Assignment task: Dr. Julia Connors from ClearEyes Cataracts Clinic is thinking about expanding her clinic, by considering different options: first, she could keep her physical facility as is and expand the hours. Second, she might expand space in the same building she owns, with additional equipment and fixtures within her building. The third option is to expand to a new location. The fourth alternative, which is the focus of this study, would increase volume by increasing the yield of potential patients, most of whom drop out before completion. This alternative would require only minor increases in capacity and avoid the expenses of physical expansion as well as the personnel risks of extending the hours of operation. As the first step in determining whether the fourth option was even possible, Dr. Connors uses the process flow diagram (Exhibit 2) to calculate utilization for each category of staff and also the yield from initial inquiries through surgeries. Annual non-surgeon minutes capacity (5 days*48 weeks*8 hours*60 min) = 115,200 minutes Receptionist utilization = 26,678/115,200 = 23.2% PSR utilization (per person) = 347,742/115,200 = 301.9% /4 workers for this job title = 75.5% Technician utilization (per person) = 168,638/115,200 = 146.4%/3 workers for this job title = 48.8% Cleaner utilization = 41,049/115,200 = 35.6% Annual surgeon minutes capacity (5 days*48 weeks*7 hours* 60 min) = 100,800 minutes Staff surgeon utilization = 92,220 /100,800 = 91.5% Dr. Connors also calculated the capacity utilization of the two examining rooms at 50% and of the three surgical rooms at 66%. Task, Annual Demand, and Job titles Demand (# patients) Calculations Initial patient call 14,345 22% defect after this point Mail paperwork 11,189 = 14,345*78% Call to remind 11, 189 28% defect after this point Arrive at clinic for intake 8,056 =11,189*72% 74% insured, 26% cash payers Remind call 8,056 40% reschedule call 30% insured defect, 47% of cash payers defect Check-in at clinic 5,283 =8,056*65.58% Surgery, clean -up, record 5,283 First follow-up 5,283 21% defect after first follow-up 3-week follow-up 4,174 =5,283*79% Yield from initial inquiries through surgery : 5,283/14.345 = 36.8% This 65.58% represents those who return for surgery after completing intake. It is calculated as a weighted average of the patients paying with insurance and cash and their different propensities to defect. (.74 insured*.70 insured retained) + (.26 cash payers*.53 retained cash payers) = 65.58% Based on the information presented in the case and above, please answer the following questions:
Q1. What are some of the factors specific to ClearEyes Cataracts Clinic that make the clinic so profitable despite the apparent low barriers to entry for this procedure? Please list as many factors as you can think of, but no less than 5 factors. Explain their contribution to the success of the clinic.
Q2. By what percent would patient volume and capacity utilization for the examining and surgical rooms change if ClearEyes cut in half the percentage of patients who complete intake but fail to show up for surgery? Also, calculate the new capacity utilization for staff by type. Please round to two decimal places.
Q3. After viewing the results provided by the analysis in question 2, Dr. Connors decides that in order to sustain the 50% reduction in yield loss for customers after intake would require one more technician and a part-time surgeon (30%). How much would the pre-tax profit change (relative to the initial situation when they performed 5,283 surgeries) if this increase in yield were accomplished? Assume that the extra technician is hired at the wage as the previous ones, the part-time surgeon is hired with costs proportional to the current one, and the direct variable cost, cleaning and maintenance, legal and miscellaneous costs increase proportionately with patient volume.
Q4. What actions could ClearEyes take to increase yield? Be careful to recommend actions, rather than results of actions such as "reduce patient anxiety about the operation". Provide 6 recommended actions and explain why you think these actions will increase the yield for the clinic.
Q5. What would you recommend to Dr. Connors? Should she seriously consider this fourth option, or should she choose one of the first three options (expand hours, expand existing space, or moving to a different location). Please explain your answer.