The effect of rural hospital closures on the financial performance of neighboring rural hospitals.

This study investigates how the closure of rural hospitals affected other rural hospitals. The empirical analysis examined whether being the neighbor of a closed rural hospital affected financial performance variables during the periods before and after closure. Before and after comparisons of surviving rural hospitals were made between 1985 and 1989 for closures in 1987 and between 1986 and 1990 for closures in 1988. The regression results showed that neighbors of closed rural hospitals typically did experience increased volume in comparison to non-neighbors, but the increased volume did not lead to reductions in average cost or to improved profitability, after controlling for other factors.