Provider Altruism and Medical Fraud: Evidence from an Audit Study of Malaria Treatment

We provide evidence of fraudulent diagnostic misreporting leading to spending on unnecessary medical care and show that it is strongly associated with provider profit motivation and weak prosocial preferences. Using incognito standardized patients (SP) presenting identical acute malaria symptoms as real walk-in clients to private providers in Kenya, we observe diagnostic and treatment decisions under controlled conditions with externally verified disease status. Because the SPs were confirmed to be malaria-negative, any reported positive diagnosis is a false positive by construction. Providers ordered malaria tests in 81% of the SP encounters. Conditional on administering a malaria test, providers report false positive results in 30% of encounters, substantially exceeding the approximately 3-5% false positive rates reported for the same malaria tests in diagnostic accuracy studies. This occurs despite near-perfect knowledge of appropriate diagnostic protocols. We link this behavior to provider preferences measured using a real-stakes, modified dictator game. While ordering a test is uncorrelated with preferences, the top 25% most profit-motivated providers report 16 percentage point (pp) more false positives and sell 20 pp more antimalarial drugs than more altruistic providers, conditional on ordering a malaria test. Misreporting is accompanied by selective concealment of diagnostic evidence from patients.