Shouldice Hospital Limited

Case Study: Shouldice Hospital Limited

1. Problem Statement:

The Shouldice Hospital is a highly specialized hospital, which has developed their own surgical technique to repair external hernias in a more efficient way compared to other hospitals. The “Shouldice Method” delivers value by being a straightforward medical procedure and already encompasses 82% of all operations performed at Shouldice.

Due to its own success, demand is much higher than the hospital’s current capacity of 89 bed and the hospital faces a challenge of improving capacity whilst keeping the quality of service delivery simultaneously.

Scarcity of beds created a major problem in capacity and Dr. Shouldice is considering to run operations on Saturdays and increase capacity by 20%, open a second hospital elsewhere or to diversify the surgical procedures.

1. Situation Analysis:

1. Internal

The Shouldice Hospital is functioning at its “full operating capacity” in a niche market in which demand is higher than supply. The hospital faces a limited space in patient intake (bed occupation) and highly specialized medical workforce is required to perform the Shouldice method.

Furthermore, increasing capacity without recruiting new staff and have them trained appropriately in advance, may lead to an overload of the current staff, who is already unsatisfied, and this may decrease quality of the services provided.

There are a few specifications to Shouldice’s service delivery that are the key factors contributing to its success:

1. It only accepts patients with any medical complications in their external hernias and who are in good health;
2. Patients are subject to early ambulation;
3. Good atmosphere and facilities designed to stimulate social activities between patients.

The facilities at Shouldice hospital consist of the following: Five operating rooms, a patient recovery room, a laboratory, and six examination rooms. On average they perform 150 operations per week and patients stay at the hospital for 3 days (Annex 1). Medical surgeries are performed only 5 days a week, however the hospital is in operation continuously to attend the recovering patients. A medical surgery at Shouldice is performed by one of the 12 fulltime surgeons and it takes about 1 hour to prepare for and to perform each hernia operation.

In order to deal with the capacity issues, internally there are several options to increase response of market needs and demand:

1. Perform surgeries on Saturday and increase capacity by 20%.
2. Invest $4million in a new space and increase the number of beds in 50%  
3. Diversify the portfolio of services available and to perform other surgeries in addition to the Shouldice method.

1. External

The hospital doesn’t have a marketing strategy despite their competitive advantage (Annex 2) when compared to other hospitals, and until now marketing is mainly done by word of mouth. Hence, patient experience is highly important and reputation is at risk if capacity increases without a strategic and operations plan.

When implementing the expansion plan there’s a risk that if won’t be done efficiently and considering all variables it can decrease patient’s satisfaction which will ultimately translate in less revenues for the hospital. On another hand, failing to increase capacity of the hospital may risk the reputation of the brand if piracy continues to grow. Competition may also account for a loss in Shouldice’s Hospital market share.

1. Alternatives:

Considering the external environment, there are two feasible short term solutions: 1. Perform surgeries on Saturdays to increase capacity; 2. To diversify the portfolio of surgeries performed.

On a long term, in order to keep market share and looking at having a continuous plan to increase capacity Dr. Shouldice should establish a new facility, with the same business model in a different location, as for example in the United States of America as suggested in the case or in a country where hernia problems account for high prevalence in population. Expanding to the American market might be easier due to proximity and similar ways of doing business, therefore operation procedures could be easily replicated.