What question did this study set out to answer?

This study aims to explore how hospitals manipulate budget data to maximize allowable revenues under state regulation.

Information Asymmetry, Incentive Schemes, and Information Biasing: The Case of Hospital Budgeting Under Rate Regulation.

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Observational analysis reveals hospitals bias budget data under rate regulation, indicating incentive scheme flaws.

This study aims to explore how hospitals manipulate budget data to maximize allowable revenues under state regulation.
Analyzed hospital budgeting practices in Washington State.
Examined the relationship between budgeted and actual volume impacts.
Identified patterns in data biasing reported to the regulatory commission.
Evidence shows hospitals overstate budget impacts during volume increases.
Hospitals understating budget impacts during volume decreases are also observed.
Data biasing follows predictable patterns based on financial incentives.

Blanchard et al. (1986) studied this question.

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