Shouldice Hospital
Uploaded by barkhaamonkar (634) on Oct 14, 2005 |
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Shouldice Hospital Limited
A Brief History:
Dr. Edward Earle Shouldice graduated from the University of Toronto in 1916. By 1940, Dr. Shouldice was operating a private medical and surgical practice, lecturing at the University of Toronto, and pursuing research work in areas of advancing medical knowledge. During World War II, he was called to serve on the Medical Examining Board. Dr. Shouldice, a major in the army, found that many young men willing to serve their country had to be denied enlistment. These men needed surgical treatment to repair their hernias before they could be pronounced physically fit for military training.
In 1940, hospital space and doctors were scarce, especially for this non-emergency surgery that normally took three weeks of hospitalization. Dr. Shouldice resolved to do what he could to alleviate the problem. Contributing his services at no fee, he performed an innovative method of surgery on seventy of these men, hastening their induction into the army. The delighted recruits soon made known their success stories and by the war's end, more than 200 civilians had contacted the doctor and were awaiting surgery. The scarcity of hospitals beds however, created a major problem. There was only one solution; Dr. Shouldice decided to open his own hospital.
Facts of the Hospital:
Location: The hospital was located in Toronto in the southern part of Canada and 48% of the demand was from northern U.S.
Layout: The Shouldice Hospital has two basic facilities; hospital and the clinic in one building. The rooms are design such that the patients have an opportunity to visit each other and this helped to create a service culture with the help of the people who worked for the Shouldice hospital.
Capacity Planning: Shouldice was constructed with a capacity of 36 beds. After some years passed, they improved the capacity of the hospital to 89 beds.
Service Encounter: There is a sensible service culture in Shouldice. Training in Shouldice technique is important since the procedure could not be varied. The patients, who were experienced hernia operation in Shouldice, can return their normal daily lives much before the other patients that had experienced the similar operation at other hospitals. And the recurrence rate for all operations performed at Shouldice is about 0.
The Unique Selling Point of the Hospital
“There is No Substitute for Experience”. Shouldice Hospital has been dedicated to the repair of hernias for over 55 years. The trained team of Shouldice Hospital surgeons have repaired more than 300,000 hernias with a greater than 99% success rate.
Surgeons at Shouldice Hospital have a virtual 100% success rate performing primary inguinal indirect hernia repairs. Shouldice Hospital has offered its Medical Guarantee for more than 55 years.
Shouldice’s strategic service concept
The patients at the Shouldice center take some of care of themselves. In Shouldice, all the patients were encouraged to walk up and down the halls and to get in dialog with the other patients and the surgeons. In thought of encouraging the patients, the steps between the floors are constructed with a smooth inclination, there are not TV’s at the bedrooms and the rooms were designed as if it were a home instead of a hospital. Every square foot of facility is carpeted to reduce the hospital feeling and the possibility of a fall.
The Key Success Factor:
The Shouldice Hospital case demonstrates an excellent example of a well-developed, focused service delivery system. Shouldice has been remarkably successful in its ability to not only provide its patients with a quick, quality and low cost surgery but also providing an unforgettable experience and comfortable environment to all of its patients. Shouldice Hospital success is due to a number of factors ranging from their warm environment to their surgery techniques.
Secondly, Shouldice Hospital is psychologically appealing to patients receiving surgery, they are able to associate with other patients receiving the procedure to compare notes and discuss concerns and ultimately alleviate any anxieties with other patients. Lastly, Shouldice Hospital has a high success rate; Dr. Shouldice technique is far superior to others.
The Strategies Followed:
• Social enterprise:
When we talk about a social enterprise, the whole hospital experience is reduced to the bare minimum. Firstly the entire floor is carpeted to get rid of the hospital feel. This also helps in reducing the disinfectant smell. The policy is that a friendly environment will help in faster recuperation. To meet this objective the patients are given rooms that they share with a roommate who is generally from a similar professional background or shares similar hobbies. This encourages building of partnerships and sharing of medical notes.
Further the patients are encouraged to enjoy their meals in the common cafeteria, so that they get a chance to interact not only with other patients but also with other doctors. The most crucial aspect of this treatment is the post-operative treatment that they get. No television or telephone is kept in the room. Thus the patient compulsorily has to walk down the specially constructed stairs and come to the common room to avail of these facilities. This has a dual impact. Firstly the patient recovers mentally and considers himself fit and healthy. Secondly the little exercise helps in fast healing.
• Market Segment:
The target market for Shouldice Hospital was basically healthy people who they perceived would heal and recover faster. Also these patients were the ones who were detected with a primary inguinal, which was the most common kind of hernia. More complicated cases, especially those involving patients with other health problems, were not undertaken.
This kind of target market served several advantages.
The primary advantage of admitting only healthy people was that the duration of the patient in the hospital was drastically cut down. Thus new patients could be admitted with a higher frequency. This becomes highly crucial given the scenario that the hospital was a non-profit organization and only the clinic generated profits. So by cutting down on the stay of the patient costs could be reduced substantially.
Further, since the patient is healthy enough to walk around the place, his linen need not be washed regularly and can be changed only after he leaves the hospital after four days. This cost cutting is coupled with the fact that the patients do not need bed pans. This also reduces the amount of time that the nurses need to devote to each patient in terms of individual care. Nurses could better utilize this time by conducting orientation programs for the patients and also counseling them. This kind of work keeps the work force motivated and they do not have to deal with the drudgery of day-to-day work.
Yet another advantage of having to work on healthy patients is that the operation gets done quickly and the postoperative care required by these people is lesser. Also the recurrence rate remains low since the patients that generally come here suffer from the normal or simple variant of hernia.
• Organizational Structure:
A closer examination of the organizational chart reveals that there is no fixed structure. Alan O’Dell went on to further elaborate the ‘open door’ policy that was in place for the staff. They could come in and discuss their problems ranging right from their personal problems to their official problems. This kind of close staff and management interaction helped in keeping the staff happy and feeling involved.
Yet another policy prevalent was that of job rotation. O’Dell was of the opinion that this kind of rotation, besides removing the monotony from the job also helps in keeping the staff prepared to face crisis situations, which could possibly arise due to some staff member remaining absent or suddenly taking ill.
Dr. Shouldice and his sister Mrs. Uquhart each owned 50% of each, i.e., the hospital and the clinic. O’Dell as the administrator was responsible for all the five departments – surgery, nursing, administration, maintenance and housekeeping. The staff functioned more as autonomous units loosely controlled by the administration. This freedom served as a motivating factor and propelled them to achieve higher efficiency results.
• Services Marketing:
When we talk about services marketing we realize that production and consumption are an inseparable phenomenon. So too in the case of Shouldice Hospital, the product here is the actual surgery while the service offered is the expertise of the doctors, the dedication of the staff and the overall feel of the place that makes you comfortable and assists in the patients speedy recovery.
Another important aspect is the variability factor. Services are inherently variable. In the case of Shouldice this variability aspect has helped them to create a niche market in the medical profession by catering to only certain kinds of low risk hernia operations. Also since they top this surgery with exceptional service, they are in a position to charge a premium, which they do not do since they fear that this will reduce their target market. So they have build themselves a unique selling proposition by giving good quality at a low price.
• Word-of-mouth:
The three important aspects of services marketing triangle are the employees, customers and the company itself. Shouldice keeps its staff happy through profit sharing policy, wherein the employees are paid a part of the profit in addition to their fixed salaries. This sharing is done based on their contribution towards the success of the firm. This entices them to work hard and put in more efforts. From the management point of view, they have given their staff a lesser working load and weekends off. This enables people to spend time with their family and this in term keeps them contented and in the long run reduces the attrition rate. This is internal marketing for the company.
Happy employees keep the customers happy. This policy is applicable here too. The nurses and doctors in turn treat their patients with more care and understanding and treat them more like family members. This has led to the high level of praise for this hospital and its treatment. Despite doctors at large not recommending this treatment and there being practically no advertising, the rising number of patients only go to prove that in a service industry, especially a people oriented service industry like a hospital, word of mouth advertising is the most crucial. This would fall in the domain of interactive marketing.
Also their policy of not charging the parents of the children who came in for surgery as well as their concept of having alumni meet further helped in spreading a good word about the hospital’s exceptional service features.
The Central Problem
The Shouldice Hospital is a successful organization and admired by most of the people who had relation with it or who have heard of it. However, due to its unique surgery method, although without mass advertisement, the operating capacity is close to %100. Thus, they have a fear of not meeting the demand in the future. Moreover, some of the hospitals and surgeons take benefit of the Shouldice method in their advertisement although they hardly perform it perfectly. This leads the hospital to become notorious.
To sum up, they have problems in meeting demand and abuse of the method, which is unique to them, and have expending business opportunities while keeping the quality level.
Cost Calculation for the patient at Shouldice vis-à-vis similar hospitals
ROUGH ESTIMATES
Charges levied on customer MIN MAX Competitors
Charges for the hospital stay $111 per day 4/5 day stay $444 $555
Surgical fee for primary inguinal $450 - $450 $450
Assistant surgeon fee $60 - $60 $60
General anesthetic $75 - $0 $75
Round trip fares - - $200 $600
Total $1,154 $1,740 $2000 - $4000
Assuming approx 600 operations per surgeon and a team of 12 surgeons we get:
Min revenue 6,868,800.00
Max revenue 8,208,000.00
Expense For the Hospital
Hospital 2,800,000
Clinic 2,000,000
Total 4,800,000
Doctors' straight salary 600,000
Bonus 500,000
Assistant surgeons' salary 128,520
Anesthetic's salary 78,214
Nurses' salary 22 nurses 550,000 Assume: full time nurses get paid $25,000
Nurses' salary 18 nurses 270,000 Assume: part time nurses get paid $15,000
Total 2,126,734
The rest is assumed to be administrative expenses and other necessities like food and laundry charges
The Future:
• Setting up a new hospital in USA
To expand the capacity, Shouldice should hire new surgeons and nurses to deal with the expanded capacity. Addition of Saturday operations will result in increased workload. Moreover, as a consultant they should decide on whom to promote. Since the patients stay at Shouldice for average of 5 days, an increment in capacity will be inevitable. There is a demand for the same operation from other hospitals. Besides, some of the other hospitals are imitating the same method wrongly. So, they should develop a self-contained branch in northern part of US. And by the help of their good image in medical care, they can brass to offer new specialty medical service first in Toronto. If the demand is enough, they can expand their new specialty medical care service area.
The existing staff would need to be briefed about any changes and encouraged to teach the new employees so that the high quality standards of the hospital are maintained. This expansion would definitely earn profits in the long run, but would incur high costs for establishment of the hospital, hiring of the staff and training them. Brochures saying that Shouldice Hospital is the only hospital having the technical expertise to practice the Shouldice method and warning the people against fraudulent practices will ensure that the failures of such fraud operations are not blamed on the Shouldice method. The media could be used to draw to the attention of the people that there are other doctors wrongly claiming to know the Shouldice technique and that they are not representative of Shouldice Hospital.
Finally in the text of the case, it is not stated whether Shouldice has copyright of its unique method. If not performed this necessity yet, it is very hard to prevent people from taking advantage or abuse of this method without patent of the method. |
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