Hospital closure: an efficiency analysis

Abstract

Logistic regression analysis was used to test the hypothesis that market forces have led to recent hospital closures. Specifically, inefficient and underutilized hospitals in competitive markets were hypothesized to be at greater risk for closure. While past studies used crude measures of hospital efficiency to predict closure, this study used data envelopment analysis to construct an efficiency index. Mixed support was found for the market forces hypothesis; however, contrary to expectations, inefficient hospitals were not shown to be at increased risk for closure. In fact, efficiency proved to be a weak, but positive, predictor of closure.