Department of Health Administration and Policy
Medical University of South Carolina

Hospital Closure and Economic Efficiency

February 2, 2007
12:00-1:30 PM
Colonial Penn Center Auditorium

Abstract Paper

Dr. Lindrooth is a health economist whose recent research has focused on the economics of inpatient hospital care and mental health services delivery. He is an Associate Professor in the Department of Health Administration and Policy at the Medical University of South Carolina. He is also Associate Director of the Center for Health Economic and Policy Studies. Dr. Lindrooth received his Ph.D. in Economics at the University of Washington in 1998. Prior to joining the MUSC faculty he was a faculty member at Northwestern University. Dr. Lindrooth's current research portfolio includes a project funded by AHRQ that aims to measure: the effect of entry into specialized cardiac care on general hospitals; the effect of closing labor and delivery units; and how emergency departments affect the viability of general hospitals. In addition, he is beginning a project funded by NIMH which will examine the precursors and impacts of changes in acute care inpatient psychiatric care capacity. His published research papers include studies of hospital markets and costs; the behavior of for-profit and not-for-profit hospices; the effect government policies on the financial viability of health care providers; the economics of mental health service delivery; and the effect of peer influence on substance use. He has published over 30 papers in a variety of economics and health services research journals including: Economic Inquiry, Health Affairs, Health Economics, Health Services Research, Inquiry, Journal of Health Economics, and Southern Economic Journal.

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.

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