An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Ramji Balakrishnan
University of Iowa

Leslie Eldenburg
University of Arizona

Ranjani Krishnan
Michigan State University

Naomi Soderstrom
University of Colorado at Boulder

Abstract: We examine the effects of operating risk and ownership on hospital outsourcing behavior. Ownership influences governance, incentives, and the types of institutional constraints faced by firms. As a result, outsourcing decisions in response to increased financial and competitive pressures likely vary by hospital ownership. We expect for-profit hospitals to have the strongest incentives to respond to financial and competitive pressures via outsourcing, and government hospitals to have the weakest, while nonprofit hospitals may have other social objectives as well as financial performance. We expect nonprofit behavior to be somewhere between the other two hospital types. We find that nonprofit hospitals increase outsourcing as cost pressures increase, while for-profit hospitals respond to competitive pressures by outsourcing. Outsourcing does not appear to affect profitability (measured as ROA) in any hospital type. These results suggest that ownership affects

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