Thank you for considering our consultation on the operational assessment of your Shouldice Hospital. We appreciate that you have successfully implemented a strong focus strategy, both in terms of the market and internally. Consequently, Shouldice Hospital excels in delivering outstanding value to patients while effectively managing service costs.
The hospital’s nurses and doctors offer care and empathy to patients, treating them as family, resulting in high praise for their treatment. This has led to a growing number of satisfied patients and word-of-mouth referrals, creating a demand that surpasses the hospital’s current capacity. You are seeking guidance on how to expand the hospital’s capacity while maintaining control over service quality and management.
In this text, I have identified the issues and proposed alternative solutions. The problem at Shouldice is that they are experiencing a contradiction in terms of change. Shouldice is currently operating at an optimal level for a service company, but their facility has limited flexibility and their workforce is specialized. Despite this, they are unable to meet all the demand in their chosen market niche. If they were to expand their capacity to meet the unfulfilled market need, it could disrupt the existing workforce and lead to a decline in service quality. On the other hand, if they fail to meet the market demand, it may attract competitors who could eventually take away Shouldice’s market share and leave them with excess capacity.
The hospital is currently operating efficiently and receiving positive feedback from patients regarding their treatment. However, there is a concern regarding the hospital’s capacity. At present, the hospital conducts 30 operations per day with an average patient stay of 3-4 days. Consequently, the hospital is nearing full capacity with 89 beds being utilized during a 5-day work week. To address high demand situations, an additional 15% capacity (14 hostel rooms) can be made available. This increases the overall capacity to approximately 70% when compared to operating at full capacity for a duration of 7 days. Therefore, it is deemed optimal to operate at this maximum capacity level.
The hospital must undergo expansion to uphold its output and quality, as the rising utilization rate of services has resulted in a decline in service quality. Nevertheless, this expansion entails substantial capital investments and time commitments. Furthermore, it will disrupt both the hospital’s quality and its country club atmosphere during the construction phase. Currently, due to shift limitations, the operating rooms remain unused for two days per week and 15.5 hours on weekdays.
The kitchen and common area at Shouldice are specifically designed for the comfort and satisfaction of one hundred patients. It is crucial to ensure that these facilities are well-maintained in order to uphold the high level of patient experience at our institution. Additionally, it is important to note that our staff members possess limited flexibility, particularly in specialized fields such as surgeons and surgeons’ assistants. These individuals are not inclined to undergo cross-training and are assumed to be content with their current work schedule. Altering the number of days they work could result in a more demanding operating room schedule, potentially impacting working relationships and attitudes.
Alternative Courses of Action
The assumption behind alternative courses of action is that expanding is desired in order to meet a market demand that has not been fulfilled.
- They could add an additional day by operating on Saturday.
- They could do nothing different and continue to do as they are currently doing.
- They can add a new floor (i. e. 45 i. e. 50% more hospital beds).
- They can meet the unmet market demand with external capacity (establish a new facility).
- They can utilize the current facilities during some of its present idle time.
Considering alternatives and making decisions is crucial in this situation. One possibility is to include an extra operating day on Saturday, effectively utilizing the hospital’s capacity. This change could result in serving more patients, with a potential increase of up to 9% or 800 patients per year. However, it remains uncertain whether this boost would be sufficient to discourage competition from entering the same market.
Furthermore, introducing a Saturday operating day is also anticipated to have adverse effects on the workforce. This may lead to a decline in quality, which presently gives Shouldice a competitive edge. Nevertheless, hiring additional staff might help mitigate this negative impact and maintain a service utilization rate below 70%.
Considering the time it will take for new staff to become as efficient, it is important to assess the need for any action. The company’s current system and reputation make it a market leader and presumably profitable. If things are going well, there may be no need for changes. Management likely finds the existing setup satisfactory in terms of profitability and other operational measures. Nevertheless, not taking any action poses a risk of competition entering the market and possibly luring patients away from Shouldice.
Insufficient data is available to properly analyze the risk. Increasing the number of beds by 50% without also increasing the number of doctors and surgery rooms would not be wise. This is because the current plant capacity and number of doctors cannot accommodate an additional 45 beds, leading to overcapacity in the surgery rooms. Furthermore, constructing more beds would necessitate significant capital investment and time, disrupting the country club atmosphere. However, it is worth considering meeting the unmet market demand through external means, which can be achieved using various methods.
One approach is to collaborate with doctors from similar facilities to train them in the Shouldice processes and share profits. This partnership can protect against competition and work as a silent partner until service quality aligns with Shouldice’s reputation. Establishing a new hernia facility or subcontracting/franchising the operation are also viable options. Additionally, maximizing the use of current facilities during idle time can alleviate the operating room bottleneck.
Adding weekend or evening surgeries will increase throughput without the need for capital investment. Expanding the facility’s kitchen and social areas would accommodate the higher patient throughput while ensuring a high-quality patient experience.
My recommendation is to maintain the existing staff and plant, while also addressing the unmet market demand by using external sources of capacity. This approach will preserve the country club atmosphere and friendly nursing staff that give the facility a competitive advantage. If needed, I can provide further details on my recommendations in future communication.
Benefits of creating a new facility:
- New location close to current setup, say a major city (New York) in 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 facility.
Drawbacks of setting up a new facility:
- Requires a significant investment and time
- Difficult to maintain Quality control
- Difficult to create the same culture and atmosphere
- Potential competition with the existing facility
