The Impact of Changes in Regulation on Cost Behavior

Cost (In)Efficiency and Institutional Pressures in Nursing Home Chains

“…We also demonstrate that our nursing homes respond to varying pressures from local regulatory authorities. This is consistent with the study of Holzhacker et al (2015) who use a German hospital sample to show that for-profit organizations are more likely to respond to changes in regulation than non-profit ones as the for-profit sector experiences increased pressure to demonstrate its capacity to generate profits.…”

“…Ex ante, initial profit margins must be high (relative to other firms in the industry), in order to attract investors, who are becoming increasingly demanding concerning expected profitability. To be able to meet shareholder expectations of value, Holzhacker et al (2015) point out that for-profit nursing homes adjust their costs on a regular basis. The audit firm Ernst and Young (2008) highlights the trade-off nursing homes face: prices must be low, so as to be accepted by residents, as well as high enough to allow operators to quantitatively and qualitatively develop their business.…”

“…Holzhacker, Krishnan, and Malhendorf (2015) observe that hospital cost structures are highly dependent on institutional pressures and recommend investigating the effects of institutional constraints to avoid obtaining misleading or inconclusive results. Hence, we show that, similarly to hospitals, many external stakeholders exert pressure on nursing homes and influence how resources are managed (Cardinaels & Soderstrom, 2013).…”

The influence of the trade-off between profitability and future increases in sales on cost stickiness

“…On the other hand, other studies stress on the deliberate decisions of managers, depending on expectations (Cooper and Kaplan, 1992;Yasukata and Kawijara, 2011;, past sales growth (Anderson et al, 2013), the type of adjusted resources (Balakrishnan and Gruca, 2008), manager's building incentives (Chen et al, 2012), CEO compensation and expectations for value creation of input resource expenditures (Banker et al,. 2011a;Banker et al, 2011b), incentives to meet earnings targets (Kama and Weiss, 2013), changes in regulation (Balakrishnan et al, 2004;Holzhacker et al, 2015), capacity utilization (Cannon, 2014), demand uncertainty (Banker et al, 2013), etc. However no previous study analysed cost stickiness under the scope of attaining current profitability and future sales growth.…”

Accounting and the ‘Insoluble’ Problem of Health-Care Costs

“…Whereas a small number of recent hospital accounting studies have started to explore issues relating to the allocative efficiency of inputs (e.g. Holzhacker, Krishnan, & Mahlendorf, 2015;Hsu & Qu, 2012), the relationship between hospital accounting practices and the allocative efficiency of health service outputs has not been a focus of the accounting literature. Amidst emerging suggestions that health systems like the NHS cannot remain financially viable unless they focus scarce resources on those services that provide the greatest health benefits relative to their costs (e.g.…”