The Effect of Rural Hospital Closures on Community Economic Health

Abstract

To examine the effect of rural hospital closures on the local economy. U.S. Census Bureau, OSCAR, Medicare Cost Reports, and surveys of individuals knowledgeable about local hospital closures. Economic data at the county level for 1990-2000 were combined with information on hospital closures. The study sample was restricted to rural counties experiencing a closure during the sample period. Longitudinal regression methods were used to estimate the effect of hospital closure on per-capita income, unemployment rate, and other community economic measures. Models included both leading and lagged closure terms allowing a preclosure economic downturn as well as time for the closure to be fully realized by the community. Information on closures was collected by contacting every state hospital association, reconciling information gathered with that contained in the American Hospital Association file and OIG reports. Results indicate that the closure of the sole hospital in the community reduces per-capita income by 703 dollars (p<0.05) or 4 percent (p<0.05) and increases the unemployment rate by 1.6 percentage points (p<0.01). Closures in communities with alternative sources of hospital care had no long-term economic impact, although income decreased for 2 years following the closure. The local economic effects of a hospital closure should be considered when regulations that affect hospitals' financial well-being are designed or changed.