Case Study: Shouldice Hospital — How Well Is The Hospital

Case Study Shouldice Hospital A Cut Above1how Well Is The Hospital C

Develop a comprehensive analysis of Shouldice Hospital’s capacity utilization and potential expansion strategies. The focus should be on assessing current bed utilization, the impact of adding operational days, exploring capacity increases, and evaluating financial implications to justify growth within a five-year horizon. Include calculations for bed utilization, operational capacity, cost analysis of expansion, and revenue forecasts based on historical sales data using exponential smoothing techniques.

Sample Paper For Above instruction

Shouldice Hospital, renowned for its specialized hernia surgery, operates within a defined capacity that influences its service delivery and financial outcomes. Analyzing the current utilization and potential expansion provides insights into operational efficiencies and strategic growth opportunities. This paper assesses the hospital's current bed utilization, explores the ramifications of extending operations to Saturdays, evaluates the impact of increasing bed capacity by 50%, and discusses financial justifications backed by demand forecasting models, particularly using exponential smoothing.

Current Bed Utilization

Shouldice Hospital has a total of 90 beds, operational seven days a week, yielding a total capacity of 630 bed-days per week (90 beds x 7 days). Based on given data, the hospital performs 30 operations per day, each lasting approximately three days, with five days of weekly operations. The utilization is calculated as follows: 30 surgeries/day x 3 days = 90 bed-days per day of operation, and over the week, 450 bed-days are used (30 surgeries x 3 days x 5 operational days). Dividing this by total capacity: 450/630 ≈ 71.43%, indicating that roughly 71% of the hospital's beds are utilized during the current schedule.

Impact of Adding Operations on Saturdays

Extending the schedule to include Saturdays with the same daily volume of 30 operations shifts the weekly operation count to six days, increasing total weekly surgeries to 180 (30 surgeries x 6 days). The bed utilization now becomes 30 surgeries x 3 days per surgery x 6 days, totaling 540 bed-days. The percentage utilization improves to 540/630 ≈ 85.71%. This indicates that the hospital can handle additional surgeries without capacity constraints, assuming operational efficiencies are maintained. However, this necessitates reviewing staffing, resource allocation, and physical space to sustain increased throughput.

Capacity Expansion by 50%

A 50% increase in beds elevates capacity from 90 to 135 beds, thereby increasing weekly capacity to 945 bed-days. If the hospital maintains the same five-day surgical schedule, they could theoretically perform 45 operations daily (since 135 beds / 3 days per surgery = 45 surgeries per day). Under current resource constraints, the number of surgeries performed per day is limited by surgeons and operating rooms, which currently support performing 30 surgeries daily. To perform 45 surgeries daily, the hospital would require additional operating rooms or extended operating hours, and possibly more surgeons.

Given that the facility has 12 surgeons and five operating rooms, capacity is a bottleneck. For example, if each surgeon performs one operation per day, only 12 surgeries can be performed daily, which is below the desired 45 surgeries, implying the need to either increase surgical staff, add rooms, or extend working hours. The analysis suggests that while bed capacity can support more surgeries, the current operating infrastructure constrains throughput, emphasizing the necessity for resource investment.

Financial Justification for Expansion

Adding beds incurs costs of approximately $100,000 per bed, resulting in an initial investment of $10 million for a 100% increase (from 90 to 180 beds). Revenue per operation averages around $1,300, with surgeons earning a flat rate of $600 per surgery, implying that each surgery contributes approximately $700 in gross profit before fixed operating costs. To justify expansion financially, Shouldice needs to evaluate whether increased capacity will translate into sufficient additional revenues exceeding the investment over five years.

Estimating total additional revenue involves projecting the number of surgeries performed and applying the average charge. Assuming an increase to 45 surgeries per day over 250 operational days per year (excluding weekends), the annual additional surgeries could reach 11,250 (45 surgeries x 250 days). At $1,300 per surgery, this equates to approximately $14.625 million annually in gross revenue. Deducting estimated operational costs and initial investment, the hospital could recover costs within a few years if operational efficiencies are maintained.

Demand Forecasting Using Exponential Smoothing

Historical sales data for six months illustrate the variability in monthly surgeries: January (94), February (106), March (80), April (68), May (94), June (94). Applying simple exponential smoothing with a smoothing factor (α) of 0.2 aids in forecasting future demand to inform capacity planning. Calculations proceed as follows:

  • February forecast: f(feb) = 0.2 January sales + 0.8 forecast of January (initial forecast can be set to January actual sales): 0.2 94 + 0.8 94 = 94
  • March forecast: f(mar) = 0.2 February sales + 0.8 previous forecast: 0.2 106 + 0.8 94 ≈ 96.8
  • April forecast: f(apr) = 0.2 March sales + 0.8 previous forecast: 0.2 80 + 0.8 96.8 ≈ 90.2
  • May forecast: f(may) = 0.2 April sales + 0.8 previous forecast: 0.2 68 + 0.8 90.2 ≈ 81.76
  • June forecast: f(jun) = 0.2 May sales + 0.8 previous forecast: 0.2 94 + 0.8 81.76 ≈ 84.2

The mean absolute deviation (MAD) can be calculated by averaging the absolute differences between actual sales and forecasts, providing a metric for forecast accuracy. This forecast informs future capacity planning, resource allocation, and scheduling strategies, ensuring the hospital can meet demand without overextending resources.

Conclusion

Shouldice Hospital has demonstrated effective utilization of its current capacity, with room for growth via operational extension and infrastructure expansion. Strategic investment in additional beds and operating rooms, underpinned by demand forecasts, will support increased surgical volume, improve utilization, and enhance financial sustainability. Incorporating demand forecasting models such as exponential smoothing provides precise data to guide decision-making, ensuring the hospital’s growth aligns with market needs and operational capabilities. Careful analysis of costs, revenue potential, and resource constraints facilitates an informed approach to expansion that can secure the hospital’s competitive edge and service quality in the long term.

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