The effects of changes in cost allocations on the assessment of cost containment regulation in hospitals

Leslie G Eldenburg, Sanjay Kallapur

Research output: Contribution to journalArticle

22 Citations (Scopus)

Abstract

Empirical studies that examine the effects of regulation on cost containment frequently ignore the impact of changes in accounting practices. This results in a potential bias of research findings. For example, some studies found evidence of cost containment for inpatient services after a change in Medicare reimbursement in 1983. However, Eldenburg and Kallapur (1997, p. 33) found that more costs were allocated to outpatients and correspondingly less to inpatients after 1983, which could bias the cost comparisons. In this paper we examine changes in inpatient costs relative to outpatient costs, after controlling for allocations, to determine whether the magnitude of allocation changes was large enough to bias the findings of studies that ignored these accounting practices. As in previous health-care studies (noted in our paper), we found that inpatient full costs (i.e., direct cost plus allocated costs) decreased relative to outpatient full costs after 1983. However, when cost allocations were excluded, inpatient direct costs increased relative to outpatient direct costs, thus providing no evidence of cost-containment. When regulation provides incentives that have the potential to affect accounting practices and public policy researchers do not consider the implications of these accounting practices, analyses of the success of public regulation may reach improper conclusions. Accordingly, subsequent policy based on such research findings may be incorrectly motivated.

Original languageEnglish (US)
Pages (from-to)97-112
Number of pages16
JournalJournal of Accounting and Public Policy
Volume19
Issue number1
StatePublished - Mar 2000

Fingerprint

cost containment
regulation
costs
Cost containment
Costs
Cost allocation
trend
Inpatients
evidence
public policy
incentive
Accounting practices
Outpatient
health care

ASJC Scopus subject areas

  • Accounting
  • Sociology and Political Science

Cite this

The effects of changes in cost allocations on the assessment of cost containment regulation in hospitals. / Eldenburg, Leslie G; Kallapur, Sanjay.

In: Journal of Accounting and Public Policy, Vol. 19, No. 1, 03.2000, p. 97-112.

Research output: Contribution to journalArticle

@article{a7fa67c43dbd4a528d3fabadab756823,
title = "The effects of changes in cost allocations on the assessment of cost containment regulation in hospitals",
abstract = "Empirical studies that examine the effects of regulation on cost containment frequently ignore the impact of changes in accounting practices. This results in a potential bias of research findings. For example, some studies found evidence of cost containment for inpatient services after a change in Medicare reimbursement in 1983. However, Eldenburg and Kallapur (1997, p. 33) found that more costs were allocated to outpatients and correspondingly less to inpatients after 1983, which could bias the cost comparisons. In this paper we examine changes in inpatient costs relative to outpatient costs, after controlling for allocations, to determine whether the magnitude of allocation changes was large enough to bias the findings of studies that ignored these accounting practices. As in previous health-care studies (noted in our paper), we found that inpatient full costs (i.e., direct cost plus allocated costs) decreased relative to outpatient full costs after 1983. However, when cost allocations were excluded, inpatient direct costs increased relative to outpatient direct costs, thus providing no evidence of cost-containment. When regulation provides incentives that have the potential to affect accounting practices and public policy researchers do not consider the implications of these accounting practices, analyses of the success of public regulation may reach improper conclusions. Accordingly, subsequent policy based on such research findings may be incorrectly motivated.",
author = "Eldenburg, {Leslie G} and Sanjay Kallapur",
year = "2000",
month = "3",
language = "English (US)",
volume = "19",
pages = "97--112",
journal = "Journal of Accounting and Public Policy",
issn = "0278-4254",
publisher = "Elsevier Inc.",
number = "1",

}

TY - JOUR

T1 - The effects of changes in cost allocations on the assessment of cost containment regulation in hospitals

AU - Eldenburg, Leslie G

AU - Kallapur, Sanjay

PY - 2000/3

Y1 - 2000/3

N2 - Empirical studies that examine the effects of regulation on cost containment frequently ignore the impact of changes in accounting practices. This results in a potential bias of research findings. For example, some studies found evidence of cost containment for inpatient services after a change in Medicare reimbursement in 1983. However, Eldenburg and Kallapur (1997, p. 33) found that more costs were allocated to outpatients and correspondingly less to inpatients after 1983, which could bias the cost comparisons. In this paper we examine changes in inpatient costs relative to outpatient costs, after controlling for allocations, to determine whether the magnitude of allocation changes was large enough to bias the findings of studies that ignored these accounting practices. As in previous health-care studies (noted in our paper), we found that inpatient full costs (i.e., direct cost plus allocated costs) decreased relative to outpatient full costs after 1983. However, when cost allocations were excluded, inpatient direct costs increased relative to outpatient direct costs, thus providing no evidence of cost-containment. When regulation provides incentives that have the potential to affect accounting practices and public policy researchers do not consider the implications of these accounting practices, analyses of the success of public regulation may reach improper conclusions. Accordingly, subsequent policy based on such research findings may be incorrectly motivated.

AB - Empirical studies that examine the effects of regulation on cost containment frequently ignore the impact of changes in accounting practices. This results in a potential bias of research findings. For example, some studies found evidence of cost containment for inpatient services after a change in Medicare reimbursement in 1983. However, Eldenburg and Kallapur (1997, p. 33) found that more costs were allocated to outpatients and correspondingly less to inpatients after 1983, which could bias the cost comparisons. In this paper we examine changes in inpatient costs relative to outpatient costs, after controlling for allocations, to determine whether the magnitude of allocation changes was large enough to bias the findings of studies that ignored these accounting practices. As in previous health-care studies (noted in our paper), we found that inpatient full costs (i.e., direct cost plus allocated costs) decreased relative to outpatient full costs after 1983. However, when cost allocations were excluded, inpatient direct costs increased relative to outpatient direct costs, thus providing no evidence of cost-containment. When regulation provides incentives that have the potential to affect accounting practices and public policy researchers do not consider the implications of these accounting practices, analyses of the success of public regulation may reach improper conclusions. Accordingly, subsequent policy based on such research findings may be incorrectly motivated.

UR - http://www.scopus.com/inward/record.url?scp=0034148577&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0034148577&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:0034148577

VL - 19

SP - 97

EP - 112

JO - Journal of Accounting and Public Policy

JF - Journal of Accounting and Public Policy

SN - 0278-4254

IS - 1

ER -