With hospital closures in the United States accelerating in recent years, Associate Professor of Public Policy Soroush Saghafian, along with his former PhD student Lina Song, now an assistant professor at the University College London School of Management, and Dr. Ali Raja from Massachusetts General Hospital, analyze this concerning trend in the journal Health Care Management Science. The trio lay out a series of recommendations for policymakers to mitigate the challenges that these closures pose for patients and the healthcare system in general. Saghafian, regularly collaborates with hospitals to improve their operational efficiency, patient flow, medical decision-making, and more broadly, healthcare delivery policies. He is a faculty affiliate of the School’s Mossavar-Rahmani Center for Business and Government as well as Harvard’s PhD Program in Health Policy, Center for Health Decision Science, and Data Science Initiative.
Q: What are some of the reasons behind the growing numbers of hospitals shutting their doors?
Hospital closures directly affect patients because they are losing access to healthcare, but they also impact surrounding communities, especially in rural areas given that hospitals themselves are often large employers in such communities. We’ve seen this trend of hospital closures for some time now, but during COVID, closure rates really spiked as many hospitals paused elective surgeries. They also had to make capacity for providing medical care to COVID patients, but the margins for serving COVID patients is relatively low compared to some more lucrative elective surgeries, further putting financial pressure on these institutions. For many hospitals that already had financial issues prior to the pandemic, these issues were magnified by COVID.
Q: How do hospital closures impact patient care?
What our research shows is that when a hospital closes, care delivery in surrounding hospitals is negatively affected. People say, “oh, we should let this hospital close because it isn’t efficient.” Closing it, they argue, allows having a more efficient healthcare system, because the remaining hospitals are more efficient in serving patients. Yes, we’ve found via our analyses that neighboring hospitals become more efficient because they’re able to serve a larger number of patients with the same number of resources (e.g., beds) they have, but the way they do this is not by utilizing their assets such as beds more efficiently. We’ve found that mainly what happens is that they speed up patient treatment to be able to accommodate the increased volume of patients they have to serve. In essence, they cut some value-added care that needs to be provided to the patients. We see that this sped-up behavior increases patient mortality rates, which is very alarming.
It is also worth noting that the effect of hospital closures in urban and rural areas are vastly different. For example, the economic impacts of urban hospital closures are often less severe than rural hospitals, as medical personnel from shuttered hospitals in urban areas are more easily able to find employment in nearby facilities. In rural areas, on the other hand, hospitals can often be the largest employer in a community, and their closures can have deleterious economic impacts as unemployment rates rise and the local tax base might further shrink.
Q: Hasn’t the federal government increased its support for hospitals as part of the CARES Act COVID relief package?
Congress provided $175B for healthcare providers as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a large portion of which went to hospitals that were struggling with the financial fallout from COVID. But the federal government isn’t really targeting that funding. Hospitals can apply for and receive federal COVID relief funding. But the financial impact of the pandemic has hit different types of hospitals in different ways. Large teaching hospitals such as MGH have significant resources to weather this storm than, say, do rural hospitals or those that serve lower-income communities. While there are some federal programs to aid rural and certain lower-income serving urban hospitals, , they have been largely criticized. For example, prior to COVID-19, Disproportionate Share Hospital (DSH) payments were designed to supplement the cost of uncompensated care, and the Critical Access Hospital (CAH) program was introduced to cover the high fixed costs that rural hospitals face.
Recent healthcare reforms have attempted to cut the DSH fund by $35.1B between FY2017 and FY2024, and there have been various efforts to make the CAH program’s eligibility stricter. The COVID-19 pandemic, however, forced the U.S. government to increase its support for struggling hospitals and introduce the CARES ACT. The Department of Health and Human Services has also expanded the Medicare Accelerated and Advance Payment program-a loan program that helps hospitals with disruptions in cash flow. Nevertheless, these funds are limited, and hence, how they are allocated and used will serve a critical role in determining the future operating status of many hospitals and the care of many patients.
Q: What recommendations did you lay out for policymakers to address the hospital closure issue?
Hospitals are mainly reimbursed on a volume basis. So the more patients they serve and the more tests they perform, the higher the reimbursements they receive. There is a lot of research that shows that this volume-based reimbursement model leads to poor patient outcomes. Shifting to a value-based payment, which emphasizes that hospitals should be reimbursed based on how much value they provide to their patients is important. In addition, as I mentioned above, we found that when a hospital closes its nearby hospitals speed up the patient care to be able to digest the increased volume of patients they have to serve. This means that monitoring the speed of treatment in such hospitals to ensure that they aren’t cutting corners with patient treatment. can be very useful. For example, policymakers can design programs to monitor the length of stay of patients to understand if patient care is being compromised. It’s an intervention that essentially costs nothing, as regulators should be able to do this easily (e.g., via data available to Centers for Medicare & Medicaid Services) and step in if they see a sudden decrease in average length of stay or other key metrics.
In addition, related to this massive infusion of CARES Act funding, my collaborators and I urge policymakers to evaluate other methods of direct federal support for hospitals other than just basing those payments on patient volumes. For example, hospitals’ reliance on Medicaid funds, and both the access and quality dimensions of care delivery should be taken into account. Finally, we believe researchers also have a unique opportunity to inform policymakers via careful studies that shed light on implications, trade-offs, and consequences of various strategies that can be followed. As such, we also urge researchers to grasp this opportunity and perform more cutting-edge research on these topics that can further inform policymakers.
Banner image: A hospital in Colorado systematically closing its doors for good due to city budgeting. Photo by Andy Cross/The Denver Post. Faculty portrait by Martha Stewart