Patient Reallocation Following Rural Hospital Closure

• In Event: When Distance Matters: Rural Healthcare Access and Disparities

Abstract

The rural hospital market has seen an increasing rate of hospital closures, with an average of 9 closures each year since 2005. Hospital closures have raised significant concerns about access to care for rural populations. Moreover, the impact could be heterogeneous across patients with different types of insurance. For example, surviving hospitals in the same markets may have differential capacities and willingness to absorb rerouted patients under Medicaid relative to other types of insurance, due to Medicaid’s low reimbursement rates, which could exacerbate disparities in access and health outcomes. To date, limited studies address the distributional effects of rural hospital closures across payers. Our study attempts to quantify how rural hospital closures affect the utilization of hospital inpatient care differently across patients with different types of insurance.

We use the Centers for Medicare & Medicaid Services Hospital Cost Report Information System to estimate the effect of 138 rural hospital closures from 2005 to 2023, identified using the information from the UNC Sheps Center for Health Services Research. We first estimate the direct effects of rural hospital closures at the Hospital Service Area (HSA) level. We limit the sample to HSAs of which more than half of the ZIP code areas are rural areas based on the Rural-Urban Commuting Area codes. Using the staggered difference-in-differences approach, we compare inpatient discharges overall and by patients’ insurance type in treated HSAs that experienced a hospital closure with control HSAs that never had a hospital closure. 

On average, closed rural hospitals had 3269 inpatient days one year before the closure. Our preliminary difference-in-difference analysis found evidence of significant pre-trends—inpatient volume for Medicare and Medicaid in treated HSAs relative to control HSAs had been declining long before the hospital closure. This implies that declining demand may have led to rural hospital closures. The pre-trend became insignificant after matching treated HSAs with control HSAs that had similar population profiles before the treatment. We found that total inpatient days in a treated HSA declined by about 1530 annually during the 5-year period after a hospital closure, consisting of a decline of about 990 inpatient days for Medicare patients and 504 days for Medicaid patients.

We then conduct a hospital-level analysis to estimate the effects of hospital closures on remaining hospitals in the same HSA. We observe an insignificant increase of 1185 total inpatient days annually and a significant increase of 578 inpatient days for Medicaid patients after a hospital closed in the same market, while inpatient volume for other payers did not significantly change. Findings are similar when examining hospitals by ownership status (for-profit, nonprofit, public). These findings collectively indicate that patients with better ability to pay (e.g., insured by Medicare or private insurers) may bypass the nearest rural hospitals after hospital closures. Our next steps will further explore the mechanism and quantify: 1) the magnitude of patients bypassing the closest rural hospital and reallocating to hospitals in urban areas; 2) the magnitude of patients forgoing hospital inpatient care; 3) the extent of patients reallocating to high-quality hospitals.

Author

• Kun Li, Duke University
  Presenting Author