Value Creation in Public Enterprises: An Empirical Analysis of Coordinated Organizational Changes in the Va Hospital System

54 Pages Posted: 18 Aug 2005

See all articles by Nicole Thibodeau

Nicole Thibodeau

Willamette University - Atkinson Graduate School of Management

John Evans

University of Pittsburgh - Katz Graduate School of Business

Nandu J. Nagarajan

University of Texas at Arlington

Jeff Whittle

Clement J. Zablocki Medical Center - Department of Medicine

Abstract

As part of a federal government initiative to increase efficiency and quality, in 1996 the United States' VHA (Veterans Health Administration) radically restructured its organizational design and management processes. This study uses 1992-1998 clinical, workload and financial data to examine the effect of this reform on performance. Several previous government attempts to introduce private sector management practices, such as management by objectives (MBO) or program planning and budgeting system (PPBS), have been largely unsuccessful. In contrast to prior reforms, the current restructuring introduced coordinated changes in the VHA organizational structure, performance measurement, and reward systems. Our results document that, following the reorganization, the VHA cost per patient declined significantly and various quality measures improved. Our analysis suggests that reduction in excess capacity and the more intense use of remaining capacity are among the primary explanations for the VHA achieving the observed cost reductions. These findings suggest that coordinated changes in organizational structure, performance measures and incentives can create value for public enterprises even though control mechanisms are generally more limited in these environments than in the private sector.

Keywords: Value, public sector, coordination, organizational design, performance, incentives, strategic performance management

JEL Classification: M40, M46, G34, H51, I18

Suggested Citation

Thibodeau, Nicole and Evans, John Harry and Nagarajan, Nandu J. and Whittle, Jeffrey, Value Creation in Public Enterprises: An Empirical Analysis of Coordinated Organizational Changes in the Va Hospital System. Accounting Review, Vol. 82, March 2007, Available at SSRN: https://ssrn.com/abstract=782864

Nicole Thibodeau (Contact Author)

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
307 Mudd Hall
Salem, OR 97301
United States

John Harry Evans

University of Pittsburgh - Katz Graduate School of Business ( email )

230 Mervis Hall
Pittsburgh, PA 15260
United States

Nandu J. Nagarajan

University of Texas at Arlington ( email )

415 S West St Apt no 205
Arlington, TX 76019
United States

Jeffrey Whittle

Clement J. Zablocki Medical Center - Department of Medicine ( email )

5000 W. National Ave.
Milwaukee, WI 53295
United States

HOME PAGE: http://www.mcw.edu/display/router.asp?DocID=10377

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