Shouldice Hospital a Cut Above

1. ) How well is the hospital currently utilizing its beds? The hospital stay cycles have been provided: | Mon Beds| Tue Beds| Wed Beds| Thu Beds| Fri Beds| Sat Beds| Sun Beds| Available Beds| 90| 90| 90| 90| 90| 90| 90| Monday Admission| 30| 30| 30| | | | | Tuesday Admission| | 30| 30| 30| | | | Wednesday Admission| | | 30| 30| 30| | | Thursday Admission| | | | 30| 30| 30| | Friday Admission| | | | | | | | Saturday Admission| | | | | | | | Sunday Admission| 30| 30| | | | | 30| TOTAL USED| 60| 90| 90| 90| 60| 30| 30| Capacity Utilization| 66. 67%| 100. 00%| 100. 00%| 100. 00%| 66. 67%| 33.

33%| 33. 33%| If we average the utilization rates, we come up with a current average utilization of 71. 43%. 2. ) Develop a similar table to show the effects of adding operations on Saturday. How would this affect the utilization of the bed capacity? Is this capacity sufficient for the additional patients? The hospital will be admitting an additional 30 patients on Friday, each of whom will be operated on the next day, staying on until Sunday: | Mon Beds| Tue Beds| Wed Beds| Thu Beds| Fri Beds| Sat Beds| Sun Beds| Available Beds| 90| 90| 90| 90| 90| 90| 90| Monday Admission| 30| 30| 30| | | | |

Tuesday Admission| | 30| 30| 30| | | | Wednesday Admission| | | 30| 30| 30| | | Thursday Admission| | | | 30| 30| 30| | Friday Admission| | | | | 30| 30| 30| Saturday Admission| | | | | | | | Sunday Admission| 30| 30| | | | | 30| TOTAL USED| 60| 90| 90| 90| 90| 60| 60| Capacity Utilization| 66. 67%| 100. 00%| 100. 00%| 100. 00%| 100. 00%| 66. 67%| 66. 67%| The new average utilization rate will be 85. 71%, an improvement over the hospital’s current five-day week. The beds will be sufficient for the expanded operations, as each day’s in-patient total will not exceed the hospital’s total available beds (90).

3. ) Now look at the effect of increasing the number of beds by 50 percent. How many operations could the hospital perform per day before running out of bed capacity? How well would the new resources be utilized relative to the current operation? Could the hospital really perform this many operations? The installation of an additional 45 beds will result in the following values (assuming that the hospital still receives 30 patients a day): | Mon Beds| Tue Beds| Wed Beds| Thu Beds| Fri Beds| Sat Beds| Sun Beds| Available Beds| 135| 135| 135| 135| 135| 135| 135| Monday Admission| 30| 30| 30| | | | |.

Tuesday Admission| | 30| 30| 30| | | | Wednesday Admission| | | 30| 30| 30| | | Thursday Admission| | | | 30| 30| 30| | Friday Admission| | | | | | | | Saturday Admission| | | | | | | | Sunday Admission| 30| 30| | | | | 30| TOTAL USED| 60| 90| 90| 90| 60| 30| 30| Capacity Utilization| 44. 44%| 66. 67%| 66. 67%| 66. 67%| 44. 44%| 22. 22%| 22. 22%| The resulting average utilization rate will be 47. 62%, two-thirds of the hospital’s current utilization rate. This assumes that the hospital only still performs 30 operations a day. The utilization, understandably, will be much lower.

If, on the other hand, the hospital was to perform an additional 15 operations per day (to maximize on the beds), the values will be: | Mon Beds| Tue Beds| Wed Beds| Thu Beds| Fri Beds| Sat Beds| Sun Beds| Available Beds| 135| 135| 135| 135| 135| 135| 135| Monday Admission| 45| 45| 45| | | | | Tuesday Admission| | 45| 45| 45| | | | Wednesday Admission| | | 45| 45| 45| | | Thursday Admission| | | | 45| 45| 45| | Friday Admission| | | | | | | | Saturday Admission| | | | | | | | Sunday Admission| 45| 45| | | | | 45| TOTAL USED| 90| 135| 135| 135| 90| 45| 45| Capacity Utilization| 66.

67%| 100. 00%| 100. 00%| 100. 00%| 66. 67%| 33. 33%| 33. 33%| The average utilization rate will then be 71. 43%, similar to the hospital’s current operations (noting that the increase in bed space was matched by a proportional increase in operations performed). With 45 operations per day, the hospital’s bed capacity will still suffice. This will be the most that the hospital can perform, however, since the beds will already be fully utilized from Tuesday to Thursday. Even with the additional bed capacity, the hospital will still need to look into their other resources.

The operating rooms, for one, may require some attention. The hospital currently has five operating rooms, which are utilized daily from 7:30AM to 4PM (by which time the surgeons call it a day) – a total of eight and a half hours. For the operating rooms, the maximum number of operations that can be performed per day can be arrived at by solving Available rooms x [(operation per hour)/room] x hours per day: = 5 rooms x 1 operation per hour/room x 8. 5 hours/day = 42. 5 operations/day The hospital currently performs 30 operations per day, well within the operating room capacity of 42.

5 operations. The maximum operating room capacity will not be enough, however, for the 45 daily operations that can be achieved by the additional beds. At this point, it may be helpful to note that the operating rooms can be only practically used for eight hours a day – one cannot have half an operation performed on oneself unless on is half-herniated, after all. We therefore use the previous formula to determine the realistic number of operations that can be performed in a day: Available rooms x [(operation per hour)/room] x hours per day: = 5 rooms x 1 operation per hour/room x 8 hours/day.

= 40 operations/day In this case, considering only the bed and operating room capacities, the hospital can only perform 40 operations per day. This translates to a utilization rate of only 88. 89% (40/45) for the beds. As for the hospital’s available surgeons, the maximum number operations that the current set of twelve surgeons can perform daily will be: Available surgeons x [(operation per day)/surgeon]: = 12 surgeons x (4 operations per day)/surgeon = 48 operations/day.

Since each surgeon only performs four operations per day, the hospital can perform a maximum of 48 operations daily based on their available surgeons. The current capacity of 30 operations per day, as well as the proposed 45 per day, will be both within capacity. Realistically, the hospital can only expect to perform 40 operations per day, based on the operating table constraint. The beds will be underutilized by 11. 11%, and the surgeons by 16. 67%. 4. ) Although financial data are sketchy, an estimate from a construction company indicates that adding bed capacity would cost about $100,000 per bed.

In addition, the rate charged for the hernia surgery varies between about $900 and $2,000, with an average rate of S 1,300 per operation. The surgeons are paid a flat $600 per operation. Due to all the uncertainties in government health care legislation, Shouldice would like to justify any expansion within a five-year time period. The following table summarizes the incremental costs and revenues that are involved in the two options available to Shouldice Hospital: Add Saturday Operations:| | | | | |

Additional Operation Costs| 600| x 30| x 52| x 5| $4,680,000| Units| Cost/Optn| Optns/Week| Weeks/Year| Years| Cost/Year| Additional Revenues| 1,300| x 30| x 52| x 5| $10,140,000| Units| Revenue/Optn| Optns/Week| Weeks/Year| Years| Revenue/Year| Additional Gross Profit| | | | | $5,460,000| Add New Floor:| | | | | | Additional Construction| 100,000| x 45| | | $4,500,000| Units| Cost/Bed| Beds| | | Construction Cost| Additional Operation Costs| 600| x 50| x 52| x 5| $7,800,000| Units| Cost/Optn| Optns/Week| Weeks/Year| Years| Cost/Year| Additional.

Revenues| 1,300| x 50| x 52| x 5| $16,900,000| Units| Revenue/Optn| Optns/Week| Weeks/Year| Years| Revenue/Year| Additional Gross Profit| | | | | $4,600,000| For the first option – adding operations on Saturdays – the incremental costs will simply be the thirty additional fees ($600) that they will pay their surgeons. Likewise, the incremental revenues will be the thirty additional surgical fees ($1,300). This will translate to a $700 gross profit per Saturday operation. The total gross profit over five years, will be $5,460,000 (assuming 52 weeks in a year).

This will also assume that the hospital will indeed perform 30 operations every Saturday for the next five years. As for the second option, adding a new floor with 45 additional beds, the major cost to be considered will be for the construction of the new floor. Since a $100,000 construction cost is estimated for every bed, Shouldice will expect to spend $4,500,000 for the new floor. The new floor will result in fifteen additional daily operations for the hospital, which, for a five-day working week, will be seventy-five (75) additional operations per week for the next five years.

Given the operating room constraint, however, the hospital will only be able to add ten additional operations per day, or fifty (50) per week. Given this, and using the $700 gross profit arrived at above, the expected gross profit will be $9,100,000. Subtracting the construction cost from this amount, Shouldice Hospital will be able to expect to gain $4,600,000 from this option in five years. This also assumes that the demand will be steadily sustained at forty (40) operations per day over the next five years. Based on the analysis, the best option for Shouldice Hospital would be to offer Saturday operations.

1. ) How well is the hospital currently utilizing its bed? 90 beds x 7 days/ week = 630 beds available in a week 30 patients x 3 days x 5 days per week = 450 beds utilized 450 beds …

The total beds used if the hospital adds operations on Saturday: 540 beds The utilization rate = 540/650 = 85.71%. So with the addition of one more day operation will increase the utilization of bed capacity. With this rate of …

In the Shouldice Hospital case, I have identified two primary constraints: 1) The number of beds available to patients and 2) The number of surgeons available to operate on the patients. Since the demand for this type of operation seems …

Introduction Shouldice Hospital, set up in 1945 by Dr. Earl Shouldice, is located near Toronto. It follows the business model of focus on a single standardised service for a narrow target of consumers, rather than to provide customised solution (as …

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