نقش نقدینگی در تصمیمات مدیریت سود بیمارستان The Role of Overbilling in Hospitals’ Earnings Management Decisions

1. Introduction In this paper, I examine the role of overbilling in hospitals’ earnings management choices. Hospitals engage in overbilling when they classify patients’ ailments as more severe than they are to earn higher revenues without changing the actual treatment. Such behavior is made possible by the information asymmetry between hospitals and insurers regarding patients’ conditions, and is an acknowledged problem in the US healthcare industry with costs ranging from $23.2 billion in 1996 to $77.4 billion in 2014 as highlighted by the US Government Accountability Office (GAO, 2000, 2013, 2015) and the US Department of Health and Human Services (HHS, 2013). Overbilling encompasses a broad set of actions, ranging from liberal interpretation of rules to, at the extreme, outright manipulation of the patient record (Dafny & Dranove, 2009; Heese, Krishnan, & Moers, 2016). In prior examination of organizations’ earnings management strategies, accounting research has typically focused on earnings management via accruals and real activities such as cutting expenditures (e.g. Healy & Wahlen, 1999; Roychowdhury, 2006). Overbilling via misclassifying patients’ ailments, however, has advantages over managing accruals and cutting discretionary expenditures, because it allows hospitals to increase actual revenues without altering operations, affecting costs directly, or having to reverse such behavior in the future. In contrast, cutting discretionary expenditures requires changing the hospital’s operating activities, and managing accruals involves judgment in the application of reporting methods without generating cash flows. Following these arguments, I propose that overbilling reduces hospitals’ use of accrual-based or real activities earnings management. I begin my investigation by validating a measure of overbilling. Following Heese et al. (2016), I focus on three distinct diagnosis-related group (DRG) families identified by the Office of the Inspector General (OIG, 1998) of the HHS as being prone to overbilling: ‘general respiratory ailments’ (DRG family 79), ‘circulatory system disorders’ (DRG family 144), and ‘diabetes and metabolic disorders’ (DRG family 296).