University of Stockholm
School of Business
Marketing Department
Tutor: Bengt Gustavsson
Group 2
98-12-02
Case 3
The Shouldice Hospital
Authors: Marcus Lindquist
Leif Wicklund
Julia Hilgers
Gabriel Martinez
Nicklas Norrby
2
TABLE OF CONTENT
1. INTRODUCTION ............................................................................................................................................. 3
1.2. MAIN PROBLEM ............................................................................................................................................ 3
2. DESCRIPTION OF THE CASE ..................................................................................................................... 3
2.1 THE 6 CRITERIA OF A GOOD SERVICE ............................................................................................................. 4
2.1.1 Professionalism and skills .................................................................................................................... 4
2.1.2 Attitudes and behavior .......................................................................................................................... 4
2.1.3 Accessibility and flexibility. .................................................................................................................. 4
2.1.4.Reliability and trustworthiness. ............................................................................................................ 4
2.1.5.Recovery. .............................................................................................................................................. 4
2.1.6 Reputation and credibility. ................................................................................................................... 5
2.2 THE AUGMENTED SERVICE OFFERING .......................................................................................................... 5
2.2.1 The service concept .............................................................................................................................. 5
2.2.2 The basic service packing ..................................................................................................................... 5
2.2.3 Augmentation of the offering ................................................................................................................ 6
2.2.3.1 Accessibility of the service ............................................................................................................................. 6
2.2.3.2 Interactions ..................................................................................................................................................... 6
2.2.3.3 Customer participation.................................................................................................................................... 7
2.3 THE SHOULDICE HR POLICY ......................................................................................................................... 7
2.3.1 Recruiting Policy .................................................................................................................................. 7
2.3.2 Training Policy ..................................................................................................................................... 7
2.3.3 Compensation Structure ....................................................................................................................... 8
2.3.4 Open Door Policy ................................................................................................................................. 8
2.4 THE SHOULDICE SOURCING POLICY ............................................................................................................... 8
2.4.1 Housekeeping ....................................................................................................................................... 8
2.4.2 Laundry................................................................................................................................................. 9
2.4.3 Catering ................................................................................................................................................ 9
2.4.4 The anesthetist ...................................................................................................................................... 9
2.5 THE CHARACTERISTICS THAT DIFFERENTIATE SHOULDICE HOSPITAL ........................................................... 9
3. CAPACITY INCREASE ................................................................................................................................ 10
3.1 THE ALTERNATIVES ..................................................................................................................................... 10
3.1.1 The current situation .......................................................................................................................... 10
3.1.2 New floor ............................................................................................................................................ 10
3.1.3 New hospital outside Canada ............................................................................................................. 11
3.1.4 Franchising......................................................................................................................................... 11
3.1.5 Opening on Weekends ........................................................................................................................ 11
3.1.6 Public health care ............................................................................................................................... 12
3.2 ANALYSES OF THE VIABLE EXPANSION ALTERNATIVES ............................................................................... 12
3.2.1 Opening an additional floor: .............................................................................................................. 12
3.2.2 Opening on weekends ......................................................................................................................... 12
4. PRICE INCREASE ......................................................................................................................................... 13
5. RECOMMENDATIONS ................................................................................................................................ 14
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1. Introduction
This is paper is based on the Shouldice hospital case. First of all we will describe the main
problem and look for the highlights. Thereafter we will describe the situation at the hospital
through the theory. We will focus on the service delivery, the service quality and the market
situation. We will also analyze the sourcing policy and to what degree it is successful. Before
starting the analysis we will describe the main characteristics that differentiates Shouldice
from other hospitals.
After having a basic background to the case and the situation, we will look at the different
expansion alternatives and the benefits and drawbacks related to each of them. Finally we will
discuss other options for profit enhancement.
1.2. Main problem
The Shouldice operation doesn’t face any major challenge. Quality is good. Customers are
satisfied. Employees seem to be content. However, the current demand is higher than
Shouldice’s capacity. Whether this is a problem or not can always be discussed.
If Shouldice would have been a non-profit operation aiming at serving as many customers as
possible, the limited capacity is regarded as a problem. Hence the challenge would be to
increase capacity.
However, since Shouldice is a profit oriented operation1, the limited capacity is regarded as
constrain for revenue and profit increase. Hence the challenge is to increase profit. Profit can
be increased through three basic alternatives;
1. Increasing revenue at current capacity
2. Lowering costs at current capacity
3. Increasing capacity at current cost/revenue ratio
Our discussion will focus the increased profitability issue.
2. Description of the case
In this chapter we are going to explore Shouldice in the light of certain models described in
the course literature. We are also focusing on critical factors for the hospital not described in
the theories. This is to analyze the case, and from the analyzes draw some conclusions that
can lead to suggestions to how the hospital could handle the situation.
1
Telephone interview with Assistant Administrator Steven Dixon on 98-11-30
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2.1 The 6 criteria of a good service
The following section is describing the hospital from the perspective of the “6 criteria of a
good service”. The theory is meant to provide a conceptual model of services as objects of
marketing viewed with the eyes of the customer.
The 6 criteria of a good service is based on a large number of studies of how customers
perceive a good service. These criteria offer a good summary of the studies.2 The criteria and
the implications for this case are the following:
2.1.1 Professionalism and skills
The customers realize that the service provider has the employees, skills, knowledge and
systems to solve the customers’ problems in a professional way. In this case it is the way the
surgeries are performed. Shouldice has achieved a well respected position due to its special
methods. There is also a backlog for its services. A large part of the clients heard of Shouldice
through “word of mouth”. Hence we conclude that the hospital performs well with regard to
professionalism and skills.
2.1.2 Attitudes and behavior
The customers experience a true concern and interest in solving their problems from the
service providers’ employees. Staff at Shouldice feel that the attitudes of the patients are the
most important element in the hospital’s treatment program. As some patients asked to stay an
extra day we can draw the conclusion that the attitudes and behavior of the employees are
conceived well by the patients.
2.1.3 Accessibility and flexibility.
The customers feel that the service provider, its location, operating hours, employees and
systems are easy to get access to and are flexible to the customers needs. Due to the location
in Toronto, patients from outside that region might feel there are some difficulties in getting
there. Though, the patients at the hospital seem to enjoy the possibility to have their family
members staying with them at the hospital. This indicates some flexibility that is appreciated
by the customers.
2.1.4.Reliability and trustworthiness.
The customers can rely on the provider to keep its promises and act upon the best interest of
the customer. As this corporation is a hospital and the reliability and trustworthiness criterion
is fundamental to any hospital operation, we do not think there is any problems related to this
matter.
2.1.5.Recovery.
The customers realize that the service provider, if something goes wrong, will immediately
and actively take actions to find a solution. The ability to recovery is another fundamental
criterion for a hospital. It is vital for a hospital that a surgical recovery function works well.
2
Grönroos, Christian, Service Marketing Theory. Back to Basics, p. 11.
5
In the other activity areas such as after operation stay, there can occur situations that will not
have the same kind of implications as in surgery. Whether the recovery function works well
or not in other areas than surgery, we cannot comment on. This is mainly due to lack of
information.
2.1.6 Reputation and credibility.
The customers believe that the service provider’s operation can be trusted and that the
operation stand for good performance, which can be shared by the consumer and the service
provider. The backlog of patients and the turn up at the annual patient reunion, are evidences
that the Shouldice reputation is undoubtedly good. This also indicates a high credibility.
2.2 The Augmented Service Offering
In this section we are going to describe the service process at Shouldice Hospital in terms of
the Augmented Service Offer – model3. This model discuss how to manage the service
process so that both functional quality, how the process functions, and the technical quality,
what the service leads to, are taken into account. Thus, the whole interactive marketing
process is included in the model. The model is divided into three phases:
1. Developing a service concept.
2. Developing a basic service packing.
3. Augmentation of the offering.
2.2.1 The service concept
The service concept determines the intentions of the service provider. In this case it is to
perform hernia surgery.
2.2.2 The basic service packing
The basic service package includes three groups of services:
1. The core service. This is the main reason for being on the market. In this case it could
consist not only of the special method of surgery performed at the hospital, but also the
process of handling the patients in connection with the surgery, e.g. pre-examinations,
diagnosis.
2. The facilitating services, which are needed so that the core service can be used. This could
be the surgeons, nurses and administration, which are needed to perform the hernia
surgery.
3. The supporting services, which are not required for the core service but which help to
distinguish the service package from the competitors. This could be the handling
procedure of patients used at Shouldice, the interior and special atmosphere created by the
staff as well as the facilities in which the patients are during their stay at the hospital.
3
Grönroos, Christian, Service Marketing Theory. Back to Basics, p. 12.
6
Fig. 1 The Augmented Service Offering
The service concept
The Core service
Accessibility of
the service
Interactions
Facilitating
services
Supporting
services
Customer
Participation
2.2.3 Augmentation of the offering
Further, the service process can be distinguished by the other elements in the model:
2.2.3.1 Accessibility of the service
Making the service accessible so that the service can be easily used or consumed. That is to
have the right mix of competence and resources in the service process. In the case of
Shouldice this is partly the location of the hospital, which cannot be relocated easily, but also
the number of employees and their related skills. This part also constitutes of the technology,
the systems and the customer orientation of those. Although the hospital is located in Toronto,
many patients travel from the U.S. or Europe to undertake surgery at Shouldice. This could
implicate that the physical location is not so important in a matter of a surgery. The skills and
number of employees seem to be sufficient relative to the number of patients currently at the
hospital. The systems and technology of the hospital seem to be adequate, as the patients
sometimes want to stay an extra day. However the fact that 1.200 persons are waiting for
surgery is a sign of poor accessibility.
2.2.3.2 Interactions
The developing of interactions between the consumer, and the service provider and the
resources that the customer confronts, impact the perception of the service quality of the
customer. The short waiting time the customers experience, from arriving at the hospital and
undergoing pre-examination and the actual surgery, is an example of such an interaction. The
interactions with other customers also fall in this category. The extensive contact between
patients and the exchange of experiences are examples of a good service quality for the
customer.
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2.2.3.3 Customer participation
Enabling customer participation in the service process means that the customer has the
possibility to influence the service process and on the perceived quality. This can be described
as the patients giving the correct information about the problems to enable the doctor to give a
sufficient diagnosis. The way the patients are encouraged to exercise and to walk from the
operating room after surgery are examples of such a customer participation, especially as this
is not common in hospitals.
2.3 The Shouldice HR Policy
Deficiencies in HR policy many times create provider Gap 3, where service delivery is not
performed according to service standards. Gap nr 3 does not seem to be a major issue at
Shouldice. We believe the explanation can be found in the Shouldice HR policy. Important
aspects of the Shouldice HR policy are:




Recruiting Policy
Training Policy
Compensation Structure
Open Door Policy
2.3.1 Recruiting Policy
In interviewing prospective doctors, Shouldice goes beyond the basic skills set and emphasize
traits and attitudes related to how the doctors will fit into the overall atmosphere at Shouldice.
This policy is different to other hospitals where formal competence and experience are being
regarded as the prime criteria. If a prospective doctor has the wrong attitude, there is no room
for him at Shouldice, regardless of his skills. Like Dr. Obney expressed it; “ This is no place
for prima donnas.”
Through this different recruiting policy, Shouldice is able to select people that fit into the
Shouldice culture. The recruiting policy is a key element to preventing gap nr 3 to occur.
2.3.2 Training Policy
The Shouldice training policy can be characterized as solid, secure and conservative.
Shouldice allows sufficient “on the job training” for newcomers before they are left on their
own. A newcomer is gradually growing into his area of responsibility through assisting senior
doctors. Once the skills are sufficient he takes over on his own, however always under
supervision of and support by a senior doctor.
Although we believe this training procedure is standard at any hospital, we get the impression
that Shouldice is a bit more conservative and careful in leaving newcomers on their own.
An important element of the Shouldice training policy is the treatment of recurrences. The
doctor who performed the first operation has to be present at the recurrence to learn from his
mistake. The Shouldice training policy assures functional quality and is an other important
element to why gap nr 3 is closed.
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2.3.3 Compensation Structure
We believe the Shouldice bonus system and profit sharing plan increase the level of
motivation among doctors as well as other staff.
Increased motivation among front-line personnel is a key element in delivering service
according to standards. This is particularly true in health care where face-to-face contacts with
customers is the mean of communication.
Since the Shouldice staff seem to be fairly motivated, we believe it can be partly explained by
the compensation structure. However, we believe other elements such as the overall spirit
among the staff is as important. An effective compensation structure helps to close gap nr 3,
but can never be used as an isolated program to close that gap. The compensation structure
must be regarded as a tool to sustain a positive spirit and to keep motivation high.
2.3.4 Open Door Policy
Superiors’ openness is an additional contributor to a general good spirit at Shouldice. The
Shouldice open door policy is an evidence to openness. When a superior demonstrates
openness through always having his door open, the subordinates get the feeling of
accountability and trust. Closed doors generate a feeling of secrets being discussed which in
turn lead to insecurity among others. In the longer context, closed doors have a negative
motivation impact, as well as open doors have a positive impact.
Many companies claim they have an open atmosphere, but don’t apply it in practice.
Shouldice proves this policy through action. We believe the Shouldice open door policy is a
contributor to increased motivation and thus one explanation to why gap nr 3 is closed.
2.4 The Shouldice sourcing policy
Outsourcing of services becomes more and more frequent in any operation. There are many
benefits associated with outsourcing services, yet some key risk aspects must also be
considered. One of the risk elements are lessened control over service quality4.
Shouldice has a well pronounced quality policy and rely heavily on its reputation. To
outsource some of its simpler services such as housekeeping, laundry and catering would
likely lead to certain productivity gains and cost savings. However, Shouldice has chosen not
to outsource. We believe Shouldice has taken a conscious decision not to outsource any of its
services. We believe this is mainly related to the quality control issue and the severe
implication a quality defect would have on Shouldice’s reputation.
2.4.1 Housekeeping
Shouldice performs its own housekeeping. In that way Shouldice can assure the housekeeping
staff to act according to service standards. If a problem occurs, Shouldice can fix that
instantly. In a situation where the housekeeping service was outsourced, and a quality issue
had to be fixed, Shouldice had to negotiate improvements with a subcontractor. Such a
procedure would be far lengthy and inefficient than discussing the issue with Shouldice’s own
4
Scheuing, Eberhard E., “Sourcing Services” in Edvardsson & Modell, Service Management, 1996
9
personnel. Hence we believe the risk associated with outsourcing the housekeeping does not
balance eventual cost savings.
2.4.2 Laundry
The laundry service is another area that typically would be outsourced. We do not believe the
quality assurance aspect can be an explanation to why Shouldice has chosen not to outsource
its laundry service. We believe the explanation must fall in the area of no cost savings as well
as staffing flexibility. If there is a need for temporary assistance in the housekeeping area for
instance, Shouldice can move laundry resources temporary to the housekeeping area. Such a
procedure would have been impossible if the laundry services had been outsourced.
2.4.3 Catering
As far as catering services is concerned, we believe it is one of the important physical
evidences attached to the Shouldice servicscape. Using fresh raw material in cooking and
enabling the customers to talk to the kitchen staff every day, are pronounced features of the
Shouldice customer services. We believe those features would be difficult to enable through a
catering service being outsourced. Hence the reason not to outsource the catering service must
be explained through the quality control aspect.
2.4.4 The anesthetist
Yet it seems obvious that Shouldice has a policy not to outsource any of its customer
interfaced services, the anesthetist is the exception. We cannot see any explanation to why the
anesthetist is an outsider, other than that Shouldice has been unable to recruit that function.
Using an anesthetist 250 days a year for a fee of $ 300 per day, corresponds to an annual cost
of $ 75.000. That amount equals a doctor’s salary including bonus. Consequently we cannot
conclude there are any cost savings associated with outsourcing the anesthetist.
2.5 The characteristics that differentiate Shouldice Hospital
In terms of the Augmented service offering model, the main things that seem to make this
hospital different from others can be summarized in two main points. Core service and
supporting service.


Core service. Shouldice have a special surgery method that allows the patients to recover
fast.
Supporting services. The staff and the patients together create a special atmosphere
between both staff members and patients. This is also influenced by the design of the
facilities and the option for family members welcomed to stay at the hospital for free.
There are however other features characterizing Shouldice, such as the interactions between
patients, their exchange of experiences and the opportunity to make friends. There is also the
customer participation, which leads to quicker recovery for the patients, as they exercise by
walking around freely in the premises.
When looking trough the glasses of the 6 criteria of a good service there are two criterions
that stand out.
10


Attitudes and behavior. The staff feels that the patient’s attitude is the most important
element in the Shouldice method. It also seems to be a special feeling in the premises.
Reputation and credibility. There is no doubt Shouldice has a special reputation which has
resulted in that Shouldice never had to market itself, part from the word of mouth method.
This indicates that the credibility is also very high. .
3. Capacity increase
In this part of our analysis we are going to show different expansion alternatives which can be
used by Shouldice. In the text the author describes that there is an aim on the managerial side
to increasing the hospital’s capacity and simultaneously maintain the control over the quality
of the service delivered. Both sides must be taken into consideration because the wrong use of
these factors can jeopardize the unique atmosphere in the hospital. The main challenge of the
management is to keep this very special atmosphere, which is produced by the number of
people, the physical evidence and the well organized process. If an unbalance occurs between
these three factors the exclusivity will be destroyed and the hospital cannot longer compete
with this very special feature.
3.1 The alternatives
First, we will describe Shouldice’s actual situation, and then the different alternatives will be
discussed in terms of benefits and drawbacks. After a first look at the different options we will
discuss the viable alternatives in detail. The different alternatives are:





A new floor
A new hospital outside Canada
Franchising
Opening on weekends
Using the public health care
3.1.1 The current situation
Benefits
Optimal number of beds
Optimal number of personnel
Optimal communication between the personnel
(doctors, nurses, housekeepers, patients)
Special good atmosphere.
Skilled personnel.
Facility in one building, hospital and clinic.
Drawbacks
Lack of capacity
3.1.2 New floor
In addition to the three floors (First level: kitchen, dining rooms; Second level: large open
lounge area, admission offices, patient rooms, Florida room; Third level: patient rooms, large
11
lounge, reception area; bottom level: operation, laboratory, patient recovery room) the
Shouldice hospital could open a fourth level, which have to be integrated with the old ones. It
is important that there is no conflict in the architecture of the building, so that the atmosphere
still remains the same.
Benefits
Drawbacks
Risk of loosing friendly atmosphere,
optimized communication and control
Integration with other floors
Increased capacity
Capacity increase kept in the same facility
3.1.3 New hospital outside Canada
In order to satisfy the demand from outside Canada the management can take into
consideration to build a new hospital, for example in North America. This new house must be
designed in the same way , since the architecture is an important aspect in keeping the
atmosphere. Senior personnel have to move from Canada to the new place in order to educate
the new employees.
Benefits
Satisfying the demand outside Canada
Creating new customers.
Drawbacks
Problem to build up the same atmosphere
Control problem for the parent operation
Quality problem
Significant investment.
3.1.4 Franchising
Franchising to license the name and the method of operating hernias.
Benefits
Satisfying demand inside and outside
Canada
Financial risk reduced
Drawbacks
Problem to build up the same atmosphere
Communication with parent operation
Quality control?
Shouldice philosophy might be destroyed or
mixed with other ideas
3.1.5 Opening on Weekends
Working on Saturdays means that the size of the building will remain, but Shouldice will be
able to treat more customers.
Benefits
Increased number of satisfied patients
Atmosphere remains, because of same size of
the building
Quality and personnel control
Drawbacks
Process (timetable) must be shifted
Older, high skilled doctors have to work on
weekends
Wedge between the younger and the older
doctors
Requires additional bed capacity
12
3.1.6 Public health care
Local doctors, who are trained to handle these kind of operations, should take care of the
unproblematic patients, who then can leave Shouldice after just a couple of days. In that way
Shouldice can release capacity. The local doctors are the ones who do a part of the recovery,
which Shouldice normally does.
Benefits
Increased number of patients
Work share with local doctors
Atmosphere remains the same
Just problem patients in the hospital
Drawbacks
Lack of control over the local doctors
Lack of quality
Lack of communication
Reputation could be damaged
High patient flow can have a negative
influence on the atmosphere
3.2 Analyses of the viable expansion alternatives
Shouldice Hospital’s success is based on the great atmosphere they have managed to create.
This atmosphere brings up a good relationship between the employees and the customers. It is
obvious that this interaction is very successful. Therefore the best alternatives are the ones
that can increase the capacity of the hospital, delivering more service, but retain Shouldice’s
own values.
From our point of view the most workable alternatives for expansion are: “open a new floor”
and “open on weekends”.
3.2.1 Opening an additional floor:
It is clear that this alternative will increase Shouldice’s profit. It is also true that the number of
patients treated, served, will also increase, and therefore the supply and demand ratio will be
more balanced. Finally everything is going to take place at the same facility for the customers.
It is true that Shouldice may challenge problems related to lack of communication between
the patients and personnel and among the patients. The number of patients could also be a
problem, so Shouldice can be unable to customize patient treatment. However, having a good
strategy and a good human resources policy, new employees can be recruited and trained by
the current employees, who know exactly how to create this personal atmosphere and
customize the treatment of the patients. It is also important that Shouldice mix old and new
employees so that the problems of communication and the integration of the floors, are
minimized.
3.2.2 Opening on weekends
The main point of opening on weekends is that the operation can remain under control. All the
schedules must be shifted correctly so that senior high skilled doctors work on weekends,
however together with new employees. In that way the newcomers will learn how to work and
what attitude they must have. This is important, because if Shouldice do not manage, doctors
13
will become exhausted. This will have a quality impact with significant worse atmosphere. In
the end Shouldice’s customers will experience dissatisfaction.
It is clear that Shouldice need a good strategy in terms of efficient structure and organization.
If this is possible, Shouldice will maintain its quality and its special atmosphere. Which will
lead to increased number of satisfied customers and higher profitability.
4. Price increase
The US market for hernia operations is estimated to an annual volume of 600.000 operations.
Shouldice performs 145-165 operations per week, corresponding to an annual number of
approximately 8.000 operations. The Shouldice market share is estimated to 1.3 %.
The Shouldice pricing is competitive and attractive. In total, a customer ends up paying
around $ 1.000 for the entire package including operation and stay. Competition offers a
similar service for a total cost of $ 2.000 to $ 4.000. One of the explanations to why
competition is more expensive is the number of days a patient needs to stay at the hospital
after operation. On average a Shouldice patient leaves on the fourth day. Competition usually
requires the patients to stay for five to eight days.
Another important benefit of the Shouldice method is the total time off work for a patient is
significantly lower compared to the competitors. The average total time off work is eight at
Shouldice.5 At other hospitals, the off work time can be as long as eight weeks.
Addressing the US market, Shouldice has to consider the travelling costs to Toronto as a
disadvantage. However a round trip ticket to Toronto range from $ 200 to $ 600. Hence the
current pricing enables Shouldice to be competitive in spite of the travelling costs that must be
taken into consideration.
We believe Shouldice’s superior reputation can justify a total cost of $ 2.000 for the entire
service including travelling. A $ 1.500 price level must be competitive. With a market share
of only 1.3 %, and a back-log of 1.200 patients, we do not believe a price increase will have a
major impact on long term demand.
Based on an average volume of 8.000 operations, a $ 500 incremental revenue per operation
will bring additionally $ 4 M revenue to Shouldice. We believe such an approach is far
superior to increasing capacity at current price level.
To avoid intricate discussions about price raise and to what degree it is justified, we
recommend Shouldice to restructure its pricing. We believe the best way is to price the
service at a fixed package price including operation and stay. Such a move will avoid direct
comparison with historical prices.
5
Your stay at Shouldice hospital, www.shouldice.som/operate.htm
14
5. Recommendations
Shouldice Hospital’s success is based on the great atmosphere they have managed to create.
This atmosphere creates a good relationship between the employees and the customers. It is
obvious that this interaction is very successful. It is important that Shouldice focus on keeping
its core services intact.
Since the hospital is the non-profit part of the organization and the clinic is the profit part, the
way to increase profits is to increase the number of surgery performed, or raise the prices for
the surgery. The fees for staying at the hospital is regulated by Canadian law and cannot be
raised. The options are therefor to increase capacity, both in number of beds and in number of
surgery performed, or to raise prices for the surgery.
There seem to be too many risks associated with increased capacity regardless of any option.
Quality control, keeping the good atmosphere, maintaining the reputation etc. There is also
the risk of new legislation, in the U.S. or in Canada, which can change e.g. taxes, medical
insurance policy etc. Such a change can effect the business conditions significantly. Hence a
large investment can be too risky. We therefor recommend Shouldice to postpone the
expansion alternatives for the future.
Taking it all together the best way to increase profit in the short run seems to be a price raise.
Yet the hospital is a non-profit operation, the clinic is not. The clinic can charge for its
operation at a free market price.
Shouldice should be able to raise its prices and remain competitive. A price level of $ 1.000 $ 1.500 for an operation seems to be a fair market price. A price level of $ 1.000 for the
operation will mean a total cost of $ 1.500 including stay. For a US citizen travelling costs
has to be taken into consideration. Since a round trip ticket to Toronto only range from $ 200
to $ 600, Shouldice will still be competitive. Competing hospitals offers a similar service for $
2.000 to $ 4.000.
However a price raise can be an exposure. Changes in local and foreign legislation as well as
medical insurance regulation could have an impact on the cost reimbursement from the
insurance companies.
In a longer context, Shouldice can consider increased capacity if the backlog of customers
remains large. However, we believe increased capacity should not be consider in the nearest
future.
One possible option could be to expand the operation into completely new areas such as
homes for old people. Shouldice can use its know-how in creating a positive atmosphere and
their experiences in caring people.