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This study empirically examines the determinants of hospital entry into management contracts with multihospital systems. Using a resource-dependence framework, the study tests whether market conditions, regulatory climate, management effectiveness, and certain enabling factors affect the probability of hospital entry into a contract management arrangement. The study used a pooled sample of 312 contract-managed and 936 traditionally managed hospitals. Results suggest the importance of management effectiveness, regulatory climate, and hospital ownership (investor owned or nonprofit) as predisposing conditions of contract management.