Accounting system management by hospitals operating in a changing regulatory environment

Leslie Eldenburg, Naomi Soderstrom

Research output: Contribution to journalArticlepeer-review

66 Scopus citations


Under hospital accounting guidelines, contractual adjustments are an allowable deduction from revenue that reflect the difference between gross charges and reimbursement amounts. This study explores the use of contractual adjustments to shift costs among payors and increase revenues within a regulatory environment that attempted to limit cost shifting and set revenue constraints. Throughout the regulatory period, we find that hospitals overestimated budgeted contractual adjustments in a systematic manner which allowed cost shifting among payors and increased revenues. In addition, budgeted patient volumes and variable costs were manipulated in an attempt to relax the revenue constraint. After deregulation, we find that volume and cost biasing behavior decreased while overestimation of contractual adjustmentss increased. Further, we examine the interaction of this regulation with cost-containment regulation at the federal level.

Original languageEnglish (US)
Pages (from-to)23-42
Number of pages20
JournalAccounting Review
Issue number1
StatePublished - Jan 1996


  • Budgeting
  • Cost shifting
  • Health care
  • Incentives
  • Regulation

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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