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Shouldice Hospital: Operational Managment Case Analysis

Use the case:
Shouldice Hospital Limited
by James Heskett for Harvard Business School

1.How successful is the Shouldice Hospital? Generate a P&L statement using available information from the case. Treat each of the two operations hospital and the surgery separately.

2.How do you account for its successful performance?

3.Prepare a patient process flow diagram from arrival through surgery and determine the capacities at each stage. For this diagram, only indicate major points in the process, e.g., admitting, examination, operating room surgeries, etc. Use the actual hours of operation for each step in the process to determine the capacity of each step. Where is the bottleneck?

4.Do a detailed analysis of potential on-site capacity expansion alternatives (on a per week basis). Assume an average of 3.5 days stay at the hospital for each patient, including surgery, and Sunday admits. This means that half the patients spend three days while the other half spend four days.

It may help to use an exhibit similar to the following to do this analysis.
Item Sun Mon Tue Wed Thu Fri Sat Sun Mon
No. of beds in use
Total no. of beds available

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Operational Management of Shouldice Hospital

Answer 1
Shouldice Hospital is a well equipped hospital that is its specialist in Hernia Repair. It is running successfully because it has good member of skilled and trained staff that provides effective services & advices about everything from medical to marital problems related to Hernia problem. The simple and painless surgery is its competitive advantage that also makes it successful as most of the doctors suggest for Shouldice hospital for Hernia surgery. People come for the surgery in Shouldice Hospital from all over the world, approximately 44% patients come from the United Sates and provinces and rest of 56% patients come from Ontario and European Countries. Hospital provides the mail and Medical Information Questionnaire for these out-of-town patients that increase its effectiveness for the treatment of patients.
The increasing number of patients from the different parts of world is causing an increase in its revenue that shows its sound financial performance. The low cost and simple and painless surgery is causing an increase in number of patients in the hospital continuously that is also increasing its financial position. The capacity utilization is also good within the hospital that is also an important factor in its success. The following income statement also shows the effectiveness of hospital management in generating revenue from the optimal utilization of available resources. The experience of patients, doctors and nurses is also joyful with the hospital that increases the retention ration and reduces overall cost of the business. Higher amount of bonuses to doctors, nurses also shows a significant growth in the financial performance of the business.
The profit & loss statement of Shouldice Hospital is as below -
Profit & Loss Statement of Shouldics Hospital
Revenue from Hospital:
Revenue from patient's stay ($111*4 days*10800) $4,795,200
Revenue from surgery:
Surgical fees ($450*10800) $4,860,000
Fees of assistant surgeon (7*$60*10800) $4,536,000
Additional fees of anesthetic (1*$75*10800) $810,000
Total revenue: $15,001,200

Operating expanses of Hospital:
Cost of food ($1.10*400*300 days) $132,000
Cost of operating room (5*$30000) $150,000
Average salary of nurses ($20000*40) $800,000
Operating expanses of surgery:
Salary of surgeons (12*$50000) $600,000
Salary of assistant surgeons (7*$30.6*10800) $2,313,360
Salary of anesthetists (1*$300) per day $90,000
Total cost: $4,085,360
Net Income: $10,915,840 or $10.9 million

It is assumed that the total number of working days is 300 per year. It is also assumed that the 36 operation are operating per day in the hospital. The salary of nurse are varied from $15000 to $25000 so, the average salary of nurse is taken as $20000 per year.
Working notes:
1). Revenue from patients stay (in hospital) = Fees of stay per day*total number of operation per year*average number of days patient stay in hospital
Fees of stay per day = $111 per day
Number of working days = 300 per year
Average number of days patient stay in hospital = 4 days
Total number of operation per year = Average operation per day* number working of days
= 36*300
= 10800 operations per year
Then, revenue from patient's stay in hospital will be -
= $111*10800*4
= $4795200
Revenue from Operation or Surgery:
1). Revenue ...

Solution Summary

A operational management cash analysis for Shouldice Hospital is examined.