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

Deepak Premkumar, Dave Jones and Peter Orazem

ISU General Staff Papers from Iowa State University, Department of Economics

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.

Date: 2016-11-29
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Working Paper: Hospital Closure and Hospital Choice: How Hospital Quality and Availability will Affect Rural Residents (2017)
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