Closure and Economic Efficiency
C., Dranove, D., Lindrooth, R.
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.
Closure and Economic Efficiency (PDF