Information Asymmetry, Incentive Schemes, and Information Biasing: The Case of Hospital Budgeting Under Rate Regulation.
ABSTRACT: Revenues of hospitals in the state of Washington are constrained by an upper bound that is a function of budgeted costs, budgeted volume, and actual volume. Basically, allowable revenue is the hospital's total budgeted cost, with an adjustment for the difference between actual and budgeted volume. A hospital can increase its allowable revenue by biasing the budget data reported to the Washington State Hospital Commission. For example, when a hospital budgets for an increase in volume, it is to the hospital's advantage to overstate the impact of the increase in volume on the hospital's total budgeted cost. Conversely, when a hospital budgets for a decrease in volume, the constraint on revenues can be relaxed by understating the impact: of the decrease in volume on the hospital's total budgeted cost. Empirical evidence is consistent with hospitals biasing, in certain predictable ways, budget data reported to the regulatory commission.
- DOI
- 10.2308/tar-4490333
- Volume
- 61 (1)
- Pages
- 1-15
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref