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Turbocharging Profits? Contract Gaming and Revenue Allocation in Healthcare

Author

Listed:
  • Atul Gupta
  • Ambar La Forgia
  • Adam Sacarny

Abstract

Firms often exploit weaknesses in government contracts to boost revenues, yet little is known about how they allocate these funds. We study how hospitals allocated $3 billion obtained from gaming a Medicare loophole. The average gaming hospital increased Medicare and total revenue by around 10 percent, implying large spillovers on other payers. Nonprofit hospitals deployed most funds toward operating costs. For-profits—driven by a large chain—deducted funds off their balance sheets, distributing them to executives and share holders. Accordingly, we detect reductions in mortality only at nonprofits. Our results imply that the consequences of engineered windfalls vary substantially by hospital ownership.

Suggested Citation

  • Atul Gupta & Ambar La Forgia & Adam Sacarny, 2026. "Turbocharging Profits? Contract Gaming and Revenue Allocation in Healthcare," American Economic Journal: Applied Economics, American Economic Association, vol. 18(3), pages 322-361, July.
    • Handle: RePEc:aea:aejapp:v:18:y:2026:i:3:p:322-61
    DOI: 10.1257/app.20240589
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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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