Welfare Effects of Rural Hospitial Closures: A Nested Logit Analysis of the Demand for Rural Hospital Services

Abstract

been a central question in rural health debates over the past decade. The reported results are mixed, with some researchers finding that hospital closures in rural areas result in lower rates of inpatient hospitalizations (Bindman, Keane, and Lurie), while other researchers have found no such link (Hadley and Nair). The literature on the economic impact of rural hospitals provides an additional perspective on hospital closures, where researchers find that the presence of a hospital in a rural community generates significant positive economic effects (Cordes). While research on both the access effect and the economic impact shed light on rural hospital closures, neither approach rests upon the economic theory of demand and the principles of welfare analysis. This paper argues that welfare evaluations of U.S. rural health policies can be undertaken with a discrete choice model of the demand