The Influence of Ownership on Strategic Cost Management: Evidence from U.S. Hospitals

Posted: 24 Jul 2013

See all articles by Kathryn J. Chang

Kathryn J. Chang

Sonoma State University

Hassan R. Hassabelnaby

Northern Kentucky University

Date Written: July 22, 2013


This paper empirically examines the influence of ownership on strategic cost management (SCM) and related performance consequences in the health care industry. The concept of SCM is proposed as a two-dimensional strategy construct: revenue enhancement and cost reduction. Revenue enhancement refers to the use of SCM instruments to improve the quality of current revenue streams and identify revenue growth opportunities, whereas cost reduction refers to the use of SCM instruments to identify operational inefficiencies and contain costs. Drawing upon property rights theory and prior accounting literature, we develop the hypotheses that predict the ownership type would affect the extent to which the hospital strategically manages revenues and costs of operation, leading to possible improvement in financial performance. We select certain performance measures that are commonly used in accounting and healthcare research to operationalize the extensive use of SCM revenue-enhancing and SCM cost reduction strategies. A two-stage analysis approach is employed to address potential endogenity issues commonly associated with the relationship between ownership and performance in accounting research (Larcker and Rusticus 2010). Using a sample from short-term general, acute care hospitals in the State of California, we find that the ownership type does play a significant role in the choice of SCM strategies along the dimension of revenue-enhancing and cost reduction across different types of hospitals. Moreover, there is strong evidence that the association between the extensive use of SCM strategies and hospital financial performance is a function of the “match” between SCM use and a hospital’s ownership type, operating characteristics, and market environment.

Keywords: strategic cost management, performance, healthcare

JEL Classification: M41, L31

Suggested Citation

Chang, Kathryn J. and Hassabelnaby, Hassan R., The Influence of Ownership on Strategic Cost Management: Evidence from U.S. Hospitals (July 22, 2013). AAA 2014 Management Accounting Section (MAS) Meeting Paper, Available at SSRN: or

Kathryn J. Chang (Contact Author)

Sonoma State University ( email )

1801 East Cotati Avenue
Rohnert Park, CA 94928
United States
7076642400 (Phone)

Hassan R. Hassabelnaby

Northern Kentucky University ( email )

Nunn Drive// BC 305D
Highland Heights, KY 41099
United States
859-572-7720 (Phone)

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