Accounting facilitating sociopolitical aims: The case of Maryland hospitals

• Date: 01 November 2019
• Author: Margit Malmmose,Negin Fouladi
• DOI: http://doi.org/10.1111/faam.12220
• Published date: 01 November 2019

Received: 27 February2018 Revised: 6 September 2019 Accepted:7 September 2019

DOI: 10.1111/faam.12220

ORIGINAL ARTICLE

Accounting facilitating sociopolitical aims: The

case of Maryland hospitals

Margit Malmmose1Negin Fouladi2

1Department of Management, Aarhus School of

Business and Social Sciences, Aarhus University,

Aarhus V, Denmark

2Department of Health Services Administration,

School of Public Health, College Park,University

of Maryland, Maryland

Correspondence

MargitMalmmose, Department of Management,

AarhusSchool of Business and Social Sciences,

AarhusUniversity, Fuglesangsalle 4, 8210 Aarhus

V,Denmark.

Email:mmalmmose@mgmt.au.dk

Abstract

In 2014, the State of Maryland in the United States implemented a

substantial change to their hospital payment approach in the form

of “Global Budgets”.This strategy for financing garnered significant

attention because acute care hospitals in the state transitioned from

a fee-for-service hospital payment system to a prospective frame-

based budget. Applying the conceptual framework of Miller and

Power[Academy of Management Annals, 7(1), 557–605], we empha-

sise howcalculative practices actively influence organisational struc-

ture decision-making. The study investigates the reciprocal role of

accounting practices in the facilitation of hospital policies. Findings

demonstrate that accounting practices recursively constitute and

reshape the organisation of hospitals. The policy change to Global

Budgets has influenced accounting practices, which likewise have

promoted large organisational changes that increase engagement

with external stakeholders. The consequences of the Global Budget

policy have been significant, leading to highly complex administra-

tive practices while also necessitating a cost shifting in order to sub-

sidise physician costs, due to the separation of hospitals and physi-

cian organisations. However, we also witness how Global Budgets

and the combination of centralised monitoring with decentralised

managerial freedom substantiate remarkable holistic quality initia-

tives.

KEYWORDS

accounting, budgeting, costs, hospitals, quality

1INTRODUCTION

This case study on Maryland hospitals’ attempt to balance cost and quality illustrates the reciprocal influence of

sociopolitical goals and accounting practices. More specifically,the case demonstrates how a calculative tool (hospital

budgeting) facilitates the aims of reducing utilisation and costs while motivating both cooperationand quality improve-

ment. In 2014, the US state of Maryland applied the “Global Budget” approach to implement extensive changes in

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414 MALMMOSE ANDFOULADI

hospital treatment practices (Patel et al., 2015). The policy aimed to replace a volume-based reimbursement system

with a global budget, with the twin goals of improving the quality of healthcare and controlling costs (Evans & Meyer,

2014; Patel et al., 2015).1The global budget in Maryland represents an unconventional shift in behavioural motiva-

tions towards quality of care, moving away from the traditional focus on volume. The policy change is significant for

illustrating an attempt to extend accounting from occupyingtechnical domains to the monitoring of wider social prac-

tices, an observation discussed in the public sector accounting literature (Bevan & Hood, 2006; Broadbent & Guthrie,

2008; Cardinaels & Soderstrom, 2013; Kurunmäki & Miller, 2006). This study advances these discussions with two

contributions: (a) we include hospital quality initiatives in the accounting literature, which naturally (b) expand upon

the problematisation of accounting practices at both the organisational and social levelsof analysis. The study thereby

addresses the call from Cardinaels and Soderstrom (2013) for studies on how hospitals balance the competing societal

and political demands of providing higher quality without raisingcosts. Additionally, Malmmose (2019) argues that the

accounting literature does not mirror the quality initiativesidentified as a core New Public Management (NPM) theme

in recent years.

Maryland provides a unique case in the United States. The state has historically well-established regulation of

healthcare prices, and it is the only US state to utilise an all-payer hospital rate-setting approach (Kastor & Adashi,

2011). Therefore, the NPM goal of balancing costs and quality is similar in the case of Maryland as with other OECD

nations. Yet, the overallUS healthcare system is distinct for having a complex mix of private and public markets and

a variety of third-party payers. This cross-national difference is essential to contextualising the Maryland case study.

Although NPM has been widely debated in many European nations, US healthcare initiatives that have similarities to

NPM (Watkins& Arrington, 2007) are seldom explored in the accounting literature. We first position the case of Mary-

land within the NPM literature to emphasise an OECD relevanceof a case study that is particular to the United States.

This discussion examinespertinent arguments from the accounting literature, principally by applying concepts of costs

and quality to the case study. Subsequently,we develop a theoretical framework that emphasises the influence and

interrelationof calculative practices with the wider social context (Miller, 2001; Miller & O’Leary,1987; Miller & Power,

2013). This framework allows us to explain the budget changes in conceptual terms that accentuate the influence of

accounting on hospital management.

2NPM, COSTS, AND QUALITY

A body of critical accounting research arose in response to the NPM, highlighting the disadvantages of a strict focus

on accounting as well as how changes in management practices (Chua & Preston, 1994; Donabedian, 1985a; Preston,

1992;Samuel, Dirsmith, & McElroy, 2005) emphasised narrow cost containment that lead to suboptimisation and poor-

quality services. For example, early research by Arnold, Hammond, and Oakes (1994) suggested that a skewedcost

focus prioritised a rationalmarket logic, which privileged a business view and dismissed the logic of human rights, social

responsibility,and democratic participation in decisions. Twenty years later, Watkins and Arrington (2007) confirmed

the observations by Arnold et al. by identifying the expansion of an accounting logic in political theory. A predomi-

nant method utilised in hospital settings to maintain price controls is prospective payment systems, typically apply-

ing diagnostic-related group (DRG) classifications (Malmmose, 2015). However,one consequence of the DRG-based

prospective payment strategyhas been to neglect volume control; in fact, this approach has often incentivised volume

escalationin hospitals (Chapman, Kern, & Laguecir, 2014; Chua & Preston, 1994). In European countries, increasing vol-

ume has been a particular goal of healthcare systems in order to reduce waiting lists (Busse, Geissler,Quentin, & Wiley,

2011). In contrast, waiting lists have not been a major issue in the United States, due to the private market mecha-

nisms that structure the US healthcare system. Increasing volume has not been a societal aim in the United States and

instead reflects profit maximisation. Additionally,an acknowledged concern in the United States has been “upcoding”,

which refers to when patients are misclassified into DRGs that yield higher Medicare reimbursement (Heese, 2018;