HOSPITAL  CLOSURE:  1987  . 

RICHARD  P. KUSSERO W 
INSPECTOR  GENERAL 
OAC04-89-00740  MAY  s!d9  EXEClJTlVE  SUMMARY 

PURPOSE 
This inspection was conducted to describe the phenomenon of hospital closures in the United 
States. It examines the characteristics of, reasonsfor, and impact of closures in 1987. 
BACKGROUND 
In recent years, the closure of general, acute care hospitals has generated increasing public and 
congressional concern.  According to recent studies, more hospitals are expected to close their 
doors in coming years. Numerous questions have been raised about the reasonsfor-and the ef
fects of hospital closure, as well as the implications  for public policy.  Legislation  was passed. 
in 1987 to provide Rural Health Care Transition Grants to help communities addressthe kinds 
of changesthat may lead to hospital closure. 
FINDINGS 
This inspection found that for 1987: 
Sixty-nine  general, acute care hospitals closed. They were located in 27 States. Thirteen new 
hospitals opened in 1987, and 8 of the 69 which closed in 1987 reopened in 1988. 
Rural and urban hospitals closed in roughly equal proportion to their numbers nationally. 
Hospitals that closed were small.  Rural hospitals that closed were about half the size of the 
averagerural hospital.  Urban hospitals that closed were just over one-third as large as the 
averageurban hospital. 
Occupancy rates for both rural and urban hospitals that closed were much lower than the na
tional averages. 
When compared to national norms, there were no signifkant  differences in either the 
Medicare or the Medicaid utilization  rates of hospitals that closed. 
There was no single factor or event which causedhospitals to close. Rather, a set of factors 
relating to hospital financing gradually diminished hospital viability.  Hospitals that closed 
were reported to have had: 
. 	 declining revenues due to fewer admissions; lower third-party reimbursement, and more 
uncompensatedcare; and 
. 	 rising costs due to increasing demands for new medical  technology, skilled personne!. 
and facility  maintenance, renovation, or replacement. 
1  Emergency services and inpatient care are accessibleto most people living  in communities. 
where hospitals closed in 1987. 
SUMMARY 
Hospitals that closed in 1987 were small and had low occupancy rates. When the hospitals 
closed, few patients were affected.  Most could get medical care nearby. 
FUTURE  STUDIES 
The Office of Inspector General will  look further into actions communities can take to main
tain accessto medical care in the face of possible hospital closure. 
ii  TABLE  OF CONTENTS 

Page 
EXECUTlVE  SUMMARY 
INTRODUCTlON  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..l 
Background  .....................................................  . 
Purpose  ......................................................  ..l 
scope  .........................................................  . 
Methods  .......................................................  . 
FlNDlNGS  ........................................................  . 
Extent  and  Nature  of Hospital  Closures  .............  r ...  ; .............  .3 
Howmanyclosed?  ............................................  . 
Where  werethey?.  ............................................  . 
Howmanyopened?  ...........................................  . 
What  were  these  hospitals  like?  .................................  .4 
Whydidtheycfose?  ...........................................  . 
Impact  of Hospital  Closures  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
How  many  patients  were  affected?  ...............................  11 
Is inpatient  care accessible?  ...................................  .I2 
Is emergency  care available?  ..................................  .12 
What  happened  to the buildings?  ...............................  .13 
FutureStudies........................................:.........l  4 
NOTES...:......................................................l  5 
APPENDICES 
Appendix  A:  Methodology  by Topic Area  . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-l 
Appendix  8:  Hospital  Closure  Charts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-l 
. . . 
111  INTRODUCTION 

BACKGROUND 
Congressand the public have shown increasing interest in hospital closings.  They raise con
cerns about accessto inpatient care and emergency services,particularly  for older people in 
rural areas. 
The American Hospital Association (AHA)  reported 96 hospitals closed in 1987. According 
to a 1984 study by Arthur Anderson & Company, health industry policymakers estimate that 
700 of the nations hospitals will  have closed by 1995.  A recent Touche Ross survey found 
that 48 percent of 419 hospital executives believe their hospitals may fail within  5 years2  The 
Government ResearchCorporation estimates that over 40 percent of all hospitals in the United 
Stateswill  close or be converted to other usesby the year 2000.3 
PURPOSE 
This inspection was designed to describe the phenomenon of hospital closures in the United 
States. It examines the characterktics of, reasonsfor, and impact of theseclosures. 
SCOPE 
The study examined hospitals that closed in Calendar Year 1987, the latest year for which suf
ficient data are available on the characteristics of hospitals. 
For purposes of this study, the following  definitions were used: 
Hospital:  A facility  that provides general, short-term, acute medical and surgical inpatient ser
vices. 
Closed Hospital:  One that stopped providing general, short-term, acute inpatient services in 
1987. If a hospital merged with or was sold to another hospital and the physical plant 
remained open for inpatient acute care, it was not considered a closure.  If a hospital closed 
and reopened in 1987, it also was not considered a closure. 
METHODS 
Information  for this study was obtained Tom an AI-IA list of 1987 hospital closures and Htxirh 
Care Financing Administration  (HCFA) data bases. Additional  information  came from con
tacts with State hospital associations, State licensing and certification  agencies, State health 
planning agencies,officials  associatedwith closed hospitals or hospitals nearby, and !OCJI 
public officials. 
1 
 When the AHA  list was compared with HCFA data on Medicare hospitals and information 
@omState Government agencies, only 61 of the 96 hospitals listed by the AHA  fit the defini
tions used in this study. 
The list comparison showed that 22 of the hospitals on the AHA  list were psychiatric, 
rehabilitation  and other specialty hospitals which did not meet the study criteria.  Ten other 
hospitals on the list had closed in a year other than 1987. Three hospitals on the list were still 
operating.  The inspection also uncovered eight hospital closures in 1987 that did not appear 
on the list 
More information  appearsin appendix A on data collection methods. 
2 
 The Inspector  Generals  study  of hospitals  closed  in 1987 found  that: 
.  sixty-nine  general, acute care hospitals closed in 1987; 

.  size and occupancy levels appearto be the major factors in hospital viability; 

.  becauseof the small size and low occupancy of hospitals that closed, few patients were 

affected; and 
.  hospital closures do not appearto have resulted in major health care accessproblems. 
EXTENT  AND  NATURE  OF HOSPITAL  CLOSURES 
How  many  closed? 
In 1987, there were more than 6,800 hospitals in the United States. Of those, 5,143 were 
general, short-term, acute care hospitals shown in HCFAs data baseas participating  in the 
Medicare program.  Forty-eight  percent are rural and 52 percent are urban. 
Sixty-nine  hospitals closed in 1987--1.3 percent of all hospitals nationally.  When t&y  closed, 
the general acute care inpatient bed supply was reduced by 4,233 beds, or one-half percent. 
Where  were they? 
Ea  On*  HospitCallosure 
3 
 The closed hospitals were located in 27 States. One-half of these States had only one hospital 
closure. The greatest number of closures was in Texas (14), followed  by Michigan  (6), 
&.lifornia  (5), and Minnesota (5).  Appendix B shows a list of the 1987 closures and the num
ber of rural and urban hospital ciosures by State. 
Rural and urban hospitals closed at a rate roughly proportional  to their numbers nationally, 
Thirty-seven of the closed hospitals (54 percent) were rural; 32 (46 percent) were urban. 
RURAL  URBAN 
TOTAL:  5143  2,489  (48%)  2,654  (52%) 
CLOSED:  69  37  (54%)  32  (46%) 
How  many  opened? 
While 69 hospitals closed  in 1987, 13 new general,  acute care hospitals opened, adding back 
1,116 beds to the national bed supply. Eight of the 69 hospitals which closed in 1987 
reopened in 1988, adding back 261 beds. 
What  were these hospitals  like? 
Size: Hospitals that closed in 1987 were small.  Forty-three of them--almost two-thirds--had 
fewer than 50 beds. Only  12 had more than 100 beds. 
SIZE  OF CLOSED  HOSPITALS 
NUMBER  OF BEDS  HOSPITALS 
Rural  Urban  Total  Percent 
o- 29  15  5  20  29.0% 
30 - 49  13  10  23  33.3% 
50 - 99  6  8  14  20.3% 
loo  - 199  3  5  8  11.6% 
200 - 299  0  4  4  5.8% 
300 +  0  0  0  0% 
37  32  69 
TOTALS  100% 
I 

4 
 Compared to the average  size of general, acute care hospitals nationally, both the rural and 
Fban  hospitals that closed in 1987 were a great deal smaller.  Rural hospitals that closed were 
,about half the size of the averagerural hospital.  Urban hospitals that closed were just over 
one-third as large as the averageurban hospital nationally. 
BED  SIZE 
#  of  Beds 
300 
241.7 
RURAL  HOSPITALS  URBAN  HOSPITALS 
- NATIONAL  AVG  @i$8 CLOSED  HOSPITAL  AVG 
5 
 Occupancy:  Occupancy rates for both rural and urban hospitals that closed in 1987 were 
much lower than the national averages.
. 
OCCUPANCY4 
1 
70 
-.._.-...-.-...- -_.-._-_----___--.----- -5&+%  .._.........__._...._..............................
i 
60  -
----_._...---- ..__.___  _--___-- -. 
50  - 
.--...-3&9.%~--~- -.-.  _  _.._.. 
40  -. 
.-.  _-__---...-
30  -. 
-...  -- 
20  -, 
-.-...  .__--...... 
10 - 
Rural  Hospitals  Urban  Hospitals 
m  National  Avg  88!  Closed  Hospital  Avg 
Medicare  and Medicaid  Utilization:  There was no significant difference in average 1Medicax-e 
occupancy between hoqAals  that closed and ail hospitals nationally.  Similarly,  there were 
only marginal differences in averagelkfedicaid utilization  between hospitals that closed and all 
hospitals nationally. 
UTILJZAT10N5 
Medicare  Medicaid
60 
Rural  Urban  Rural  Urban 
Hospitals  Hospitals  Hospitals  Hospitals 
m  National  Avg  a  Closed  Hospital  Avg 
6 
 Medicare  Compliance  and Program  Integrity:  According  to HCFA, five of the closed hospi
tals had been involuntarily  removed from the Medicare program for failure to meet LMedicares 
conditions of participation.  Further, HCFA had taken adverseactions against 11 more of the 
closed hospitals for noncompliance with conditions of participation  in recent years. 
Eleven of the closed hospitals had been reported to the Office of Inspector Generals Office 
of Investigations for possible violations of Medicare or Medicaid laws.  Of these 11 cases, 1 
resulted in a civil  monetary penalty; 1 resulted in administrative recoupment of Medicare 
funds; 3 were referred to the U.S. Attorney  (but were not accepted for prosecution); 5 were 
closed with no violation  found; and 1 caseis pending: 
Why  did they  close? 
The many health care professionals interviewed in the course of this inspection reported no 
single reason for hospital ciosure. Rather, they suggesteda number of factors which gradually 
weakened the financial condition of thesehospitals.  As occupancy declined, revenues lagged; 
but costs continued to rise.  Operating margins shrank and ultimately  there was no choice but 
to sell, merge with another hospital, or close the doors. 
DecZining  Occupancy:  Hospital occupancy is a function of the number of admissions and the 
lengths of hospital stay. Respondentscite fewer admissions as the main causeof declining  oc
cupancy. 
Physicians control where patients are admitted for inpatient care. For most of the 69 hospitals 
that closed in 1987, physician referrals were said to have dwindled for a number of reasons: 
.  Physician  availability  was a problem  in rural  areas. 
In several rural communities where hospitals closed in 1987, the towns physician 
retired, died, or moved his practice and no repiacement was found. 
Rural areasare less able to attract and retain physicians. The smaller population  base 
often means that the physician practices alone and is always on call.  Many physicians 
find rural practice, under these conditions, to be unattractive. 
.  Physicians lost confidence in the local hospitai. 
Many of the hospitals included in this study were old and neededrenovation and nml
ernization.  They lacked the high technology diagnostic and treatment equipment which 
physicians value. 
In caseswhere newer and better equipped hospitals are available  nearby, physx:xy  CYL: 
to shift their admissions to those facilities. 
7 
 .  Patients,  too, preferred  other  hospitals. 
People.are becoming better informed about health and medical care. They want the best 
care available, and they are more likely  to question quality.  Although  they may be un
certain how to measurequality in technical terms, many will  choose a large hospital 
over a small one; a newer, better equipped facility  over one which shows its age. Many 
of the hospitals which closed in 1987 did not inspire patient confidence. 
. 	 Medicare  peer review organizations  (PRO) are more carefully  scrutinizing  the 
necessity of hospital  admissions. 
The PROS are responsible for reviewing  hospital admissions for appropriateness, and 
may sanction individual  physicians for unnecessaryhospitalization.  Where there are 
only a few physicians admitting to a hospital, the likelihood  of a physician being in
cluded in the PROS sample increases. This factor is said to have made physicians more 
cautious in admitting marginally  sick Medicare patients, which, consequently, has 
lowered hospital admissions. 
A more subtle effect of the PROS diligence is also at play.  Patients who were less sick 
and might  have been admitted before the advent of PRO review are less likely  to be ad
mitted.  Without these cheap cases, hospitals are less able to offset the higher cost of 
unquestionably necessaryadmissions. 
.  Competition  among hospitals is intense. 
People interviewed for this study reported that competition  with other hospitals was a 
factor in many of the closures. Hospitals with limited  resources are hard-pressedto com
pete with newer or larger hospitals which aggressively market their services, maintain a 
healthy capital reserve, and offer higher salaries to nursing and technical staff. 
.  People are more mobile. 
With better roads and improved transportation there is increased accessto distant medi
cal facilities.  Now physicians and their patients can choose a hospital on the basis of 
quality  orreputation  rather than solely on proximity. 
.  Practice  patterns  are changing. 
Medical advancesand new technology have allowed some procedures which formerly 
required a hospital stay to be performed on an outpatient basis; 
One respondent noted that, as if competition  by other hospitals  were not enough, now hospl
tals are in competition  with doctors, urgent care clinics, and surgical centers. With the xidsi! 
factors of better transportation and greater mobility,  patients now have less expensive 2nd 
more convenient alternatives to hospitalization. 
8 
 Lagging  Revenues:  Lower occupancy means less income for hospitals.  Other factors were 
also mentioned by respondents as reasonsfor-declining  hospital revenue:
I 
. 	 Patients without  hospital  insurance,  or with  inadequate  insurance,  create 
substantial  lossesfor the hospital. 
There are estimated to be 37 million  people in the United Stgtes who have no medical in
surance. Others carry minimal  coverage for hospitalization.  When hospitals admit 
theseparients they accept losses which appear on the books as charity  and bad debt-
uncompensatedcare. In Mississippi,  uncompensatedC~I+iZsJ reported to have totaled 
$443 million  in 1987, up almost  $70 million  from  1986. 
Historically,  hospitals covered theselosses,by cost shifting  to patients who were in
sured or could afford to pay. Hospitals set their charges high enough to cover the cost 
of the insured patients careplus  a portion of the uncompensatedcare. More and more 
insurers are refusing to accept thesecostshifts. 
.  Insurers  are better  controlling  their  costs. 
Both public and private insurers are pressedto controi their hospital outlays.  Some have 
reduced the percentage of hospital chargesor costs they will  reimburse.  Others have 
changed from charge-basedreimbursement to paying a scheduled amount per case, 
usually basedon diagnosis and intensity of care required. 
Many respondents pointed out that, with thesechanges,payments from some insurers 
no longer cover the actual cost of care. Several mentioned Medicaid in particular. 
When payments do not cover costs, hospitals must either recoup the difference from the 
patient, shift the cost to another payor, or take a loss. 
.  Medicare  pays rural  hospitals  less. 
Medicare reimbursement rates are basedon averagecosts for the geographic area. Since 
rural costs have historically  been lower than urban, rural hospitals reimbursement TXSS 
are lower.  Respondentssuggestedthat hospitals classified as rural  by HCFA but lo
cated in the same labor market as urban hospitals are particularly disadvantaged 5:. \a;n 
payment formulas. 
Rising  Costs: According to many respondents, hospital costs are rising despip efforx  :o ;-.:q 
them. On a per-casebasis, costs increased by 9.5 percent in 1987 over 1986. 
9 
 Some of the important factors cited by respondents are: 
. 
.  New medical  technology  is a major  capital  expense. 
While  beneficial in speeding up diagnosis and treatment, technology is very costly.  If a 
hospital fails to provide this modem equipment to physicians, they will  take their 
patients elsewhere. Small hospitals can least afford such purchases. 
.  Labor  costs.are increasing,  and nursing  and technical  staff are scarce. 
Shortages of skilled hospital personnel have made it difficult  for hospitals to attract and 
retain staff.  Rural hospitals in particular have problems competing in the regional and 
metropolitan  markets. They must offer salaries equal to or better than suburban hospi
tals to balance the disincentives to rural medical practice. 
. 	 Deteriorating  facilities  require  major  capital  investments  to renovate and 
modernize. 
Many of the hospitals that closed in 1987 are old facilities  in need of repair or renova
tion.  These alterations are expensive. With declining revenues, smaller hospitals are 
often unable to make the neededchanges. 
Health care planners, regulators, and hospital administrators contacted during the course of 
this inspection described these factors--occupancy, revenue, and cost--as intricately  related 
and interdependent.  Hospital viability  was said to depend on the stability  of all three. The 
weakening of one may begin a chain reaction eventually leading to hospital closure. 
When a hospitals patient censusbegins to slide, patient revenues necessarily decline.  If a sub
stantial proportion of the remaining patients are uninsured and poor, the cost of providing  care 
is no longer covered by operating revenue. 
In order to make payroll  and pay the bills, the hospital diverts funds which would ordinarily 
be deposited to capital reserves. Needed maintenance and renovation must then be postponed. 
The hospital forgoes purchaseof expensive high technology equipment.  Soon it is unable to 
compete with neighboring hospitals. 
Physicians begin admitting their patients to other hospitals which better meet their needs. 
This further erodesoccupancy and patient revenues. The hospital may make every effort to 
reduce its costs, which may diminish  its attractiveness to doctors and patients even more.  But 
fixed costs remain, and now must be supported by fewer and fewer patients. 
The hospitals operating margin shrinks to the point that all possible solutions become LOO~XY-
pensive. The range of options narrows to merger, sale, or closure. 
10 
 Small hospitals are least able to defend against this downward spiral.  Hospitals which closed 
id 1987 were significantly  smaller than average. Every one of them was said to have en-
countered some or all of the problems described here. 
IMPACT  OF  HOSPITAL  CLOSURES 
Through interviews with local hospital and Government officials,  the inspection assessed: 
.  the number of patients affected; 
.  the availability  of inpatient care; 
.  accessto emergency medical services; and 
.  present use of the closed hospital buildings. 
Inpatient and emergency care were found to be accessibleto most communities  where hospi
tals closed in 1987. Respondentsindicated that accessto care was less convenient for some, 
but not a major problem. 
How  many  patients  were affected? 
Few patients were affected by hospital closure. For rural hospitals that closed in 1987, the 
averagedaily censuswas about nine patients. Therefore, when a rural hospital closed, presum
ing that those hospital stays were necessaryand that the demand remained constant, only nine 
beds needed to be found nearby. In the urban areas,25 beds needed to be found. 
WHEN  HOSPITALS  CLOSED,  HOW  MANY  PATIENTS  WERE  AFFECTED? 
Rural  Urban 
Hospitals  Hospitals 
Average Number of Beds  42.6  83.0 
Average Occupancy Rate  x  21.4%  x  29.6% 
Average Patient Census  9.1  24.6 
Medicare utilization  data were analyzed to determine the number of elderly affected by hosTI
tal closure.  In rural hospitals that closed the averagecensuswas nine patients at the nme  01 
closure, Only four were Medicare beneficiaries.  In urban hospitals that closed, only  i 0 {jr ; 
average25 occupied beds were tilled  by Medicare patients. 
11 
 WHEN HOSPITALS  CLOSED,
. 
HOW MANY  MEDICARE  PATIENTS  WERE AFFECTED? 
Rural  Urban 
Hospitals  Hospitals 
Average Patient Census  9.1  24.6 
Average Medicare 
Utilization  Rate  x  44.9%  x  39.0% 
Average Medicare Patients  4.1  9.6 
Is inpatient  care accessible? 
Urban:  In urban kas  whose hospitals closed, residents of only one community  must travel 
over 10 miles for inpatient care. In Wasco, California,  the nearesthospital is located 19 miles 
away in Delano. 
One other urban community  had a similar situation.  During the time the hospital in New Bos
ton, Texas was closed, residents had to navel 23 miles to Texarkana. However, New Boston 
-?-
General Hospital reopened in 1988. 
Rurul:  In three-quartersof the rural communities studied, another general hospital is located 
within  20 miles.  Prior to the closure of theserural hospitals, many residents and physicians 
were already bypassing the local hospital and traveling to other nearby facilities  for care. 
Residents of only three of the 37 rural communities must travel further than 30 miles for in-
patient care. In San Manuel, Arizona, residents must go 50 miles to one of several hospitals io
cated in Tucson. In Mullen,  Nebraska, the nearesthospital is located 75 miles away in.Nonh 
Platte.  In Alaska, Glennallens Faith Hospital no longer operatesas a full-service  hospital. but 
provides emergency care to stabilize patients before they are transported by air to Anchonse 
200 miles away. 
Is emergency  care available? 
When a hospital closes, the community  loses not only inpatient beds, but also emergent:. or-
vices. Generally, respondentsdid not report significant problems with accessto emrrgcni.. 
care in the communities studied in this inspection.. In rural areas,where more problem> .n:;nr 
be expected, emergency stabilization and transportation systemsare said to work nrhr:  .bc:j 
overall. 
Urban:  In urban areas,all but one of the 32 communities whose hospitals closed in s 7 - .L: 
emergency care available within  10 miles.  Most urban communities have several ho\;,*.-. I 
12 
 which provide both inpatient and emergency care, so the closure of one hospital has little ef
fsct on the communitys  emergency care system. Residents of only one community  studied 
here--Wasco, California--have  to travel further, to Delano 19 miles away. 
Rural:  In only eight of the 37 rural communities whose hospitals closed, residents had to 
travel more than 20 miles for emergency care. In those eight communities,  ground or air am
bulance services were available.  Only in Mullen,  Nebraska was the travel time over 30 
minutes, to North Platte about an hours ride by ambulance. 
When  Rural  Hospifals  Close.. .. 
WHAT  ABOUT  EMERGENCIES? 
/  /  /  f  >  ;  V  3o  \**  75  myes  J,, 
\  \  \ 
Number  of  Hospitals 
What  happened  to the buildings? 
In almost half of the 69 casesof 1987 hospital closures, the former hospital buildings are now 
used for some health care purpose. 
Prior to discontinuing  general, acute inpatient care, several hospitals provided more than one 
type of service. For example, Ashton Memorial Hospital in Idaho provided both acute 2nd 
long-term care services. In 1987, the hospital closed its general, acute care services. It 
opened a chemical dependency unit and continues to offer nursing home care. 
13 
 Other facilities  were converted to a different  type of health care use. Jay Memorial  Hospital 
in Jay, Oklahoma,  for example, is now a clinic.  The following  chart illustrates the current use 
of all 69 hospitals closed in 1987. 
CURRENT  USE OF HOSPITALS  CLOSED  IN 1987 
Use  Number of Hospitals* 

RUlXl  Urban 

Reopened Hospital  4  4 
Speciality Treatment Facility 

(e.g. chemical dependency) 
 3  3 
Long Term Care Facility 
 7  1 
Outpatient Services/Clinic 
 4  12 
Offices 
 1  2 
Vacant 
 20  14 
*Duplicate  count.  Eight of the 69 hospitals provide two separate services. 
FUTURE  STUDIES 
The OIG will  look further into actions communities can take to maintain accessto medical 
care in the face of possible hospital closure.  Some communities have carefully  analyzed their 
needs and are constructing affordable medical care systems that meet their needs. The OIGs 
follow-up  analyses are intended to learn what stepsthesecommunities have taken and to make 
that information  available to other communities facing the same dilemmas. 
14 
 NOTES 

. 
1. Arthur Anderson & Co. and the American College of Hospital Administrators.  Heafrh 
Care  in the 1990s:  Trends ana Strategies.  1984. 
3. Touche Ross. U.S. Hospitals:  The Future  of Health  Care.  June 1988. 
3. 	Larry S. Gage, Dennis P. Andrulis,  and Virginia  Beers, Americans  Safety Net:  A Report  on 
the Situation  in Our  Nations  Metropolitan  Areas.  National Association of Public Hospi
tals. October 1987. 
4. 	Hospital occupancy rate is defined as the actual number.of patient days divided by the total 
bed days available.  National occupancy rate is defined as the sum of all hospitals occupan
cy rates, divided by the number of hospitals. 
5. 	Average Medicare utilization  for closed urban and rural hospitals is defined as the percent 
of Medicare patient days compared to total patient days for each hospital, summed and 
divided by the number of hospitals.  National averageMedicare utilization  is the percent of 
Medicare utilization  for each hospital, summed and divided by the total number of hospi
tals.  Medicaid utilization  is calculated in the same way. 
6. Larry S. Gage, Dennis P. Andrulis,  and Virginia  Beers,Americans  Safety Net:  A Report  on 
the Situation  in Our,Nations  Metropolitan  Areas.  National Association of Public Hospi
tals. October 1987. Page 20. 
7. 	 Survey by the Mississippi Hospital Association as reported by Health  Week,June 6, 1988. 
Page 11. 
8. 	Carol McCarthy, President of the American Hospital Association.  Testimony to U.S. 
House of Representative Committee on the Budget.  August 1, 1988. 
15 
 APPENDIX  A 

, 
METHODOLOGY 
Phenomenon  of dosures 
To determine how many hospitals closed in 1987, the studywas started with a list from the 
AHA.  The list was compared with the list of Medicare hospital terminations in 1987 in 
HCFAs Health Standards and Quality data base(RADARS).  All  50 State licensing and cer
tification  agencies were contacted. State hospital associations and State health planning agen
cies also were contacted. When closures were found that met the definition  of hospital 
closures or when discrepancies in data were found, contacts were made with officials  as
sociated with  the closed hospitals and officials  associatedwith the hospital nearest to the 
closed hospital. 
To determine the number of hospitals in the U.S. and the bed capacity, the Hospital Cost 
Report Information  System (HCRIS) maintained by HCFA was used. Only the general, short-
term, acute care hospitals under Medicares Prospective Payment System (PPS) were  included 
in the universe. Five thousand one hundred fifty  (5,150) hospitals were listed, less 7 with no 
data reported, which left 5,143.  This was the universe of short-term, acute care, general hospi
tals on HCRIS for the fourth year of PPS (PPS 4). 
Characteristics  of closed  hospitals 
To analyze character&s  of closed hospitals, HCFAs HCRIS data were used. Cost reports 
were not available for 3 of the 69 closed hospitals. Two were not Medicare providers in the 
years prior to closure and one had not submitted a cost report since PPS began. For the 
remaining 66 hospitals, the latest cost reports prior to closure containing sufficient data were 
used. For example, if a hospital closed in October 1987 and its accounting year was on ~1Juiy -
June cycle, the providers July 1, 1986 to July 20, 1987 report was used. Cost report dat;l on 
49 of the 69 hospitals were contained in HCRIS for PPS 4, and data on 61 of the 69 hospirnis 
were contained in HCRIS  for PPS 3. 
Reasons for  hospital  closures 
To determine the reasonsfor 1987 closures, officials of the following  agencies were ~on[.:i:ct:: 

.  State hospital associations 

.  State health planning agencies 

.  State certification  and licensing agencies 

.  closed hospitals; and 

0  nearesthospitals to closed hospitals. 

A-l  Impact  of hospital  closures 
. 

The impact  issuesexamined concentrated on those relating to accessto medical care. To 

determine these impacts, many of the following  were contacted: 

.  former hospital administrators, board members, and/or staff; 

.  hospital administrators and/or staff at the nearesthospitals; 

.  local police and health officials; 

.  local government officials; 

.  State health planning agencies; 

.  State certification  and licensing agencies; and 

.  State hospital associations. 

A-2 
 APPENDIX  B 
1987  HOSPITAL  CLOSURES 
Number of  Number of  Number of 
Closures by State  Rural  Urban 
Texas 
 14  8  6 
Michigan 
 6  0  6 
California 
 5  1  4 
Minnesota 
 5  2  3 
Illinois 
 .4  2  2 
Louisiana 
 4  3  1 
Alabama 
 3  3  0 
Arkansas 
 3  3  0 
Washington 
 3  0  3 
Massachusetts 
 2  0  2 
Nebraska 
 2  2  0 
New York 
 2  0  2 
Wisconsin  . 
 2  2  0 
Alaska 
 1  1  0 
Arizona 
 1  1  0 
Colorado 
 1  0  1 
Georgia 
 1  1  0 
Idaho 
 1  1  0 
Missouri 
 1  1  0 
Montana 
 1  1  0 
North Dakota 
 1  1  0 
New Jersey 
 1  0  1 
Ohio  . 
 1  1  0 
Oklahoma 
 1  1  0 
Oregon 
 1  0  1 
Virginia 
 1  1  0 
West Virginia 
 1  1  0 
27 States  69Closures  FRural  32 Urban 
B-l  1987  HOSPITAL  CLOSURES 
I  By  Name  and  Location 
Hospital Name  City  State  .Rural/Urban 
Faith Hospital  Glennallen  AK  rural 
Guin Hospital  Guin  AL  rural 
Livingston-Tombigbee  Livings ton  AL  rural 
John Andrew Community  Hospital  Tuskegee Insmute 
 AL  rural 
Delta Medical Center  Brinkley 
 AR  rural 
Gurdon Municipal  Hospital  Gurdon 
 AR  rural 
Lafayette County Memorial  Hospital  Lewisville 
 AR  rural 
San Manuel Division  Hospital  San Manuel  AZ  Nd 
Kings burg General Hospital  Kingsburg  CA  urban 
ShastaGeneral Hospital  Redding  CA  urban 
North Kern Hospital  Wasco  CA  urban 
Coming Memorial  Hospital  Coming  CA  rural 
Buena Park Community  Hospital  Buena Park  CA  urban 
Memorial  Hospital  Greeley  co  urban 
Fort Gaines/Clay County Hospital  Ft. Gaines  GA  rural 
Ashton Memorial  Hospital  Ashton  ID  rural 
SaundersHospital  Avon  IL  rural 
Provident Medical Center  Chicago  IL  urban 
Walther Memorial  Hospital  Chicago  IL  urban 
Paxon  Community  Hospital  Paxton  IL  rural 
Dixon Memorial  Hospital  Denham Springs  LA  urban 
Catahoula Memorial  Hospital  Jonesville  LA  rural 
Leesville General Hospital  Leesville  LA  run1 
Regent Hospital Acadiana  Erath  LA  rural 
Mary A. Alley Hospital  Marblehead  MA  urban 
Parkwood Hospital  New Bedford  MA  urban 
Lakeshore Hospital  Detroit  MI  urban 
Metro Hospital & Health Center  Detroit  MI  urban 
Milton  Community  Hospital  River Rouge  MI  urban 
A. Blain Hospital  Detroit  MI  urban 
Detroit Memorial  Hospital  Detroit  MI  urban 
Springwells Health Center  Dearborn  LMI  urban 
St. Johns Hospital  Browerville  MN  rural 
Community  Memorial  Hospital  Clarkfield  MN  NKll 
Samaritan Hospital  St. Paul  MN  urban 
St. Johns Eastside  St. Paul  MN  urbar: 
Mounds Park Hospital  St. Paul  MN  urb.::: 
Poplar Bluff  Hospital  Poplar Bluff  MO  rur;:: 
Missoula General Hospital  Missoula  MT  rur::. 
B-2 
 1987  HOSPITAL  CLOSURES 

.  By  Name  and  Location 
Hospital Name  City  State  Rural/Urban 
Rolette Community  Hospital  Roiette 
 ND  rural 
Grand Island Memorial  Hospital  Grand Island 
 N-E  NIXi 
Pioneer Memorial  Hospital  Mullen 
 NE  Nl-d 
South Bergen Hospital  Hasbrouck Heights 
 NJ  urban 
Baptist Medical  Center  Brooklyn 
 NY  urban 
Sheridan Park Hospital  Tonawanda 
 NY  urban 
Southern Hills  Hospital  Portsmouth 
 OH  NEil 
Jay Memorial  Hospital  Jay 
 OK 
CascadeCommunity  Hospital  Central Point 
 OR  urban 
Shelby General Hospital  Center 
 TX  rural 
Foard County Hospital  Crowell 
 TX  rural 
Dallas Medical  & Surgical  Dallas 
 TX  urban 
Northpark Hospital  El Paso 
 TX  urban 
Continental Hospital North  Ft. Worth 
 TX  urban 
Deaton Hospital  Galena Park 
 TX  urban 
Hamilton  General Hospital  Hamilton 
 TX  rural 
Hospital in the Pines  Lone Star 
 TX  NEll 
Meridian Hospital  Meridian 
 TX  rural 
New Boston General Hospital  New Boston 
 TX  urban 
Rosebud Community  Hospital  Rosebud 
 TX  rural 
Brazos Valley Hospital  Sealy 
 TX  rural 
Wortham Hospital  Wortham 
 TX  rural 
Y sletaGeneral Hospital  El Paso 
 TX  urban 
Wytheville  Hospital  Wytheville 
 VA  rural 
Northgate General Hospital  Seattle 
 WA  urban 
Shorewood Osteopathic  Seattle 
 WA  urban 
Pacific Medical Center  Seattle 
 WA  urban 
Algoma Memorial  Hospital  Algoma 
 WI  rural 
Buffalo  Medical Center  Mondovi 
 WI  .  rural 
Stevens Clinical  Hospital  Welch 
 WV  rural 
B-3