Hospitals Supply of Medical Services

Impact of hospital closures on rural economies

Not surprisingly, the impact is significant. That is according to a study by Malone et al. (2022), estimated using a difference-in-difference design with data between 2001 and 2018. Specifically, they find:

Of the 1759 nonmetro counties in our study sample, 109 experienced a hospital closure during the study period. Relative to the nonclosure counterfactual, closures significantly decreased labor force size, on average, by 1.4% (95% CI: [−2.1%, −0.8%]). Results also suggest that Prospective Payment System (PPS) hospital closures significantly decreased population size, on average, by 1.1% (95% CI: [−1.7%, −0.5%]), relative to the nonclosure counterfactual.

As a source for high-skilled jobs in rural areas, hospital closures have a significant impact on the local economy.

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