Effect of Hospital Closure on the Financial Performance of Neighboring Surviving Rural Hospitals

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Background: The country has experienced a string of hospital closures within the last decade, with 68 rural hospitals closing between 2010 and February 2016. This study examined the impact of hospital closures on the financial performance of neighboring surviving hospitals.

Method: Hospitals in cities within 30 miles of hospitals closing in one state in 2013 (cases) were matched to hospitals located in markets without closures during that period (controls) based on: bed size, ownership, location (rural/urban), whether or not the hospital operated a skilled nursing facility or a rural health clinic, total population size, elderly population, and poverty rate. Data were obtained from the Center for Medicare and Medicaid Services (CMS) Cost Reports, the CMS Provider of Service Files and the Census Bureau for the years 2011 to 2014. The years 2011-2012 and 2013-2014 represented the pre-closure and post-closure periods, respectively. Financial performance indicators assessed included operating margin, current ratio and debt-to-asset ratio. The final analytical sample included a balanced panel of 24 case-year and 80 control-year observations over the 4-year period. A difference-in-difference framework was implemented, using generalized estimation equation regression models. Statistical significance was evaluated at the p<0.05 level.

Results: Operating margin increased in cases, relative to controls in the post-closure period, while current ratio and debt-to-asset ratio remained unchanged.

Conclusion: The profitability of hospitals located in proximity to hospitals that closed in one state in 2013 improved following the closure. These findings suggest that surviving hospitals may have benefited from the gains in additional patients.


American Public Health Association Annual Meeting (APHA)


Denver, CO