Generation of options:
Based on the above criteria, the following options can be generated. I.
The hospital can continue with the current scale of operations i.e. Maintaining Status Quo
The hospital can plan to scale up the level of operations. This can be done in 3 different ways A. Start operating on Saturdays which increases the capacity by 20% B. Expand the hospital building by adding one more floor C. Open new hospital in the USA, and thereby expanding operations to new geographical locations III.
Expand to other types of operations
Evaluation of Options:
Maintaining Status Quo:
Firstly, we shall analyze the present situation at Shouldice Hospital. Current Total Throughput
• Average: 6,850 Operations/50 weeks = 137 operations/week • Peak : 165/week
Throughput of each step:-
The various steps in the process are explained in APPENDIX II - EXIBHIT 1. The Throughput of each step is explained below:
(6 rooms x 3 hrs (1-4 PM) x 5 days x 60 min/hr) / (20 min / exam)
= 270 patients /week
(2 people x 3.5 hrs (1:20-4:50 PM ) x 5days/week x 60 min/hr) / (10min/patient) = 210 patients /week Nursing Station:
(2 stations x 3.5 hrs (1:30-5 PM) x 5 days/week x 60min/hr)/(10 min/patient) = 210 patients /week Operating Rooms:
(5 rooms x 8.5 hrs/room/day x 1.1 hrs/patient x 5 days/week)/
= 188 patients /week
12 surgeons x 4 operations /day x 5 days
= 240 patients / week
89 beds *5days /3.5 avg. stay
= 127 patients / week
117 beds (including 14 rooms Clinic)*5 days/ 3.5 avg. stay
= 167 patients / week
We can notice a bottle-neck in the number of beds and hence we are not utilizing other resources to full capacity. Also we have backlog of 1200 patients. This could lead to loss of customers. Hence we can’t maintain Status Quo. We need to increase the number of beds.
Option II. Expanding the Facility
Option A. Operating on Saturdays:
Currently the beds are not being utilized fully in the week-end, as there are no operations performed. This option will increase the number of patients by 20% and bring the operation close to the full load capacity . We can also meet the market demand clear the backlog of patients. The implementation of this option can increase the profit around $700,000 (APPENDIX I). Also, this will not require any additional investment.
But this option is opposed by the employees including the Chief Surgeon. It will affect the working relationship and in turn affect the experience of the patients. Hence it is not advisable to implement this option.
Alternatively, the hospital can increase the number of staff and surgeons so that they can be rotated over the week. Some of them can be offered holidays in the weekday and work on the weekends. Additional incentive can be offered to the staff working on Weekends. These benefits should be attractive to the staff. Since we earn additional profits of $700,000 by implementation of this option, surplus amount can be used for the additional compensation.
Option B. Expanding the hospital by adding another floor:
Adding a new floor will increase the hospital beds by 50% but the number of beds in the clinic will remain the same. The calculation in APPENDIX I shows that the number of patients increases by around 40% i.e. 54 patients/week. The entire backlog can be cleared in less than 6 months.
The operating cost of hospital shall also go up, as we might have to increase number of staff to maintain the same patients experience. The operations of the hospital may get disrupted temporarily during the construction. Also this option will require an investment of $2 million. But we can see an increase in the profit level by around $1.4 million (APPENDIX I). So we can get back the investment in just 2 years....
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