How Successful Is the Shouldice Hospital? Generate a Profit & Loss Statement Using Available Information from the Case. Treat Each of the Two Operations - Hospital and the Surgery - Separately

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

The Shouldice Hospital did an excellent job of strategically positioning itself with a unique service concept and implementing an effective operational process. Shouldice gained its competitive advantage by focusing on hernia operations and designing the line flow process from admission to operation. The success of the hospital is also due to its highly skilled staff that provides a wide range of services to its patients. Furthermore, it brings in patients from all over the world (i.e., approximately 44% of its patients are from the US and 56% are from Ontario and European countries).

The income statement below highlights the success of the hospital. The positive experience of patients, doctors and nurses shows retention and reduction of the overall cost of the business. In addition, the higher number of bonuses allocated to the staff further demonstrate the growth in the financial performance of the business.

SHOULDICE HOSPITAL OPERATING STATEMENT

Income Dollar ($)

Revenue

Patient's stay 3,333,330.00 $111x 4 days x 8,580

Surgical Fees 3,861,000.00 $450 x 8,580

Fees of assistant surgeon 3,603,600.00 7 x $60 x 10,800

Additional fees of anesthetic 643,500.00 1 x $75 x 10,800

Total Revenue 11,441,430.00

Expense

Operating Costs

Cost of food 160,600.00 $1.10*400*365 days

Cost of operating room 150,000.00 5*$30,000

Average salary of nurses 800,000.00 $20,000*40

Salary of surgeons 600,000.00 12*$50,000=sum

Salary of assistant surgeons 1,837,836.00 7*$30.6*8,580

Salary of anesthetist 78,000.00 1*$300*5*52

Total Cost 3,626,436.00

Net Income 7,814,994.00

Assumptions:

1. Average 33 operations/day (pg. 6 of reading) which is 8580 operations per year

2. 365 days in the year which is used to calculate the cost of food

3. Assume anesthetist work 5 days a week * 52 weeks per year

4. Salary figures are from the article

5. No operations on the weekend

2. How do you account for its successful performance?

The key ingredient to the hospital’s successful performance is largely due to its patient satisfaction. Patients that are brought into the facility are screened in a careful manner and are active participants in the service delivery process. The staff that works at the hospital are well compensated, are granted the opportunity to learn from one another, and have flexible work life. For instance, surgeons work regular hours (8am-4pm), are compensated 50K a year with a potential bonus of 40K, and can advise each other based on observations and insights gained from working with one another. In addition, the hospital focuses its specialization in hernia surgery which gives them a competitive advantage in quality and service of work. The success of the hospital is evident as previous patients are recommending the facility, are extending their stay, have a motivated staff to do well and the company is entertaining other avenues to grow the profitably of the business through a potential expansion.

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