The marginal benefit of hospitals: Evidence from the effect of entry and exit on utilization and mortality rates

Whether policies that change health care consumption affect health depends on the marginal benefit of the affected health care. I use variation in access to hospitals caused by nearly 1,300 hospital entries and exits to show that hospital entries cause sharp increases and exits cause sharp decreases in the quantity of inpatient care and emergency department visits with no short-term effect on the mortality rate. Thus, preventing hospital exit is not a cost effective way to save lives on average. However, exits of some hospitals with larger impacts on access to care increase the mortality rate and produce lower cost per life saved estimates.