Medicare upcoding and hospital ownership.

Many hospitals in the 1990s many hospitals were accused of "upcoding" patient diagnostic related groups (DRGs) to increase Medicare reimbursements. We find that between 1989 and 1996, the percentage point share of the most generous DRG for pneumonia and respiratory infections rose by 10 points among not-for-profit hospitals, 23 points among for-profit hospitals, and 37 points in hospitals converting to for-profit status. Not-for-profit upcoding was also higher in markets with a larger for-profit hospital share. Upcoding appears to reflect both risk-taking by administrators and a closer alignment between the goals of the administration and the behavior of the clinical staff.