The Effect of Rural Hospital Closures on Community Economic Health


  • George M. Holmes,

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    • *Address correspondence to George M. Holmes, Ph.D., Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill, 725 Martin Luther King Jr. Blvd, CB 7590, Chapel Hill, NC. Rebecca T. Slifkin, Ph.D., Randy K. Randolph, M.R.P, and Stephanie Poley, B.A., are with the Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill, Chapel Hill, NC.

  • Rebecca T. Slifkin,

  • Randy K. Randolph,

  • Stephanie Poley


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 (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.