joint work with Hendrik Jürges, Daniel Wiesen
Dishonest behavior signicantly increases the cost of medical care provision. Upcoding of patients is a common form of fraud to attract higher reimbursements. Imposing audit mechanisms including fines to curtail upcoding is widely discussed among healthcare policy-makers. How audits and fines affect individual health care providers' behavior is empirically not well understood. To provide new evidence on fraudulent behavior in health care, we analyze the effect of a random audit including fines on individuals' honesty by means of a novel controlled behavioral experiment framed in a neonatal care context. Prevalent dishonest behavior declines signicantly when audits and fines are introduced. The effect is driven by a reduction in upcoding when being detectable. Yet, upcoding increases when not being detectable as fraudulent. We find evidence that individual characteristics (gender, medical background, integrity) are related to dishonest behavior. Policy implications are discussed.