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Hospital Closure and Hospital Choice: How Hospital Quality and Availability will Affect Rural Residents

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  • Premkumar, Deepak
  • Jones, Dave
  • Orazem, Peter

Abstract

This study estimates a model of rural patient hospital choice between the nearest rural hospital, the nearest urban hospital, or the nearest research hospital. We present separate estimates for inpatient and outpatient visits, for different diagnoses, and for emergency and nonemergency admissions. The analyses illustrate the tradeoffs between hospital quality and distance in deciding whether to choose the nearest hospital or to travel farther for an alternative. The model parameters are used to simulate two hospital closing scenarios for both outpatient and inpatient data: 1) closing 25% of lowest quality rural hospitals and 2) closing 15% of the least used rural hospitals. Closing 25% of the lowest quality rural hospitals results in a 20.7% increase in expected distance and a 7.7% increase in expected hospital quality for those with inpatient ailments. Closing the least used hospitals modestly increases average distance but lowers average quality. We conclude that closing the lowest quality rural hospitals is a better policy prescription than closing the least used hospitals since closing low quality hospitals results in a substantial increase in average quality of hospital with only a slight increase in distance traveled for chosen hospitals.

Suggested Citation

  • Premkumar, Deepak & Jones, Dave & Orazem, Peter, 2016. "Hospital Closure and Hospital Choice: How Hospital Quality and Availability will Affect Rural Residents," ISU General Staff Papers 201611290800001009, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genstf:201611290800001009
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    File URL: https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1009&context=econ_workingpapers
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    References listed on IDEAS

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    1. Capalbo, Susan M. & Heggem, Christine N., 1999. "Innovations in the Delivery of Health Care Services to Rural Communities Telemedicine and Limited-Service Hospitals," Rural America/ Rural Development Perspectives, United States Department of Agriculture, Economic Research Service, vol. 14(3), October.
    2. Amitabh Chandra & Amy Finkelstein & Adam Sacarny & Chad Syverson, 2016. "Health Care Exceptionalism? Performance and Allocation in the US Health Care Sector," American Economic Review, American Economic Association, vol. 106(8), pages 2110-2144, August.
    3. Amy Finkelstein & Matthew Gentzkow & Heidi Williams, 2016. "Sources of Geographic Variation in Health Care: Evidence From PatientMigration," The Quarterly Journal of Economics, Oxford University Press, vol. 131(4), pages 1681-1726.
    4. Kate Ho & Ariel Pakes, 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians," American Economic Review, American Economic Association, vol. 104(12), pages 3841-3884, December.
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    Cited by:

    1. Kritee Gujral & Anirban Basu, 2019. "Impact of Rural and Urban Hospital Closures on Inpatient Mortality," NBER Working Papers 26182, National Bureau of Economic Research, Inc.

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