Nandu J. Nagarajan

An analysis of the stock price reaction to sudden executive deaths: Implications for the managerial labor market

Abstract Certain characteristics of managerial employment arrangements and of the managerial labor market make shareholder wealth dependent on an executives continued employment. These wealth effects are investigated by examining the common stock price reaction to unexpected deaths of senior corporate executives. Abnormal stock price changes are documented for a sample of fifty-three events. These abnormal stock price changes are associated with the executives status as a corporate founder and with measures of the executives ‘talents’ and decision-making responsibility, and of the transaction costs associated with renegotiating or terminating the employment agreement.

Benchmarking the perioperative process: III. Effects of regional anesthesia clinical pathway techniques on process efficiency and recovery profiles in ambulatory orthopedic surgery☆

STUDY OBJECTIVES (1) To incorporate regional anesthesia options for common outpatient orthopedic surgery into clinical pathways; (2) to use the clinical pathway format and the Procedural Times Glossary published by the Association of Anesthesia Clinical Directors (AACD) as management tools to measure postoperative same-day surgery processes and discharge outcomes; and (3) to determine the effects of general, regional, and combined general-regional anesthesia on these processes and outcomes. DESIGN Hospital database and patient chart review of consecutive patients undergoing anterior cruciate ligament reconstruction (ACLR) during academic years (AY) 1995-1996 and 1996-1997. Patient data from AY 1995-1996, during which no intraoperative anesthesia clinical pathway existed, served as historical controls. Data from AY 1996-1997, during which intraoperative anesthesia clinical pathways were used, served as the treatment group. SETTING Ambulatory surgery center in a teaching hospital. MEASUREMENTS AND MAIN RESULTS The records of 503 ASA physical status I and II patients were reviewed. 1996-1997 patients selected general anesthesia (+/- femoral nerve block) or epidural anesthesia, after which the remainder of the perioperative anesthesia process was standardized with respect to the drugs and equipment used. 1995-1996 patients did not necessarily have a choice in anesthesia technique and did not have a standardized perioperative anesthetic course with respect to specific drugs and supplies. Intervals described in the AACD Procedural Times Glossary, anesthesia drug and supply costs, and patient outcome variables (postoperative nursing interventions required and unexpected admissions), as influenced by anesthesia technique used, were measured. Combined general-regional anesthesia care for ACLR in 1996-1997, when compared with general anesthesia alone, led to increased pharmacy and materials costs and increased turnover time. However, patients with the combined technique showed improved recovery profiles and lower unexpected admission rates, and they required fewer nursing interventions for common postoperative symptoms. Patients receiving epidural anesthesia showed discharge outcomes similar to those patients receiving general anesthesia with femoral nerve block. Postanesthesia care unit bypass (fast-tracking) was more likely in clinical pathway regional anesthesia patients, when compared with the clinical pathway general anesthesia used. CONCLUSIONS Clinical pathway regional anesthesia care for outpatient orthopedics may have a significant role in simultaneously containing costs and improving both process efficiency and patient outcomes.

Benchmarking the perioperative process: II. Introducing anesthesia clinical pathways to improve processes and outcomes and to reduce nursing labor intensity in ambulatory orthopedic surgery

STUDY OBJECTIVES (1) To introduce anesthesia clinical pathways as a management tool to improve the quality of care; (2) to use the Procedural Times Glossary published by the Association of Anesthesia Clinical Directors (AACD) as a template for data collection and analysis; and (3) to determine the effects of anesthesia clinical pathways on surgical processes, outcomes, and costs in common ambulatory orthopedic surgery. DESIGN Hospital database and patient chart review of consecutive patients undergoing anterior cruciate ligament reconstruction (ACLR) during academic years (AY) 1995-1996 and 1996-1997. Patient data from AY 1995-1996, during which no intraoperative anesthesia clinical pathways existed, served as historical controls. Data from AY 1996-1997, during which intraoperative anesthesia clinical pathways were used, served as the treatment group. Regional anesthesia options were routinely offered to patients in the clinical pathway. SETTING Ambulatory surgery center in a teaching hospital. MEASUREMENTS AND MAIN RESULTS The records of 503 ASA physical status I and II patients were reviewed. 1996-1997 patients underwent clinical pathway anesthesia care in which the intraoperative and postoperative anesthesia process was standardized with respect to symptom management, drugs, and equipment used. 1995-1996 patients did not have a standardized intraoperative and postoperative anesthetic course with respect to the management of common symptoms or to specific drugs and supplies used. Intervals described in the AACD Procedural Times Glossary, anesthesia drug and supply costs, and patient outcome variables (postoperative nursing interventions required and unexpected admissions), as influenced by the use of the anesthesia clinical pathway, were measured. Clinical pathway anesthesia care of ACLR in 1996-1997, which actively incorporated regional anesthesia options, reduced pharmacy and materials cost variability; slightly increased turnover time; improved intraoperative anesthesia and surgical efficiency, recovery times, and unexpected admission rates; and decreased the number of required nursing interventions for common postoperative symptoms. CONCLUSIONS Clinical pathway patient management systems in anesthesia care are likely to produce useful outcome data of current practice patterns when compared with historical controls. This management tool may be useful in simultaneously containing costs and improving process efficiency and patient outcomes.

Corporate responses to segment disclosure requirements

Abstract This paper shows through increasing disclosure requirements may induce firms to reduce their value-relevant disclosures. In the absence of segment reporting requirements, an incumbent firm may voluntarily disclose value-relevant information because it can use other, value-irrelevant, information to jam proprietary disclosures. However, when required to disclose segment data, the incumbent may aggregate proprietary information with other value-relevant information to deter entry by a rival. Hence, the firm does not disclose value-relevant information it would have revealed voluntarily in the absence of segment disclosure requirements. In such situations, requiring more disaggregate disclosures can actually decrease price efficiency.

Involuntary Benchmarking and Quality Improvement: The Effect of Mandated Public Disclosure on Hospitals

This paper documents the responses of Pennsylvania hospitals to the public dissemination by the Pennsylvania Health Care Cost Containment Council (PHC4) in 1990 of mandated hospital disclosures of financial and nonfinancial performance information. We find that PHC4s relative performance disclosures had an effect in that hospitals that performed poorly on patient quality of care, as measured by mortality outcomes, reacted by making significant improvements in this measure by 1992, although this was accompanied by lower reductions in length of stay. Further, we find that the improvements in mortality outcomes were more marked for DRGs in more competitive environments and for hospitals that ranked higher on financial condition in the year of disclosure. Additionally, the rationale for these costly quality improvements in the period following the disclosure appears to be related to market share, that is, poorly performing hospitals lost, whereas better performing hospitals gained in market share.

Non-Financial Performance Measures in the Healthcare Industry: Do Quality-Based Incentives Matter?

This study examines the economic consequences of non-financial measures of performance in contracts between health maintenance organizations (HMOs) and primary care physicians (PCPs). HMOs have expanded contractual arrangements to give physicians not only financial incentives to control costs, but also to make the physicians accountable for the quality of patient care. Specifically, we examine how quality provisions in HMO–PCP contracts affect utilization (patient length of stay in the hospital), patient satisfaction, and HMO costs. Our results show that quality clauses are associated with a statistically significant increase in utilization (29 more hospital days annually per 1,000 HMO enrollees). Further, inclusion of quality clauses in PCP contracts also led to a significant increase in patient satisfaction, but no associated increase in HMO costs. Overall, these results suggest that quality clauses in PCP contracts can increase value by increasing customer satisfaction without significantly increasing cost.

Moral hazard and contractibility in investment decisions

Abstract This paper uses a principal-agent framework to study the incentive effects of contractibility and moral hazard at the first stage of a two-stage investment decision. We show that when the intermediate signal is publicly observable and contractible, there is overinvestment (relative to the first-best) in second-stage production, purely for incentive reasons. However, if the intermediate signal cannot be contracted on and, in addition, the agent and the principal are permitted to act opportunistically, the optimal delegated investment decision is to underinvest. We discuss the implications of our analysis for the literature on costly monitoring.

Managerial Entrenchment, Reputation and Corporate Investment Myopia

In this paper, we demonstrate that informational asymmetries within a firm along with managerial labor market concerns can jointly result in investment myopia being equilibrium behavior. In contrast to earlier studies (like that of Shleifer and Vishny [1989]), we find that in the presence of both reputation and entrenchment incentives, managers invest in long-term projects for reputation building and short-term projects to entrench themselves. Further, we establish conditions under which delegating project selection is optimal, even though it requires that the owner tolerate short-term project selection. Finally, we present several empirical implications of our analysis.

Incentives for overhead cost reduction: Setup time and lot size considerations

Abstract This paper addresses incentive issues arising in the integration of production control and process improvement on the shop floor. High overhead rate estimates identified by an activity based costing (ABC) system can result in a decision to increase lot sizes, thereby reducing setup related overhead costs. We integrate ABC and EOQ analyses to establish the circumstances under which increasing the lot size becomes a viable alternative. However, while increasing the lot size may be important for short-term competitiveness, long-term control of setup related overhead costs can be achieved only by decreasing setup time. We address the role of incentive systems in simultaneously implementing both short-term and long-term strategies. In particular, we focus on how the choice of performance measures can result in conflicts between production personnel who may be concerned with short-term cost reduction and engineering personnel who are responsible for reducing setup time. Finally, we discuss the value of group incentive systems in mitigating such conflicts.

DOES CEO CHARISMA MATTER? AN EMPIRICAL ANALYSIS OF THE RELATIONSHIPS AMONG CEO CHARISMA, ORGANIZATIONAL PERFORMANCE, AND ENVIRONMENTAL UNCERTAINTY.

This paper reports the results of a study examining the relationships among strategic charismatic leadership, organizational performance, and environmental uncertainty with primary data from a samp...