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Hospital closure and economic efficiency

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  • Capps, Cory
  • Dranove, David
  • Lindrooth, Richard C.

Abstract

We present a new framework for assessing the effects of hospital closures on social welfare and the local economy. While patient welfare necessarily declines when patients lose access to a hospital, closures also tend to reduce costs. We study five hospital closures in two states and find that urban hospital bailouts reduce aggregate social welfare: on balance, the cost savings from closures more than offset the reduction in patient welfare. However, because some of the cost savings are shared nationally, total surplus in the local community may decline following a hospital closure.

Suggested Citation

  • Capps, Cory & Dranove, David & Lindrooth, Richard C., 2010. "Hospital closure and economic efficiency," Journal of Health Economics, Elsevier, vol. 29(1), pages 87-109, January.
  • Handle: RePEc:eee:jhecon:v:29:y:2010:i:1:p:87-109
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    References listed on IDEAS

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    Cited by:

    1. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    2. János Kornai, 2009. "The soft budget constraint syndrome in the hospital sector," International Journal of Health Economics and Management, Springer, vol. 9(2), pages 117-135, June.
    3. Gächter, Martin & Schwazer, Peter & Theurl, Engelbert & Winner, Hannes, 2012. "Physician density in a two-tiered health care system," Health Policy, Elsevier, vol. 106(3), pages 257-268.
    4. Avdic, Danie, 2015. "A matter of life and death? Hospital distance and quality of care: evidence from emergency hospital closures and myocardial infarctions," Working Paper Series 2015:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    5. Thomas Czypionka & Markus Kraus & Susanne Mayer & Gerald Röhrling, 2014. "Efficiency, ownership, and financing of hospitals: The case of Austria," Health Care Management Science, Springer, vol. 17(4), pages 331-347, December.
    6. Pan, Jay & Qin, Xuezheng & Li, Qian & Messina, Joseph P. & Delamater, Paul L., 2015. "Does hospital competition improve health care delivery in China?," China Economic Review, Elsevier, vol. 33(C), pages 179-199.
    7. Ellerie Weber, 2014. "Measuring Welfare from Ambulatory Surgery Centers: A Spatial Analysis of Demand for Healthcare Facilities," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 591-631, December.
    8. repec:wly:hlthec:v:26:y:2017:i::p:78-91 is not listed on IDEAS
    9. repec:eee:jhecon:v:58:y:2018:i:c:p:110-122 is not listed on IDEAS
    10. Avdic, Daniel, 2016. "Improving efficiency or impairing access? Health care consolidation and quality of care: Evidence from emergency hospital closures in Sweden," Journal of Health Economics, Elsevier, vol. 48(C), pages 44-60.
    11. Samuel Kleiner & William White & Sean Lyons, 2015. "Market power and provider consolidation in physician markets," International Journal of Health Economics and Management, Springer, vol. 15(1), pages 99-126, March.
    12. Paola Bertoli & Veronica Grembi, 2017. "The life‐saving effect of hospital proximity," Health Economics, John Wiley & Sons, Ltd., vol. 26, pages 78-91, September.
    13. Leguizamon, Susane & Christafore, David, 2014. "Racial Differences in Willingness to Pay for Hospital Access," MPRA Paper 55926, University Library of Munich, Germany.
    14. Martin Gaechter & Peter Schwazer & Engelbert Theurl, 2013. "Entry into the Physicians’ Market: Empirical Evidence from the Outpatient Sector in Austria," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 4, pages 245-260, December.
    15. Mandich, Anne M. & Dorfman, Jeffrey H., 2014. "The Impact of Hospitals on Local Labor Markets: Going Beyond IMPLAN," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169791, Agricultural and Applied Economics Association.
    16. Massimiliano Piacenza & Gilberto Turati, 2014. "Does Fiscal Discipline Towards Subnational Governments Affect Citizens' Well‐Being? Evidence On Health," Health Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 199-224, February.
    17. Pan, Jay & Liu, Dan & Ali, Shehzad, 2015. "Patient dissatisfaction in China: What matters," Social Science & Medicine, Elsevier, vol. 143(C), pages 145-153.
    18. David, Guy & Lindrooth, Richard C. & Helmchen, Lorens A. & Burns, Lawton R., 2014. "Do hospitals cross-subsidize?," Journal of Health Economics, Elsevier, vol. 37(C), pages 198-218.
    19. Junyi Shen & On Fukui & Hiroyuki Hashimoto & Takako Nakashima & Tadashi Kimura & Kenichiro Morishige & Tatsuyoshi Saijo, 2012. "A cost-benefit analysis on the specialization in departments of obstetrics and gynecology in Japan," Health Economics Review, Springer, vol. 2(1), pages 1-10, December.

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