Song, Lina, and Soroush Saghafian. "Do Hospital Closures Improve the Efficiency and Quality of Other Hospitals?" HKS Faculty Research Working Paper Series RWP19-006, January 2019.

Abstract

The recent trend in the U.S. hospital closures can have important impacts on the healthcare sector by changing the operational efficiency and quality of care of the remaining hospitals. We investigate the impact of hospital closures on the surrounding hospitals' efficiency and quality and shed light on mechanisms through which they can be affected. Using and combining various data sources, we find that when a hospital closes, its nearby hospitals improve their operational efficiency without expanding their resources. However, they do so via a speed-up behavior (i.e., by reducing their service durations) instead of an effort to lower their average bed idle time. Importantly, we find that this speed-up response to the increased demand by nearby hospitals negatively affects some (but not all) aspect of the care, including the 30-day patient mortality. Furthermore, hospital closures induce changes in directions that widen social disparity, as their adverse consequences fall disproportionately among hospitals or patients with limited resources. Our results have implications for both hospital administrators and policymakers who strive to improve the efficiency and quality of the healthcare system.