Abstract
This paper describes our observations, findings, and understanding of Shouldice Hospital, an 89-bed hospital with five operating rooms, specializing in the surgical repair of abdominal wall hernias and recurrent hernias. For more than 75 years, the hospital has been offering not only efficient and low-cost services for patients and payers but also high-quality hernia repair with a lifetime guarantee, outstanding patient experience and caregiver satisfaction. Our purpose is to explain a mystery: accounting for the success of Shouldice as a modern, well-managed health care organization able to achieve the quadruple performance problem.
The research focused on three broad questions (1) What are the important features of Shouldice Hospital as a care program and delivery system? (2) How does Shouldice create value for patients, caregivers, and the organization? (3) If Shouldice does outperform other outpatient, ambulatory surgery centers, and traditional hospitals, what are the key lessons that other health care organizations can learn?
The study design was a multi-method descriptive and explanatory case study with core qualitative components—care process observations and interviews with key informants. We identified three broad streams in the literature (1) the evolutionary history of hernia surgery; (2) studies comparing the Shouldice methods with other techniques; and (3) the literature on focused factories and well-managed organizations. Each stream is discussed and drawn together in this research study.
Several key findings and lessons are highlighted in this case study. First, a focused health care program that wants to offer the best surgical outcomes and best patient experience at the lowest prices must be supported by efficient care processes that reduce unproductive work. When the workflow is structured efficiently, caregivers and staff spend most of their time on patient care activities; reducing unproductive work creates a strong people proposition for employees. Shouldice has found a way to reduce the cost of administrative overhead and middle management, by combining standardization with enough autonomy and team interdependence to allow for the customization of patient services.
We also found that the clinical service line at Shouldice was supported by a patient-centered, self-directed, and team-based culture. Being patient-centered, they learned that one way to improve value in health care is by understanding each patient as an individual and creating a true partnership between the patients and the caregivers. Shouldice employees do not need to be managed; they manage themself. Finally, the leadership and the caregivers take time to explain the rationale behind important clinical, non-clinical, and staff decisions, which creates a perception of fairness in the workplace. When employees perceive fairness in the workplace they feel a sense of pride, they become more connected and attached to the patients and other employees, and more loyal to Shouldice.
These are powerful lessons in the repositioning of the primary clinical activities and the role of management in the formulation of care practices into a care process. The science of medicine and management aims to create simultaneously value for patients, value for caregivers and staff, and value for the health care organization, which has been called the quadruple performance problem. Shouldice story is about a well-managed health care organization, and, in many ways, it is an exemplar case of how the new science of medicine and management works in practice.
We are grateful to the Shouldice Family, especially Dr. E.B. Shouldice, Dr. Robert Bendavid, and Managing Director, Mr. John Hughes, for their generosity and hospitality. This research would not have been possible without their transparency and willingness to spend time with us. Our most heartfelt gratitude goes to John Hughes, whom we had the pleasure to interview. He was a source of many important stories and pieces of information. He not only shared his knowledge of the facts and key enterprise processes, but he also read a draft of the entire manuscript.
We would also like to pay our respects to two thought leaders in the field of hernia surgery who during our interviews and encounters shared their deep knowledge of the evolution of hernia surgery at Shouldice. The first is Dr. Bendavid, who passed away, in September 2019. Finally, we were sad to hear that Dr. E.B. Shouldice passed away in April 2022. He was a humanistic clinical leader, a talented and caring surgeon, and a role model for all of us.
Jon A. Chilingerian was deceased at the time of publication
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Notes
- 1.
When an organ, tissue, or intestine finds a weakness in the abdominal wall and pushes through a tear in the muscle or tissue covering this area, it is diagnosed as a hernia. Often it is obvious to the patient because there is a noticeable bulge of soft tissue. Hernia rupture can become a serious health issue, such as causing an intestinal obstruction. Hernias can occur in the abdomen, belly button, upper thigh, and miscellaneous areas, and they most commonly occur in males. It is estimated that 75% occur in the inner groin, called inguinal hernias.
- 2.
Although Shouldice fixes hernia failures from other non-Shouldice surgeons five days a week, they estimate that they redo only 50 of their own surgical failures each year.
- 3.
Throughout this paper monetary references with a dollar sign ($) will be in Canadian dollars and cents. Otherwise, it will be noted as $ US dollars.
- 4.
That would include the round-trip airfare from major cities in the US to Toronto, Canada.
- 5.
In Canada hernia surgery is covered under provincial health care plans, as required under the Canada Health Act. There are no co-pays or deductibles, so prices to patients are not relevant. Physicians are paid on a fee-for-service basis by the Ontario Health Insurance Plan (OHIP) and the hospitals are paid a global budget rate.
- 6.
One of the authors called a Toronto ambulatory care center and received a quote in writing that a laparoscopic hernia procedure was estimated to cost between $6500 and $9000.
- 7.
In 1947 Dr. E.E. Shouldice was asked by a few patients to organize a “soiree” for himself and his patients. The patients wanted 2 things (1) to renew friendships with other patients; and (2) to stay close with the hospital. This became an annual event and Shouldice patients were encouraged to come back every year to have their hernias checked by surgeons who were in attendance as well. It was a huge event in the ballroom at the Royal York Hotel. During our visit in 2016, the managing director told us, “A few years ago, we stopped the patient reunion. It had to end—it just got too big. The demand was four thousand people every year and growing. We could not accommodate the demand, and it turned into a negative.”
- 8.
General anesthesia is used for large ventral and recurrent hernias.
- 9.
General anesthesia patients recover in the PACU.
- 10.
The research for this chapter began in the late 1980s when the health care management professor and lead author started a longitudinal study of Shouldice hospital. He conducted follow up interviews in the 1990s and more research in the early 2000s. Over several years he combed the literature on Shouldice, conducted on-site and off-site interviews with key Shouldice informants, and analyzed and taught about Shouldice as a health care organization.
- 11.
According to Hori and Yasukawa, 2021 [6], Hernia was first described in 1552 BC in Egypt and the diagnosis comes from the Latin word for prolapse. There is a lifetime risk of 17% for men and boys, and only 3% for women and girls. Females have a 4 times higher risk for femoral hernias.
- 12.
When considering issues of social justice, access, and equity, an important consideration is whether a surgical technique is affordable and scalable to lower resource countries.
- 13.
The late Dr. E.E. Shouldice is the father of Dr. E.B. Shouldice, who also passed away in April 2022.
- 14.
Each year 270 or more general surgeons apply for residency in Canada [42].
- 15.
A Blue Ocean discovers a new, sustainable untapped market space that brings prices and costs down and, at the same time, bringing quality up, offering a leap in value for patients, caregivers, and for the organization.
- 16.
The deep dissection enables the surgeon to identify occult (or hidden) hernias often present but difficult to discover by physical exam or advanced medical imaging technology.
- 17.
History reminds us that hospitals in the 1870s was the place people went to die. By the 1950s hospitals had become such complex organizations that they required clinical leadership and competent management.
- 18.
- 19.
Following the death of Dr. E.E. Shouldice in 1965, his son, Dr. E.B. Shouldice took charge of the hospital. For nearly 57 years Dr. E.B. Shouldice led the hospital and in April 2022, Dr. E.B. Shouldice passed away. Today Shouldice is led by the Managing Director, Mr. John Hughes, and Dr. Shouldice’s three children, who sit on the Board of Shouldice.
- 20.
Since 2016, this practice has been reduced. Shouldice surgeons started to perform the procedures with local anesthetic and IV sedation, moving away from the oral sedative that takes longer to metabolize and lowering fall rates postoperatively.
- 21.
Co-production is about fairness and justice. It implies that the patient is an equal partner with the most responsible caregivers in a reciprocal, two-way relationship. Coproduction means the patient, as a partner, is treated with dignity and respect. Both will be honest and truthful when they share information, and the physicians will explain the rationale for any clinical decisions.
- 22.
This was practiced safely until 2021, but new guidelines stopped this practice. Now, patients are put in their wheelchairs from the operating table, and ambulation is encouraged after four hours. This innovative practice is done in many outpatient facilities.
- 23.
At other hospitals, a hernia repair admission could require up to 7 visits. The GP visit and surgeon referral visit would require 2 or more separate visits in most hospital and hernia centers.
- 24.
The length of the wait time to schedule the surgery depends on the patient’s medical condition, as discussed in this section. Before Covid19, the waits ranged from 2–6 weeks. One estimate from the Managing Director (Summer 2022) is that more hospitals in Toronto have a two-year wait for hernia surgeries versus Shouldice’s 8–14 weeks.
- 25.
Several physicians said the online application is reviewed within 24–48 h of its submission.
- 26.
Questionnaire patients who present a complex medical history or require further investigation of their hernia will have a virtual exam is scheduled.
- 27.
Interviews with two patients on postoperative day 1 revealed that that they only had mild and modest pain when moving, which they were able to do, although at a slow pace. Each one stated that they felt very comfortable going home on the second postoperative day and were planning on returning to a desk job a week after surgery. Both patients were delighted by their choice in Shouldice hospital and team-based care.
- 28.
The Ministry pays the per diem when patients stay in a ward. Most Canadians have insurance that covers the semi-private room per diem of $305. Those without insurance pay the per diem rate out-of-pocket.
- 29.
Two of the Shouldice chefs are certified “Red Seal” Chefs, which means they have advanced culinary skills recognized nationally in Canada. Shouldice patients who go on social media often praise the quality of the dining hall.
- 30.
Patient satisfaction is rated on a scale from 1 = low to 5 = high
- 31.
These are not unproblematic, as they are anecdotal information and not scientific. We interviewed a few patients informally and heard only extremely positive comments confirming a more than satisfactory experience. Since we were unable to interview patients in private or interview patients a few months after discharge, we may not have obtained accurate information. We reviewed on-line social media comments and posts (Facebook, Twitter, RateMD) and found it confirmed our impressions. RateMD, a social media cite ranked Shouldice Physicians #1 out of 500. There were, however, some patient complaints about a rusty bathroom sink, a large noticeable scar, 20-year-old furniture, being rejected as a patient owing to co-morbidities, and the like. But far and away most posts extremely positive comments.
- 32.
Heskett [23] says that a service vision will achieve a superior position by employing three integrating elements: (1) positioning; (2) leveraging value over cost, and (3) integrating the operating strategy with the delivery system. We will use those elements in the discussion section.
- 33.
The American Society of Anesthesiology (ASA) has for decades developed classification system based on pre-anesthesia medical co-morbidities. It ranges from ASA 1 (normal healthy person) to ASA 4 (a person with severe systemic disease that is a constant threat to life).
- 34.
General practitioners and surgeons are trained under a structured “GP Change in Scope of Practice Program” supported by Ontario College of Physicians and Surgeons.
- 35.
Owing to Covid19 protocols, baseline surgeries now take about 60 min. Once the pandemic is over, they expect they will return to the 45-min surgical time. Every surgery we observed was less than 45 min.
- 36.
Prior to Covid in 2020, it was less than 5 min. After 2020 it takes 5–10 min to clean the room and sort out the new instruments for the next case.
- 37.
These observations about the Shouldice method were made by one of the authors who is a hernia surgeon.
- 38.
Again, all these observations about the Shouldice method were made by one of the authors who is a hernia surgeon.
- 39.
Hirschberg and Mattox used the phrase “top knife” playing off the popular film Top Gun. The idea was the discipling required to train the very best trauma surgeons—thinking under pressure, adapting to uncertainty and rapidly changing situations [53]. Like the name of the Naval Fighters, you cannot be a Shouldice surgeon without commitment and courage in the face of adversity and being able to cut across any type of hernia and complicated anatomical areas.
- 40.
In 2022, physician compensation is about $300,000.
- 41.
The Board not only wanted to support their employees during the pandemic, but they also understood that because of the specific training to work at Shouldice they wanted those well-trained people to come back. They would be hard to replace.
- 42.
A handful of employees did retire because of their age. After the second shutdown in 2021, they kept everyone on salary, but the second time over the 3 months, they ratcheted from 100% of salary to 90% and then 80%. Again, everyone returned. The last shutdown occurred in January 2022, for one month. This was their third shutdown. Owing to the significant losses in 2020 and 2021, they had no choice but to temporarily lay everyone off. After one month, when they were told they could re-open, every employee returned.
- 43.
As Dr. Shouldice suggests, for many general surgeons, and hospitals, there are no incentives to keep very accurate track records of successes or hernia recurrence rates, so they are always understated. In addition, he said, “How many patients have a recurrence and choose to live with it? Every day our surgeons are operating on patients who had a repair at another facility, and it failed. So, I did 2 informal studies. I asked these patients ‘did you go back and tell your surgeon it failed?’ Two-thirds said, ‘no’ the first study, and one-third said ‘no’ in the second study. However, 100% said they told their general practitioner.”
- 44.
Shouldice was headed by Dr. E.B. Shouldice, as Chair, until he passed away in April 2022. Today three of Dr. Shouldice’s children sit on the Board of Shouldice.
- 45.
Everyone reports to the managing director. There are five senior executives and 7 supervisors,
- 46.
New “in scope” surgeons undergo an extensive in-house training program, while surgeons undergoing a “change in scope” are supervised by senior Shouldice surgeons under a program approved by the Ontario College of Physicians and Surgeons of Ontario.
- 47.
The clinic is invested in the patient having an excellent outcome and being healthy. As described above, to become a Shouldice patient, individuals with hernias must fall into an acceptable weight-for-their-height range (BMI). If they must lose more than 20 pounds, there is a diet that is recommended by the on-site dietician. The physicians and staff support, motivate and encourage the patient to become healthier.
- 48.
The 11 FTE include the Chief Surgeon.
- 49.
In 1968 Dr. E.B. Shouldice designed and built a 58,000 square foot addition to the existing estate.
- 50.
In 2016, the land was sold and the hospital has a 20-year lease on 2.7 acres. The rest of the property surrounding the hospital is scheduled for further real estate condo development. In the past, the hospital had built an independent living facility on the grounds. That facility was sold in 2000.
- 51.
In Ontario in 2017 the average general hospital cost per comparable hernia surgery case was $1639, compared to that funded to Shouldice of $1072. The difference is made up by the semi-private room and out-of-province fees.
- 52.
Payments made by third parties (which include government or insurers) for health services are called a reimbursement. If there are no out-of-pocket charges to the patient, the amount reimbursed is the effective “price” paid for a service in health care.
- 53.
According to the Managing Director, the government gave them a budget of $6,946,560 for the facility fee. That was based on a day-center rate for extra post-operative days (89%) and an inpatient rate (11%). If they had more than 6780 hernia repairs, they would not get more reimbursement. If they did fewer than 6280, they would get less than $6,946,560.
- 54.
Most rooms are semi-private, and there is a ward rate option that is covered by the provincial health care plan. Most patients want a semi-private room and stay an average of 3.2 nights. As mentioned, their insurance covers the per diem charges. Patients with bilateral hernia surgery require a 5–6 day stay and most Canadians carry insurance that pays the $305 per diem.
- 55.
About 60% of patients that come to Shouldice are scheduled for surgery. About 4000 patients are given a complete physical examination by the general practitioner, and checked for a hernia by the surgeon (surgical consult), but are not scheduled for surgery. The clinic can bill for the GP examination and surgical consult. About 10% of the Shouldice patients request a 30-min massage, for which the clinic will bill $75.
- 56.
- 57.
In the United States, the average price for an inpatient hernia repair is $11,500 USD, while the average price for an outpatient procedure is $6400 USD. Those estimates came from New Choice Health [56].
- 58.
The $4000 estimates are conservative. The Chief of Surgery at Shouldice conducted a hernia cost study in a Toronto general hospital comparing open versus laparoscopic hernia surgery from 2011–2009 [55]. He found that operating room and total hospital costs for open inguinal hernia repair were lower than for laparoscopic, (median cost, $3207 vs $3724). Over the last 8–10 years, it is likely that these costs have risen much higher than $4000.
- 59.
Shouldice found several innovative ways to conduct longitudinal follow-up studies with patients. For 50 years, Shouldice had an annual reunion of patients with a celebration and dinner and at those events, thousands of Shouldice patients were checked for hernias. They also reach out to patients for whom they had performed surgeries and conduct monthly traveling clinics in Ontario, and now across western Canada.
- 60.
- 61.
According to the Managing Director, it was further fueled by a newspaper headline from the nurses’ union “Ontario health dollars going to the US.” That resulted in less medical tourism. In the US, when Senator Rand Paul came to Shouldice and paid for his hernia procedure, the newspaper headline said “Kentucky Sen. Rand Paul, one of the fiercest political critics of socialized medicine, will travel to Canada later this month to get hernia surgery.” Today Shouldice would charge a patient who is not a Canadian citizen approximately a total of $5500 for the surgery and 4-day hospital stay.
- 62.
Psychographic segmentation clusters patients by their attitudes, interests, opinions, personalities, sentiments, and values.
- 63.
One study of 165 young German surgeons, median age 33, found that 36% would choose a pure tissue repair for their own hernia repair [17].
- 64.
They have chosen hundreds of diagnoses and procedures that they will never do.
- 65.
They do fewer than 50 recurrences a year on patients who previously had their hernia repair performed at Shouldice.
- 66.
The term “productive work” implies that managers continuously eliminate anything that diverts caregivers and staff from patient care and performance. Removing unnecessary paperwork and unproductive meetings will improve caregiver and staff productivity and their job satisfaction.
- 67.
Although not discussed in this chapter, there are protocols for cleaning and disinfecting rooms.
- 68.
Before Covid19, patients were invited to get off the operating table and walk (with the help of the surgeon) to the post-operative room.
- 69.
While they no longer have reunions, they still contact patients annually and offer free examinations.
- 70.
- 71.
As previously stated, Shouldice has fewer than 50 recurrences a year on patients who previously had their hernia repair performed at Shouldice.
- 72.
The classic model for training physicians was described as “see one, do one. Teach one.” Though some have called this practice old-fashioned, the benefits of teaching others include improving communication skills and feelings of self-efficacy while building leadership skills.
- 73.
Patients get information from the staff, nurses and physicians, as well as other patients. In the operating room, the surgical team gets information from the patient and the situation. The chief of surgery and the administrator gets information from the nurses, and assistant surgeons, about underperformance or concerns, and so on.
- 74.
Larger hospitals often lose money on patient care because of their total cost structure—direct plus indirect costs. First, they may have higher direct costs. Second, their indirect costs (e.g., administrative overhead) are substantially higher. Even if their direct costs are competitive, most large hospital systems have crushing indirect overhead costs.
- 75.
We are not the first to write a case study on Shouldice. In 1983, James L. Heskett wrote a business School case study [73]. That case brought this fascinating hospital into the management curriculum of virtually every business school worldwide. We owe a debt of gratitude to him for that well-written, nicely framed original case study. Although we have added more clinical details, new facts, and updates, the narrative told in the original case has not changed much. Dr. Atul Gwande also visited Shouldice, observed surgeries, and talked about the distinct repair method and clinical efficiency [74].
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Chilingerian, J.A., Reinhorn, M., Sbayi, S. (2023). Shouldice Hospital from Interviews and Observations: The Well Managed Organization. In: Chilingerian, J.A., Shobeiri, S.A., Talamini, M.A. (eds) The New Science of Medicine & Management. Springer, Cham. https://doi.org/10.1007/978-3-031-26510-5_2
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