Professional Documents
Culture Documents
Term 2
Operations Management
Submitted
to
Prof. Janat Shah
on
18 October 2005
Team 1
Abdullah Mehtab (0511141)
Ankur Dhawan (0511150)
Debarupa Das (0511162)
Sanjay Sahai (0511183)
Shankar M. (0511187)
TABLE OF CONTENTS
Introduction.…………………………………………………………………………………………………………2
Key Differentiators……………………………………………………………………………………………….5
Process Analysis…………………………………………………………………………………………………..9
Generation of options………………………………………………………………………………………..11
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1. Introduction
Established in 1945 by Dr. Earl Shouldice, Shouldice Hospital, located on the
outskirts of Toronto, is renowned for Hernia operations that emphasize early
ambulation after surgery. The hospital follows a unique “Shouldice” method which
aims to decrease the post-operative recovery period.
*Patient can not customize the operation to be performed. It would be based on the
diagnosis by the doctors of Shouldice.
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** The hospital takes into account the condition of each patient before operation –
sends questionnaire beforehand to determine the type of hernia, and determines
risks like overweight and heart condition. If risks found, it sends sheets outlining
weight loss program.
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3.2.3 Post-operation contacts
1. Patients are encouraged to explore the premises, talk to the people on the
hospital and make friends.
2. Patients are given the free hand to have the run of the hospital.
Process
Characteristics Less customer contact and customization
(1) (2) (3)
(1)
Front Office
Less
complexity,
less
divergence
and more line
flows (2) Hybrid Office
Shouldice
Back office
(3)
The process and principle followed by Shouldice involves standard services with
some options available as found in Hybrid Office.
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In fact, 82% of all operations performed at Shouldice in 1982 represent the
most common first-time repairs (primaries), involving straightforward operating
procedures. Only about 18% cases involved customization where certain
complex procedures are used for patients suffering from recurrences.
4. Key Differentiators
The following features differentiates Shouldice from its other competitors and
account for its performance –
4.1 Operation-wise:
• High Volume Focused Service
Only external types of abdominal hernia repaired and mostly primaries. 6850
operations performed in a year in 1982.
• Unique Surgical Technique –
Shouldice Method: separation of muscle layers, more sutures and no
screens/meshes
• Lower Operating Time
45 minutes for first-time repairs (primaries) and 90 minutes for repairing
recurrences
• Lower cost of operating patients - $640 vis-à-vis $2000-$4000 elsewhere
• Lower duration of stay for patients
3 days as compared to 5-7 days for other hospitals
• Lower Recurrence
Gross recurrence rate of recurrence for operations performed at Shouldice is
0.8% based on 30 years data.
• Lower Surgeon to Operation (per-day) Ratio (0.4)
• Lower Nurse to Patient Ratio (0.44)
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• Efficient and low cost housekeeping
Since patients are always encouraged to ambulate, less soiling of linen and
better utilization. Only 2 employees run housekeeping.
• Free Annual check-ups during annual reunion
• Free Service to clergy and family members
4.2 Organization-wise:
• Hospital: Not-for-profit , Clinic: for profit
• No Formal Organization Chart
Employees spanning across functions
• No Advertising/Marketing activities
• Regular Working Hours for doctors
A surgeon’s day typically ends by 4 pm.
• High Pay Scale for employees and profit sharing
• Unique ambience
Fully carpeted, no telephone or television in rooms so that for these facilities,
patients have to walk, specially designed steps having small rise
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Patients
Diagnosis by Diagnosis on
Mail Walk-in Basis
NO
Is Reject
operation Operations
required?
YES
Admissions
Operation
Post-Operation
Care for 2 days
Discharge on
4th day
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taken. Thereafter the patient is directed towards his/her room. Later in the day,
there is an orientation session by the nurse. After medical preparation on next day,
patient is taken to the operation theater where operation is carried out.
Waiting on arrival
20 min
Physical Examination
15-20 min
Yes
Wait
5-15 min
Insurance Coverage
Check-up 10 min
Occupy Room
Orientation by Nurse
Dinner, Recreation & Sleep by
10 pm
To Operation Theatre
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5.2 Operation Process
Operation process is carried out by a senior surgeon with assistance from a junior
surgeon and 2 nurses. One of the nurses is a circulating nurse who administers
anesthesia to patient depending on his/her condition before and during the
operation. A primary operation typically takes 45 minutes. After the operation
patient is ambulated to post operation room by the surgeon. Then the surgeon
returns back for his second operation. In pre-lunch session a doctor takes care of
four operations, one being that of recurring hernia which takes around 90 minutes.
6. Process Analysis
Currently on an average, 30-36 patients get operated everyday. In peak period
average number of operations per day reaches to 33 and in lull period it drops to
29. The capacity of the hospital is 89 beds, hence we can assume an average
turnover of 30 patients per day.
Two most important processes for Shouldice hospital are –
a) Admission Process
b) Operation process
The analysis of these processes for capacity utilization is as follows
6.1 Admission process
Number of patients called for examination process every day is not mentioned in
case. Assuming 35 patients are given appointment everyday out of which around 5
patients are found either heavy weight or they don’t have hernia. These patients
are sent back. They also have 14 additional hostel rooms in case some patient
cannot be assigned room on that day. The capacity of examination room can be
calculated as follows
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After this patients are sent to see one of the two admitting personnel. The capacity
of this step can be calculated as follows
Time taken by admitting personnel 10 minutes/patient
Hence admission process cannot handle more than 36 patients with current
resources. But as hospital itself cannot handle more than 30 patients hence
bottleneck is not admission process. The capacity utilization for examination step is
only 55.55% (30/54)
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7. Generation of options
To decide upon the plan of action we need to evaluate the outcomes of the above
mentioned four options.
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Option 1
Total no of operations 9,000
% increase in operating cost 10
New operating cost $5,280,000
Op. cost per operation $586.7
Profit per operation $442.3
Additional profit $1,063,500
As can be seen from the above table, this option generates an additional profit of
$1.06 million. However the upheaval it would cause among the surgeons in the
hospital makes it a difficult choice to make, what with the prevailing culture of
allowing the doctors to spend ample time with their families.
Option 2
Total Investment $2,030,000
New bed capacity 135
Avg. stay per patient (days) 3
No. of operations per day 42
Bed Utilization 126
No of working days 250
Total no of operations in year 10,500
Increase in no of operations per year 3,000
Profit per operation $389
Additional profit $1,167,000
Payback period (years) 1.74
% Capacity utilization 93%
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Option 3: Build an additional floor and work for one hour overtime
In this option the number of operations performed per day increases to 40. Apart
from the investment of $ 2 million required for the additional floor, this option
would also require an increase in the wages of the surgeons who would be required
to work an extra hour post lunch. This increase in wage is calculated using the
hourly wage rate of the surgeons and the overtime they work. The calculations are
shown below:
Option 3
Total Investment 2,000,000
New bed capacity 135
Avg. stay per patient(days) 3
No. of operations per day 40
Bed Utilization 120
No of working days 250
Total no of operations in year 10,000
Increase no of operations per year 2,500
Operating cost 6,400,000
Overtime salary expense 29,411.8
Total operating cost 6,429,412
Op. cost per operation 642.9
Additional Profit 943,088.2
Payback period(years) 2.12
% capacity utilization 88.9
Option 4: Build an additional floor, an operating theatre and work for one
hour overtime
This involves infrastructural investment of $2.03 million and also an increase in the
wage of the surgeons as mentioned in the previous option. In this option the
number of operations performed per day increases to 48. However we proceed with
the calculations using 45 as the number of operations per day, since that is the bed
capacity available. The details are given below:
Option 4
Total Investment $2,030,000
New bed capacity 135
Avg. stay per patient(days) 3
No. of operations per day 45
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Bed Utilization 135
No of working days 250
Total no of operations in year 11,250
Increase no of operations per year 3,750
Operating cost $7,200,000
Overtime salary expense $35,294
Total operating cost $7,235,294
Op. cost per operation $643
Additional Profit $1,423,456
Payback period(years) 1.43
% capacity utilization 100
The chosen option must not only generate maximum profits, but it should also
maximize the capacity utilization of the hospital beds. In addition, it would be
highly preferable to have as least a payback period as possible. Of the remaining
three options, we find that Option 4 yields 100 % capacity utilization. The additional
profit earned can be used to pay back the investments in 1.42 yrs which is the least
among all the alternatives. Hence we would recommend option 4 to Shouldice
Hospital.
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