Regulatory Exploitation and the Market for Corporate Controls
AbstractThis paper investigates whether managers who fail to exploit regulatory loopholes are vulnerable to replacement. We use the U.S. hospital industry in 1985-1996 as a case study. A 1988 change in Medicare rules widened a pre-existing loophole in the Medicare payment system, presenting hospitals with an opportunity to increase operating margins by five or more percentage points simply by “upcoding” patients to more lucrative codes. We find that “room to upcode” is a statistically and economically significant predictor of whether a hospital replaces its management with a new team of for-profit managers. We also find that hospitals replacing their management subsequently upcode more than a sample of similar hospitals that did not, as identified by propensity scores.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12438.
Date of creation: Aug 2006
Date of revision:
Note: CF HC
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- G3 - Financial Economics - - Corporate Finance and Governance
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-26 (All new papers)
- NEP-FIN-2006-08-26 (Finance)
- NEP-PBE-2006-08-26 (Public Economics)
- NEP-REG-2006-08-26 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brickley, James A & Van Horn, R Lawrence, 2002. "Managerial Incentives in Nonprofit Organizations: Evidence from Hospitals," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 227-49, April.
- Ma, Ching-to Albert & McGuire, Thomas G, 1997.
"Optimal Health Insurance and Provider Payment,"
American Economic Review,
American Economic Association, vol. 87(4), pages 685-704, September.
- Mark Duggan & Fiona Scott Morton, 2004. "The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing," NBER Working Papers 10930, National Bureau of Economic Research, Inc.
- Cutler, D.M., 1992.
"The Incidence of Adverse Medical Outcome Under Prospective Payment,"
Harvard Institute of Economic Research Working Papers
1603, Harvard - Institute of Economic Research.
- Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
- David M. Cutler, 1993. "The Incidence of Adverse Medical Outcomes Under Prospective Payments," NBER Working Papers 4300, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000.
The Quarterly Journal of Economics,
MIT Press, vol. 115(3), pages 811-846, August.
- Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
- Austan Goolsbee, 1997.
"What Happens When You Tax the Rich? Evidence from Executive Compensation,"
NBER Working Papers
6333, National Bureau of Economic Research, Inc.
- Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
- Brian J. Hall & Jeffrey B. Liebman, 2000.
"The Taxation of Executive Compensation,"
NBER Working Papers
7596, National Bureau of Economic Research, Inc.
- Silverman, Elaine & Skinner, Jonathan, 2004. "Medicare upcoding and hospital ownership," Journal of Health Economics, Elsevier, vol. 23(2), pages 369-389, March.
- Desai, Mihir A. & Hines, James R. Jr., 2002.
"Expectations and Expatriations: Tracing the Causes and Consequences of Corporate Inversions,"
National Tax Journal,
National Tax Association, vol. 55(3), pages 409-40, September.
- Mihir A. Desai & James R. Hines Jr., 2002. "Expectations and Expatriations: Tracing the Causes and Consequences of Corporate Inversions," NBER Working Papers 9057, National Bureau of Economic Research, Inc.
- Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
- Roomkin, Myron J & Weisbrod, Burton A, 1999. "Managerial Compensation and Incentives in For-Profit and Nonprofit Hospitals," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 750-81, October.
- Dranove, David & Lindrooth, Richard, 2003. "Hospital consolidation and costs: another look at the evidence," Journal of Health Economics, Elsevier, vol. 22(6), pages 983-997, November.
- Leemore S. Dafny, 2005. "How Do Hospitals Respond to Price Changes?," American Economic Review, American Economic Association, vol. 95(5), pages 1525-1547, December.
- Horwitz, Jill R. & Nichols, Austin, 2009. "Hospital ownership and medical services: Market mix, spillover effects, and nonprofit objectives," Journal of Health Economics, Elsevier, vol. 28(5), pages 924-937, September.
- Jill R. Horwitz & Austin Nichols, 2007. "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix," NBER Working Papers 13246, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.