Lin, C. J., Chen, H. Y., and Lin, H. L. 2022. Earnings Management Behavior under the Global Budget Payment and Reduction of Medical Expenses System: The Effects of Different Types of Hospitals. NTU Management Review, 32 (3): 187-224. doi:10.6226/NTUMR.202212_32(3).0006
Chan-Jane Lin, Department of Accounting, National Taiwan University
Hsiao-Yu Chen, Department of Accounting, National Taiwan University
Hsiao-Lun Lin, Department of Accountancy, National Taipei University
The current study examines earnings management behavior under the Global Budget Payment and Reduction of Medical Expenses System across various types of hospitals in Taiwan. Using 2013-2018 financial data available from the National Health Insurance Administration, this study builds models to estimate the discretionary accruals (e.g., float-point adjustment and allowance for National Health Insurance deduction) as proxies for earnings management behavior of hospitals. Our results of regression indicate that compared to medical juridical persons, private hospitals employ discretionary accruals to reduce income to a larger extent when pre-managed earnings are high. This is possibly due to that the income of a private hospital has to be combined with the personal income of the physicians in charge of the hospital for taxes to be levied. Furthermore, the hospital governance mechanism of private hospitals is less strict than that of medical juridical persons. Our results also show that compared with medical care corporations, medical care foundations use discretionary accruals to reduce income to a greater extent when pre-managed earnings are high. The possible reason for this observation is that medical care foundations, which are nonprofit hospitals, have incentives for mitigating excessive monitoring due to high earnings. This study contributes to the extant literature by also investigating the earnings management behavior of private hospitals and medical care corporations in Taiwan. The second contribution is that this study finds besides "allowance for National Health Insurance deduction," hospitals also use discretionary "float-point adjustment" accruals to manage earnings. The findings from this study offer policy implications for regulators to consider revising the hospital governance policy, including providing guidance for hospitals to estimate discretionary accruals.
earnings managementprivate hospitalsmedical juridical personsfloat-point adjustmentNHI deduction