Selective Regulator Decoupling and Organizations' Strategic Responses

Jonas  Heese; Ranjani  Krishnan; Frank  Moers

Article | Academy of Management Journal | December 2016

Selective Regulator Decoupling and Organizations' Strategic Responses

by Jonas Heese, Ranjani Krishnan and Frank Moers

Abstract

Organizations often respond to institutional pressures by symbolically adopting policies and procedures but decoupling them from actual practice. Literature has examined why organizations decouple from regulatory pressures. In this study, we argue that decoupling occurs within regulatory agencies and results from a combination of conflicting institutional pressures, complex goals, and internal fragmentation. Further, regulatory decoupling is selective, i.e., regulators fail to adequately enforce standards only for one set of organizations. Regulated organizations that benefit from selective regulatory decoupling use non-market strategies to maintain their favorable regulatory status and in the process selectively decouple their norms in one organizational activity but not others. As an empirical context, we use the hospital industry where regulators have to balance conflicting pressures to be tough on fraud, while maintaining the community’s access to essential but unprofitable services such as charity care and medical education. In response, hospital regulators selectively decouple and exhibit leniency in enforcement of mispricing practices towards beneficent hospitals, defined as hospitals that provide more charity care and medical education. In turn, beneficent hospitals selectively decouple their service and profit goals by providing unprofitable services to uninsured patients, while mispricing insured patients to earn higher reimbursements.

Keywords: Regulator leniency; beneficence; mispricing; upcoding; Nonprofit Organizations; Health Care and Treatment; Revenue; Health Industry;

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Citation:

Heese, Jonas, Ranjani Krishnan, and Frank Moers. "Selective Regulator Decoupling and Organizations' Strategic Responses." Academy of Management Journal 59, no. 6 (December 2016). (Selected for Best Paper Proceedings of the 2015 Academy of Management Annual Meeting. Winner of the Healthcare Management Division of the Academy of Management 2015 Best Paper Award.)

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Selective Regulator Decoupling and Organizations' Strategic Responses

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