proposition that
Shouldice delivers to its customers?

We believe Shouldice Hospital has the following 3 competencies:

 Cost leadership: Shouldice hospital required low cost of equipment for operation theatres. It
operated using lean staff leading to lower administrative costs. Further, it allowed parents to
accompany and stay with children for free – reduced nursing costs. Finally, use of shared
services such as that of expensive anesthetist service charge also allowed it deliver lower
treatment costs to the patients.
 Efficient Process Management: High throughput in operation theaters where surgeons took
few breaks between successive operations. Well managed post-operation care plans where
social elements of interactions provided confidence in the efficacy of the procedure leading to
fewer days hospital stay for patients. Streamlined process of care from admission to discharge
with efficient time management of all stakeholders. Multi-function training and efficient
administrative staff, achieved through high pay and fixed working hours, offered additional
support in cases of emergency for smooth operations
 Specialized treatment procedures: High degree of specialization achieved through
Experience learning effects of performing high volume of cases and process standardization
by Shouldice Method. Team rotation between surgeons and assistants allowed all-round
development among doctors. Frequent consultation offered performance appraisal and timely
corrective actions.

Value proposition: The value propositions for patients were as follows:

 Low cost of treatment and care for patients.

 Fast recovery where patients were discharged within 4 days of admission.
 Specialized treatment with higher than conventional success rate.
 Family like environment: Interactive environment with doctors and fellow patients where
patient of similar background shared the same room and interacted with other post-op patients.
Doctors and nurses took interest patient recovery as well.

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Q2. How successful is Shouldice Hospital in terms of results produced for patients, service
providers and owners?

Shouldice Hospital’s success can be evaluated for different stakeholders across different parameters:

a. For Patients – High degree of success

 Low probability of recurrence – 0.8% as compared to 10% in US
 High satisfaction levels indicated by 100% patients (Exhibit 3, point 10)
 $-day discharge coupled with affordable prices at $1430 (on average and $2000 including
flight ticket costs) as compared to $5240 in other conventional hospitals led to minimum
disruption in work and mobility. Post-op services such as free checks to alumni, free of
charge was also an attractive feature of the services.
 Free stay for parents and family – moral support
 Low anxiety and stress due to collaborative social environment
b. For doctors, nurses, and admin staff – high degree of success:
 Good remuneration for Doctors and staff: Higher base salaries than other hospitals and
chance to earn bonus on basis of performance, productivity and hospital profitability.
 Good work conditions for all staff: Work-life balance for doctors as they had fewer number
of days for on call duty (only 2 days in a span of 10 days) and routine work hours till 4.00pm
each working day which allowed them to spend more time with family. Staff-friendly
environment as evidenced by waiting list of nurses
 Strong employee concern and job security led to lower attrition rates
c. For hospital owners- High degree of success
 Successful track record evidenced by huge demand backlog (2400) and ever- increasing
patient footfall (100 patients every 6 months) that forced management to continuously
expand their capacity. This is a phenomenal success rate given that the hospital only relied
on word-of-mouth advertising.
 Lower employee attrition rates which reduced cost and need to retrain employees.
 Non-unionized workers led to high bargaining power over staff.
 High patient satisfaction evidenced by Exhibit 3, point 10
 High experience learning effects as surgeons in shouldice hospital performed 750 operations
per year
Overall, Shouldice hospital has been able to yield successful results for all stakeholders evidenced by
high patient and employee satisfaction and high patient throughput.

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Q3. How do you account for its performance? What are the key characteristics of the operations
system which have been critical for its performance?
Operations strategy is a plan for developing resources and configuring processes such that the resulting
competencies maximize NPV. We evaluate the performance and key characteristics of operations
systems through resources and process employed.

a. Resources:
 Sizing: High capacity in clinic and hospital to meet growing demand.
 Timing: Scaled in terms of operation theatres by reviewing demand periodically.
 Type: Facility designed to encourage early ambulation for post op-patients. A team of
highly specialized surgeons and nurses to carry out procedures.
 Location: Single facility to control quality
b. Process:
 Demand: Potential patients are sent a self-diagnosis sheet. On self-evaluation and meeting
necessary criteria, patients were scheduled for further examinations.
 Supply: To maintain control and quality, all necessary pre-op preparation and patient-care
is done in-house.
 Technology: Highly specialized and standardized Shouldice Method.

Q4. What could go wrong in the operations system of Shouldice Hospital?

The Shouldice hospital was faced with several bottlenecks in its operations system.

a. Divide over capacity expansion

Few of the staff was concerned that the possibility of Saturday operations might drive a wedge
between the two groups, one being that of the old doctors who were opposed to the idea and
the other of the young doctors who were either indifferent or supported the idea.
b. Misapplication and replication of the Shouldice Method
There was a rising threat posed by other hospitals who were trying to misuse the “Shouldice”
name by misinforming the patients about the procedure and the threat posed by the new. This
meant that the hospital faced high risk of losing its competitive advantage as it did not have the
same level of credibility in other specialties.
c. Diversification concerns – Since the hospital specializes in only one process, the “Shouldice
method” of treating hernia, it was difficult for the hospital to gain the same level of expertise

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 in other specialties such as eyecare surgeries, varicose veins and diagnostic services such as
colonoscopies.

Q5. As Dr. Burns Shouldice, what actions, if any, would you take to expand the hospital’s
capacity? How would you implement the changes you propose?
There are several options that can be undertaken to expand the hospital’s capacity. These are:

a. Opening on Weekends
b. Increasing number of beds and utilization of operating rooms
c. Expanding outside Toronto, Canada with a similar hospital design
However, we need to analyze the pros and cons against each option to arrive at the best expansion
strategy for Shouldice hospital.

Option Pros Cons

Opening on Weekends  Increase 2/5 = 40% capacity  Staff dissent over working
 No investment required on on weekends (especially
infrastructure older doctors)

 Minimal impact to operating

system
Increase in no. beds and  Increased room utilization by  Capital cost of $4M
operating room increase in number of beds by  Increased workload and
utilization 50% stress on doctors
 Potential drop in quality of
operation
Expand outside Toronto  Entry to new market  Heavy capital investment
 Expansion of reach outside  Coordination and control
Toronto issues
 Escape from strict
government regulations as in
Toronto.
We have rejected first option on the basis of the reasoning that constant consultation and feedback
process in the presence of senior surgeons is critical to the hospital’s success. This warranted that senior

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staff be present during surgeries for supervision. Since it is older surgeons who are opposed to weekend
expansion, we don’t recommend this option.

The second option is the most viable option to preserve the culture of the hospital, encourage work life
balance and maintain a well-focused and well managed medical service delivery facility.

We recommend the third option as a long-term strategy. Setting up a new facility outside Toronto
would need time. Additionally, to ensure control over quality and procedure, new staff and surgeons
need to be developed prior to setting up of the new facility.

In addition to option 2, the following steps would also pipeline demand and qualified staff to cater to
the increased capacity.

a. Sourcing talent for the new location.

 Partner with Universities to train new doctors/staff in the Shouldice method
 The university freshers hired must be sourced from potential location of expansion.
These people can be deployed when the new facility opens.
 It is necessary to have them practice the procedure in existing facility for a defined period for
experience.
 As there is a waiting list of staff wanting to be hired by Shouldice, sourcing administrative
and nursing staff shouldn’t be a problem.
 Senior Staff who are willing to move to the new location needs to be identified as per the
relocation needs and compensated for their willingness to relocate.
b. Workshare with local physicians to handle minor cases and physical checkups
 Form a well-balanced and efficient network of doctors in locations where mostly patients
come from. Identify local physicians from these strategic locations
 Establish a swim lane process diagram of the existing operation system
 Share diagnosis and patient qualifying procedures with partner clinics to maintain control over
pre-operation requirements.
 Draft new swim lane and monitor throughput time between first entries to discharge with pre-
operation examination procedure outsourced.
 Exercise quality control. Monitor coordination and how correct the examination from
outsourced procedures is. Corrective actions can be employed if the results are not
satisfactory.

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