Study Examines Effects of Rural Hospital Closures on Per Capita Income

Released: 11-Apr-2006 4:10 PM EDT
Source Newsroom: University of North Carolina at Chapel Hill
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Newswise — A study conducted at the University of North Carolina at Chapel Hill has concluded that closing the only hospital in a rural community has a negative impact on the local economy: In the three-year period after a lone hospital closed, researchers found the communities' local per capita income levels fell 4 percent.

The study, titled "The Effect of Rural Hospital Closures on Community Economic Health," tracked the economic well-being of 140 counties nationwide that experienced a hospital closure between 1992 and 1998. Researchers found that, in general, a county that lost a hospital experienced a decrease of approximately 1 percent in per capita income in the county for the first three years following the closure. If there were other hospitals in the county, the income of the community returned to pre-closure levels within three years.

However, if the closed hospital was the only one in the county, then per capita income fell by 4 percent (or roughly $703) and did not return to pre-closure levels, the research team reported.

"Our findings suggest that in certain situations, it may be in a community's long-term interest to directly support a hospital in order to ensure its long-term survival," said Dr. Mark Holmes, a senior research fellow for health economics at UNC's Cecil G. Sheps Center for Health Services Research and co-author of the report.

The research, believed to be the first study to separate the economic contribution of the hospital as a major employer from the importance a hospital brings to the economic development possibilities of a community, was funded by the Federal Office of Rural Health Policy and appears in the April issue of the Health Services Research journal.

"A county losing its only hospital experiences a larger decline in its average income. This suggests that private business values the existence of a local hospital," said Holmes. "Anecdotally, we hear from local economic developers that recruiting is more difficult without a hospital to serve the community."

In addition to the decrease in average income, the unemployment rate rose by 1.6 percentage points in communities that lost their only hospital. Again, this effect was not manifested in communities that had other sources of hospital care. The community population did not change appreciably for either type of closure, suggesting that there was no exodus from counties losing their hospitals.

Other authors on the study were Dr. Rebecca T. Slifkin, program director with the Program on Health Economics and Finance; Stephanie Poley, research assistant; and Randy K. Randolph, applications analyst programmer, all of the Sheps Center.

The Cecil G. Sheps Center for Health Services Research seeks to improve the health of individuals, families and populations by understanding the problems, issues and alternatives in the design and delivery of health-care services. This is accomplished through an interdisciplinary program of research, consultation, technical assistance and training that focuses on timely and policy-relevant questions concerning the accessibility, adequacy, organization, cost and effectiveness of health-care services and the dissemination of this information to policy-makers and the public.


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