Rural hospital closures: an inquiry into efficiency

Abstract

The relationship between efficiency and rural hospital closure was examined by comparing the efficiency of nongovernment short-term general rural hospitals that closed in 1988 to that of their counterparts that remained opened. A similar comparison was made between the efficiency of open and closed urban facilities. Although no relationship between efficiency and closure was demonstrated, an examination of the surpluses and shortages in production among inefficient hospitals revealed that inefficient closed hospitals in both rural and urban areas experienced a lack of demand for inpatient services. Furthermore, a threshold value of 21 or 22 inpatient discharges per bed per year was identified as being related to closure regardless of whether a hospital was operating efficiently or not.