team crucial, capacity write up
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Shouldice HospitalCapacity Case Study
Paul AguilarAmir Assad
Jin ChaScott Skinner
Team Crucial
Shouldice Hospital IntroductionHospital specializes in hernia repair surgery
Currently facilitates 7,000 surgeries per year
Effective operations with quick turn-a-round
Patients subject to early ambulation, which promotes healing
Hospital only accepts patients with uncomplicated external hernias, in otherwise good health.
30306090909060
30 3030
303030
303030
303030
303030
Total
Sun
Sat
Fri
Thur
Wed
Tue
Mon
SunSatFriThurWedTueMonCheck-in
CURRENT “DAY ONE” INTAKE LEVELS
On Each “Day One”,An Average of
30 New Patients are Admitted
OPERATION INTERFACE
On Each “Day Two”
The 30 Previously-Admitted Patients
Undergo their Hernia Operations
DISCHARGE SEQUENCE
On Each “Day Three”
The 30 Patients That WerePreviously Administered a Hernia
Operation are Discharged
Surgeons are Scheduled to Perform Hernia Operations Monday through Friday“DAY ONE” CAN OCCUR ON THESE DAYS
Patient Intake Process Begins withScreening and Pre-Operative Exam.
Day Ends With Orientation Dinner and Social with “Recovering Patients”
“DAY TWO” CAN OCCUR ON THESE DAYS
Patient is First Administered a Local Anesthetic.
Hernia Operation is Then Performed.
Day Ends with a Dinner and SocialWith Newly Admitted Patients.
“DAY THREE” CAN OCCUR ON THESE DAYS
Patient is DischargedFrom the Hospital.
Values in Each “Total” Column RepresentAggregate Number of Patients In
Hospital (System) Each Day.
Each of These Patients Requires a Bed.
Operations Schematic
Number of Beds in Hospital
89898989898989
From “Start” to “Finish”,The Hernia Patient Processing
System Spans A Three Day Period.
90
89
= 101.12% Hospital Capacity Utilized With Current Average
Patient Load
Example:Determining Capacity Utilization
Capacity Problem SummaryShouldice is Currently Running at 72.23% Average Weekly Hospital Capacity
Average # of beds required per week is 150
Hospital Over Capacity on These DaysSharp Capacity Utilization Drop,
Limited Monetization on These Days
33.71%33.71%67.42%101.12%101.12%101.12%67.42%
SundaySaturdayFridayThursdayWednesda
yTuesdayMonday
PROBLEM AREAS:
Capacity Configuration OptionsOption 1: Maintain Current Hospital Capacity Configuration
Option 2: Hire Surgeons for Saturday, Extending Surgeries from Mon-Sat
Option 3: Add a Second Floor to the Hospital
Option 1: Business As UsualCheck In Mon Tue Wed Thu Fri Sat Sun
Mon 30 30 30
Tue 30 30 30
Wed 30 30 30
Thu 30 30 30
Fri
Sat
Sun 30 30 30
Total 60 90 90 90 90 60 60
Option 1: Business As UsualCheck In Mon Tue Wed Thu Fri Sat Sun
Mon 30 30 30
Tue 30 30 30
Wed 30 30 30
Thu 30 30 30
Fri
Sat
Sun 30 30 30
Total 60 90 90 90 90 60 60
Leave Capacity Configuration AS IS,
Maintaining Current Operation Schematic
While Monetizing Existing # of Beds.
Current Capacity Utilization
100% Capacity Utilization
Utilization Exceeds
Planned Capacity
Current Break Even Point
Shouldice Breaks Even
When Demand Reaches
60 Beds,
Creating $1,400,000 in Profit.
Option 2: Saturday SurgeriesCheck In Mon Tue Wed Thu Fri Sat Sun
Mon 30 30 30
Tue 30 30 30
Wed 30 30 30
Thu 30 30 30
Fri
Sat
Sun 30 30 30
Total 60 90 90 90 90 60 60
Employ Surgeons to Facilitate
Surgery on Saturday
30 30 30
Adding 30 Additional
Patients to the Hospital on
Friday, Saturday, and Sunday
- Amount Earned per Surgery $10,000
- Cost per Surgery $ 3,500
- Yearly Fixed Cost $22,000
Recommended Capacity Option
Option 2 Capacity Utilization
100% Capacity Utilization
Utilization Exceeds Planned Capacity
Utilization Comparison
100% Capacity Utilization
Current Schematic
Option 2
A Longer Period of Maximinum
Facility Monetization
Option 2: Break Even Point
Shouldice Breaks Even
When Demand Reaches
~ 65 Beds,
Creating $8,300,000 in Profit.
Option 3: Build a 2nd Floor
Check In Mon Tue Wed Thu Fri Sat Sun
Mon 44 44 44
Tue 44 44 44
Wed 44 44 44
Thu 44 44 44
Fri
Sat
Sun 44 44 44
Total 88 132 132 132 88 44 44
Expand the Hospital
By Adding an Additional
Floor (Creating 14 Additional Beds / Day)
- Amount Earned per Surgery $ 10,000
- Cost per Surgery $ 3,500
- Yearly Fixed Costs $ 30,000,000
- One-time Construction Costs $ 8,800,000
Option 3 Capacity Utilization
100% Capacity Utilization
Utilization Approaches,
But Stays Under, 100%.
Declining Rapidly
The Remainder of the Week.
Our Investment is Only Paying Off
When Utilization is Close to 100%.
Utilization Comparison
100% Capacity Utilization
Current Schematic
Option 3
Option 3: Break Even Point
Shouldice Breaks Even
When Demand Reaches
~ 95 Beds,
Creating $1,7500,000 in Profit.
Indifference Point Analysis
Variable costs remain constant, regardless of which option you choose.
There is NO INDIFFERENCE POINT.
Decision Tree Analysis
Yearly Fixed Cost
Variable Cost Prob Demand Revenue
Expected Cost Profit
Expected Value
33.33% 150 $390,000,000 $295,300,000 $94,700,000 $31,566,666.67
33.33% 180 $468,000,000 $322,600,000 $145,400,000 $48,466,666.67
33.33% 220 $572,000,000 $359,000,000 $213,000,000 $71,000,000.00
$30,000,000.00 $3,500.00
$22,000,000.00 $3,500.00
33.33% 150 $390,000,000 $246,500,000 $143,500,000 $47,833,333.33
66.67% 180 $468,000,000 $273,800,000 $194,200,000 $129,466,666.67
“ADD A SECOND FLOOR”“ADD A SECOND FLOOR”
“FACILITATE SURGERIES ON SATURDAY”
“FACILITATE SURGERIES ON SATURDAY”
$151,033,333.33 Expected Value (Over Five Years)
$177,300,000.00 Expected Value (Over Five Years)BEST OPTION
Our Recommendation
With surgeries facilitated on Saturday, Shouldice realizes an additional full day of maximum facility monetization
The decision tree results detail that, over a five year period, Option 2’s expected value will exceed Option 1
The break-even point for Option Two occurs sooner than Option Three, which makes it less risky from an efficiency standpoint
Based on our capacity data / financial analysis, werecommend extending surgery facilitation to Saturdays.
Shouldice HospitalWe thank you for your time.
Paul AguilarAmir Assad
Jin ChaScott Skinner
Team Crucial