Institutional Pressures for Adopting New Cost Accounting Systems in Finnish Hospitals: Two Longitudinal Case Studies

In the 1990's, a large number of Finnish hospitals began implementing new cost accounting systems, which were aimed at pricing hospital outputs at full cost. Often the method of choice was activity-based costing, which was in the process of being transferred from the manufacturing industry to health care service production. The aim of this paper is to analyse the motivations and rationale of this phenomenon in the light of two longitudinal case studies. The first case study is archival, using documents produced between 1996 and 2002. In the second case study, the data consists mainly of research diaries and personal observation and covers a hospital district activity-based costing and pricing project of 2000-2001. Institutional theory is used to interpret the findings in the two case studies. The theoretical framework used in analysing the data draws on Oliver's (1991) ideas, according to which an organisation may react to institutional pressure by emphasising either the economic efficiency or social efficiency (legitimacy) of its actions. The results indicate that while institutional theory leads us to believe that managerial accounting systems may be converging due to the pressures from the institutions, the convergence in the two case hospitals has been a convergence of names of accounting systems rather than of the methods, which, although called activity-based costing, have remained in essence characteristically different. .