Dispute Case

SHOULDICE CASE STUDY

1. Utilization = actual/design = 450 / (90*7) = 71.43%
2.

| Beds Required | Check-In | Mon | Tues | Wed | Thurs | Fri | Sat | Sun | Monday | 30 | 30 | 30 | | | | | Tuesday | | 30 | 30 | 30 | | | | Wednesday | | | 30 | 30 | 30 | | | Thursday | | | | 30 | 30 | 30 | | Friday | | | | | | | | Saturday | 30 | | | | | 30 | 30 | Sunday | 30 | 30 | | | | | 30 | Total | 90 | 90 | 90 | 90 | 60 | 60 | 60 |
Utilization = 540 / (90*7) = 85.71%
The bed capacity would change on Saturday, Sunday, and Monday. The table shows an increase in the bed capacity utilization. The total bed capacity utilization rate will increase from 71.43% to 85.71%.

3. If the number of beds is increased
by 50% (from 90 to 135 beds), Shouldice could perform 45 operations per day before running out of bed capacity. The added beds would allow an increase in surgeries, from 30 to 45 per day. In order for the facility to be fully utilized the hospital would need to increase surgeries from 30 to 45 on Monday, Tuesday, Wednesday, and Thursday. If 30 surgeries are performed each day in 5 rooms, then 6 are performed in each room. To perform 45 per day, the rooms will need to be occupied 9 hours per day or they will need to add more rooms. Extending the hours may not be a good idea because it could conflict with the recovery process at Shouldice. The hospital needs more operating rooms. Shouldice hospital cannot perform 45 operations per day.

4.
Expansion using the addtl revenue from the expansion:
$700/operation (average rate/operation – surgeon’s fee; $1,300 – $600)
Expansion will bring additional 50 operations/wk (10 operations per day for 5 days in a wk) = 2,600 operations/yr
$700 * 2,600 operations/yr = $1,820,000/yr
Cost: $100,000 per bed * 30 beds = $3,000,000
Value: Revenue – Cost=
$9,100,000 ($1,820,000 * 5 yrs) – $3,000,000 = $6,100,000
Expansion over a 5-year period is financially profitable with a value of $6,100,000.
Expansion using addtl revenue from expansion and current revenue:
Revenue:
$700/operation (average rate/operation – surgeon’s fee; $1,300 – $600)
Expansion will bring total 200 operations/wk (40 operations per day for 5 days in a wk) = 10,400 operations/yr
$700 * 10,400 operations/yr = $7,280,000/yr
Cost: $100,000 per bed * 30 beds = $3,000,000
Value:
Revenue – Cost=
$36,400,000 ($7,280,000 * 5 yrs) – $3,000,000 = $33,400,000
Current revenue:
Revenue:
$700/operation (average rate/operation – surgeon’s fee; $1,300 – $600)
150 operations/wk (30 operations per day for 5 days in a wk) = 7,800 operations/yr
$700 * 7,800 operations/yr = $5,460,000/yr
Cost:0

Value:
Revenue – Cost
$27,300,000 ($5,460,000 * 5 yrs) – $0 = $27,300,000
Expansion supports the highest payoff so it would be
justified.