The Effect of Rural Hospital Closures on Community Economic Health

Abstract

OBJECTIVE: To examine the effect of rural hospital closures on the local economy. DATA SOURCES: U.S. Census Bureau, OSCAR, Medicare Cost Reports, and surveys of individuals knowledgeable about local hospital closures. STUDY DESIGN: 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. DATA COLLECTION: 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. PRINCIPAL FINDINGS: 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. CONCLUSIONS: The local economic effects of a hospital closure should be considered when regulations that affect hospitals' financial well-being are designed or changed.