Publications
Publications
- 2018
- European Accounting Review
The Role of Overbilling in Hospitals' Earnings Management Decisions
By: Jonas Heese
Abstract
This paper examines the role of overbilling in hospitals’ earnings management choices. Overbilling by hospitals is a form of revenue manipulation that involves misclassifying a patient into a diagnosis-related group that yields higher reimbursement. As overbilling allows hospitals to increase revenues without altering operations, affecting costs, or having to reverse such behavior in the future, I propose and find that overbilling reduces hospitals’ use of managing accruals or cutting discretionary expenditures. Next, I find that hospital managers prefer overbilling to managing accruals (cutting discretionary expenditures) when cutting discretionary expenditures (managing accruals) is constrained and vice versa. Collectively, my findings suggest that overbilling is an important alternative manipulation tool in hospitals.
Keywords
Overbilling; Accrual-based Earnings Management; Real Activities Manipulation; For-profit Hospitals; Earnings Management; Health Industry
Citation
Heese, Jonas. "The Role of Overbilling in Hospitals' Earnings Management Decisions." European Accounting Review 27, no. 5 (2018).