Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

� 

‘RENDS IN RURAL HOSPITAL CLOSURE: 

1987-1991 

JULY 1993 
OFFICE OF INSPECI’OR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Office of Audit Services, the 

Office of Investigations, and the Office of Evaluation and Inspections. The OIG also informs the 

Secretary of HHS of program and management problems and recommends courses to correct 

them. 

OFFICE OF AUDIT SERVICES 

The OIGS Office of Audit Services (OAS) provides all auditing semices for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of HHS 

programs and operations in order to reduce waste, abuse, and mismanagement and to promote 

economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIGS Office of Investigations (01) conducts criminal, civil, and administrative investigations 

of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 

by providers. The investigative efforts of 01 lead to criminal convictions, administrative sanctions, 

or civil money penalties. The 01 also oversees State Medicaid fraud control units which 

investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIGS Office of Evaluation and Inspections (OEI) conducts short-term management and


program evaluations (called inspections) that focus on issues of concern to the Department, the


Congress, and the public. The findings and recommendations contained in these inspection


reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, and


effectiveness of departmental programs.


OEI’S Atlanta Regional Office staff prepared this report under the direction of Jesse J. Flowers,


Regional Inspector General and Christopher Koehler, Deputy Regional Inspector General.


Principal OEI staff included:


Atlanta Region Headquarters


Ron Kalil, Co-project Leader Cathaleen Ahern


Maureen Wilce, Co-project Leader Linda Moscoe


Paula Bowker


Ruth Reiser


For additional copies of this report, please contact the Atlanta Regional Office at 404-331-4108.

Department of Health and Human Services 

OFFICE OF 

NSPECTOR GENERAL 

TRENDS IN RURAL HOSPITAL CLOSURE: 

1987-1991 

JULY 1993 OEI-04-92-00441 
--

EXECUTIVE SUMMARY


PURPOSE 

This report describes the phenomenon of rural hospital closure in the United States 

during a 5-year period 1987-1991. It examines the extent, characteristics, reasons 

for and impact of rural hospital closure. 

BACKGROUND 

The closure of general, acute care hospitals has generated public and congressional 

concern. According to a number of recent studies, more hospitals are expected to 

close in coming years. 

We released a report in May 1989 describing the nationwide phenomenon of hospital 

closure in 1987. Thereafter, we analyzed hospital closures annually to determine the 

effects of the phenomenon. We issued subsequent reports on 1988, 1989, 1990 and 

1991 hospital closures. 

This report examines rural hospitals that closed in the United States during calendar 

years 1987 through 1991. Unlike our annual hospital closure reports, it does not 

combine rural and urban hospital closures. Nearly half the hospitals in the United 

States are in rural areas. Proportionally more rural hospitals have closed than urban. 

When a rural hospital closes, residents can be left with limited access to medical care 

because there are fewer alternative sources of medical care. Rural residents must 

often travel greater distances to obtain medical care. 

FINDINGS 

193 genera~acutecarq ruralh.arpitalfclbsedover the S-yearPeriod 

The average annual closure rate was 1.4 percent. During the 5-year period, 7.1 

percent of rural hospitals closed. These hospital closures reduced the inpatient bed 

supply in rural areas nationally by 3.4 percent. They occurred in 39 States. 

Most ml harpiiakkthatclbsedweresmull 

Rural hospitals that closed had an average of 39 beds compared to an average of 83 

beds for all rural hospitals nationally. Only 6 hospitals that closed had more than 100 

beds and no rural hospital that closed had-over 1~0 beds. 

Rural hospitak thatcbsed had bw occupancymtes 

Rural hospitals that closed had an average occupancy rate of 23 percent compared to 

an average of 37 percent for all rural hospitals nationally. 

i 
Average Medicare and Medicaid utilization at rural hospitals that closed was not 

significantly different from all rural hospitals nationally. 

Few patients wtxe afiectedby hospitalclosure 

Because of the small size and low occupancy rates of rural hospitals that closed during 

1987 through 1991, the average daily census in the year prior to closure was nine 

patients. Of these, four Medicare and one Medicaid patient were in the rural hospital 

on an average day during the year prior to closure. 

Hospitalclbsureswerecausedby a combined@2ct of deci%ningoccupancy,ikggikg 

revenues,and risingcosts 

�	 Occupancy is declining due to diminishing physician availability, changing 

medical practice patterns, and competition among hospitals. 

�	 Revenues are lagging due to fewer admissions, lower third-party 

reimbursement, and more uncompensated care. 

�	 Costs are rising due to increasing demands for new medical technology, skilled 

personnel, facility maintenance, renovation, and replacement. 

Most patierushud enuzgencyand inpatientmedicalcareavailablewithin20 milesof the 

closedhospital 

In three-fourths of the rural communities where a hospital closed, another general 

acute care hospital was located within 20 miles of the closed hospital. Residents of 15 

of 193 (8 percent) of the rural communities where a hospital closed had to travel 

more than 30 miles for inpatient care. 

In 82 percent of the rural communities where hospitals closed, emergency care 

facilities were available within 20 miles of the closed hospital. Residents of 3 of 193 

(1.5 percent) rural communities where a hospital closed had to travel more than 30 

miles for emergency services. 

Some wal commudes dkvelopedalternativesfor providinghealthcarelocal@when 

theiihospikllclosed 

Although most residents in communities which lost their hospitals had inpatient and 

emergency care available nearby, some residents had problems accessing needed care. 

Several communities created alternatives to a hospital for providing access to care. 

We report on these alternatives in two companion reports. They are (1) “Access to 

Rural Health Care: Successful Community Initiatives” (OEI-04-92-00730), and (2) 

“Medical Assistance Facilities” (OEI-04-92-00731). 

ii 
TABLE OF CONTENTS


EXECUTIVE suMMARY


INTRODUCI’ION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Ahlent And Charatitia Of RuralHospikd Closure


How Many Closed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Where Were They? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Who Owned Them? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


What Were The Hospitals Like? . . . . . . . . . . . . . . . . . . . . . . . .


How Many Patients Were Affected? . . . . . . . . . . . . . . . . . . . . .


ReasonsForRuml HmpiidClbsure


Why Is Occupancy Declining? . . . . . . . . . . . . . . . . . . . . . . . . . .


Why Are RevenuesLagging? . . . . . . . . . . . . . . . . . . . . . . . . . . .


Why Are Costs Rising? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Impct QfRural Hqitzl Ckixnme


Is Inpatient Care Available? . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Are Emergency Services Available? . . . . . . . . . . . . . . . . . . . . . .


What About Access To Care In Communities Without Hospitals?


suMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


APPENDICES


k Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


B: 1987 -1991 Rural Hospital Closures . . . . . . . . . . . . . . . . . . . . . . . . .


. . . . . . . 1 

. . . . . . . 3 

. . . . . . . 3 

. . . . . . . 4 

. . . . . . . 5 

. . . . . . . 5 

. . . . . . . 8 

. . . . . . . 9 

. . . . . . 10 

. . . . . . 11 

. . . . . . 12 

. . . . . . 12 

. . . . . 13 

. . . . . . 13 

. . . . . . 14 

. . . . . A-1 

. . . . . B-1 
INTRODUCTION


PURPOSE 

This report describes the phenomenon of rural hospital closure in the United States 

during the5-year period 1987-1991. Itexamines theextent, characteristics, reasons for 

and impact of rural hospital closure. 

BACKGROUND 

In the past several years, the closure of general, acute care hospitals has generated 

increasing public and congressional concern. Numerous questions have been raised 

about the reasons for and the impact of hospital closure on the provision of health 

care, as well as implications for public policy. According to a number of recent 

studies, more hospitals are expected to close in coming years. The Government 

Research Corporation estimates over 40 percent of all hospitals in the United States 

will close or be converted to other uses by the year 2000.1 

The Office of Inspector General released an inspection report in May 1989 describing 

the phenomenon of rural and urban hospital closure during 1987 in the United States. 

The results were presented to the Secretary and Assistant Secretaries of HHS, and to 

staff of the Health Care Financing Administration (HCFA) and the Public Health 

Service (PHS). The Inspector General testified before the U.S. House Ways and 

Means Subcommittee on Health regarding the study findings. Many of those informed 

of the study of 1987 hospital closure encouraged the Inspector General to continue 

year-by-year analyses of the phenomenon to detect differences in the rate of hospital 

closure and in the characteristics and circumstances of hospitals that close. 

Consequently, the OIG conducted similar inspections of hospital closure for the years 

1988-1991. 

This report focuses on rural hospital closures. Unlike our earlier annual hospital 

closure reports, it does not combine rural and urban hospital closures. Nearly half 

the hospitals in the United States are in rural areas. Proportionally more rural 

hospitals have closed than urban. When a rural hospital closes, residents can be left 

with limited access to medical care because there are often few alternative sources of 

medical care. Rural residents must often travel greater distances to obtain medical 

care. 

SCOPE 

We examined rural hospitals that closed during calendar years 1987 through 1991. 

For purposes of this study, the following definitions were used. 
Rural Fhspitak A facility located in a rural area that provides general, short-


term, acute medical and surgical inpatient services.


Closed Hospitak One that stopped providing general, short-term, acute


inpatient services during 1987 through 1991. If a hospital merged with or was


sold to another hospital and the physical plant closed for inpatient acute care, it


was considered a closure. If a hospital both closed and reopened in the same


year, it was not considered a closure. If a hospital closed, reopened, and then


closed again during the years in our study, it was counted as a closure only


once.


METHODOLOGY 

To determine the extent, reasons and impact of rural hospital closure, we obtained 

and aggregated information from State hospital associations, State licensing and 

certification agencies, State health planning agencies, HCFA data bases, officials 

associated with closed and nearby hospitals, and local public officials. 

We obtained information on the characteristics of all rural hospitals and those that 

closed during 1987 through 1991 from the Hospital Cost Report Information System 

(HCRIS) maintained by HCFA. 

We conducted this inspection in accordance with the Qua2i~ Standards for hspections 

issued by the President’s Council on Integrity and Efficiency. 

Appendix A describes our methodology in further detail. 

2

FINDINGS


EXTENT AND cHARAcxERIsn C!SOF RURAL HOSPITAL CLOSURE 

How Mq Clbsed? 

b 193 Genera~Acute Care, Rural Hospitak Closed Over The 5-year Period. 

In 1987, there were more than 6,800 hospitals in the United States. Of those, 5,657 

were general, short-term, acute care hospitals entered on HCFA’S data base as 

participating in the Medicare program. Of those, 2,705 (48 percent) are rural and 

2,952 (52 percent) are urban. 

Rural Hospitals in the U.S. in 1987 2,705


Closed in 1987-1991 193 (7.1 %)


The average annual closure rate was 1.4 percent. During the 5-year period, 7.1 

percent of rural hospitals closed. -

The number of rural hospital closures, year by year, is illustrated below. 

I 

RURAL HOSPITAL CLOSURES 

‘1 BY YEAR 

o~ 19s7 1988 1* 1990 1901 

Year 

b	 l%e Closed Hospitals Reduced i%e Acute Care Inpatient Bed Supply In Rural 

Areas By ~ 652 Be& -- 3.5 Percent. 

3

Where Were Zlwy? 

w During The 5-year Period, Rural Hospitals Closed In 39 States. 

Rural Hospital Closure By State 

Texas had the greatest number of rural closures (37), followed by Louisiana (12), 

Minnesota (1 Ii Mississippi (11), and Alabama (10).’ These 5 States represented 42 

percent of the closures during the 5-year period. Appendix B lists the number of rural 

hospital closures by State. 

4

Whoownedzkern? 

b AHigher Percentage ~fi"vate For-~ofit Hospitak Closed In Rural Areas~an 

Did Public Or fi”vate Not-For-I+ojit Hospitals. 

Total Number 

Hospital Ownership of Rural 

Hospitals in 

1987 

Public 1071 

Private Non-Profit 1268 

Private For-Profit 364 

W7aat Were The Ckwd Hmpitd L&? 

Number of 

Closed Rural 

Hospitals in 

1987-1991 

61 

83 

49 

Percent of 

Hospitals Which 

Closed in 1987-

1991 By Type 

5.7 

6.6 

13.5 

�	 Rural Hospitals lhat Closed Each Year Were Considerab@ Smaller l%an The 

Average Rural Hospitak Nationally. 

Over the 5-year period rural hospitals that closed had an average of 39.5 beds 

compared to an average of 83 beds for all rural hospitals nationally. The chart below 

shows a year-by-year comparison. 

RURAL HOSPITALS THAT CLOSED 

lW WERE SMALL 1 

34.2 35.1


81.3


W 

60 

40 

20 

0 

1$87 I&a 1933 1990 1991 

m ;4 Rural ~ Closed Rural 

Average Hos@tai AVWW 

5


1 
The chart below shows that closure affected a higher percentage of smaller hospitals 

than larger hospitals. Only 6 hospitals that closed had more than 100 beds, and no 

rural hospital that closed had over 150 beds. 

SIZE OF RURAL HOSPITALS CLOSED IN 1987-1991 

Total Number of Number of Rural Percent of Rural 

Size of 

Hospital 

<30 beds 

30-49 beds 

50-99 beds 

100-149 beds 

150-199 beds 

200+ beds 

Rural Hospitals 

in 1987 

396 

730 

870 

363 

176 

168 

Hospitals that 

Closed in 1987-1991 

79 

71 

37 

6 

0 

0 

Hospitals that


Closed by Size


20.0


9.7


4.3


1.7


0


0


k� Closed Rural Hospitals Each Year Had Much Lower Occupanq Rates JT7zen 

Compared To l%e Average Occupancy Rate Of Rural Hospitals Nationally.2 

During the 5-year period, rural hospitals that closed had an average occupancy rate of 

23.4 percent compared to an average of 37.3 percent for all rural hospitals nationally. 

The chart below shows a year-by-year compar%on. 

OCCUPANCYRATESWERELOW 

-1 

40%. 3s.9 35.9 35.6 37.5 

@lbzo%­

10% -

o%-

6

b	 Average Medicare Utilization At Rural Hospitak l%at Closed Each Year Was Not 

Significantly Diflerent From All Rural Hospitals Nationally.3 

Overthe 5-year period rural hospitals that closed hadan average Medicare utilization 

of 48.4 percent comparedto an average of 52.2 percent for all rural hospitals 

nationally. The chart below shows a year-by-yea; comparison. 

MEDICARE UTILIZATION 

m%, 

ao% -

40% -

90% -

20% -

10% -

o% L I& l&n3 ltlii 

- Nat)onal Rural ~ Cloaad Rural ~ AV-EUJO Hoapltal Avaniga 

�	 Average Medicaid Utiluation At Rural Hospitals That Closed Each Year Was Not 

Significantly Diflerent From All Rural Hospitals Nationally.4 

Over the 5-year period rural hospitals that closed had an average Medicaid utilization 

of 10.6 percent compared to an average of 10.2 percent for all rural hospitals 

nationally. The chart below shows a year-by-year comparison. 

MEDICAID UTILIZATION 

20% , 

1e% 1I 

12% 

8% 

4% 

o% 

1W7 l$ea 1929 1s90 1991 

- National Rural ~ Closad Rural

Ho@tad Avaraga HoapItal Avaraw 

7

How Many PatientsWereAffkded? 

b Few Patients Were Ajfected By Rural Hospital Closure. 

Because of the small size and low occupancy rates of rural hospitals that closed during 

1987 through 1991, the average daily census prior to closure was about nine patients. 

WHEN RURAL HOSPITALS CLOSED, 

HOW WY PATIENTS WERE AFFE~ED? 

Average Number of Beds 39.6 

Average Occupancy Rate X 23.3?I0 

Average Number of Patients Daily 9.2 

}	 Four Medicare And One Medicaid Patient Were In The Rural Hospital On An 

Average Day During l%e Year &“or To Closure. 

The chart below shows the number of elderly and poor affected by rural hospital 

closure during the 5-year period. 

WHEN RURAL HOSPITALS CLOSED,


HOW MANY MEDICARE AND MEDICAID PATIENTS


WERE AFFECTED?


Medicare Medicaid 

Patients Patients 

Average Number of Patients 

Daily 9.2 9.2 

Average Medicare and 

Medicaid Utilization Rate x 47.970 x 10.4?ZO 

Average Number of Medicare 

and Medicaid Patients Daily 4.4 1.0 

8

REASONS FOR RURAL HOSPITAL CLOSURE


During the 5-year period from 1987 through 1991, we found no single reason for rural


hospital closure. Rather, the many health care professionals we interviewed in the


course of our series of hospital closure inspections suggested a number of factors


which gradually weakened the financial condition of the hospitals. As occupancy


declined, revenues lagged, but costs continued to rise. Ope;ating margins s~ran~, but


fixed costs remained and had to be supported by fewer and fewer patients.


Ultimately, there was no choice but to sell, merge with another hospital, or close the


doors.


& Declining 

Occupancy 

Rising 

costs 

& 

L	 Lagging 

Revenues 

my L$occupancyDeclinhg? 

b Physician Availabili~ Is A Problem In Rural Areas. 

In several rural communities where hospitals closed during 1987 through 1991, the 

town’s only physician retired, died, or moved his or her practice. Typically, rural 

communities could find no replacement. Rural areas in general are less able to attract 

and retain physicians. The smaller population base often means that a physician will 

practice alone and is always on call. Many physicians find rural practice, under these 

conditions, to be unattractive. 

� People Are More Mobile. 

With better roads and improved transportation there is increased access to more 

distant medical facilities. Now physicians and their patients can choose a hospital on 

the basis of quality or reputation rather than solely on proximity. 

9 
� Physicians And Patients Lost Confidence In i%e Local Hospital. 

Many of the hospitals included in this study were old and needed renovation and 

modernization. They lacked the high technology diagnostic and treatment equipment 

which physicians and patients value. In cases where newer and better equipped 

hospitals are available nearby, physicians tend to shift their admissions to those 

facilities. 

Patients, too, preferred other hospitals. People want the best care available, and many 

will choose a large hospital over a small one. Patients typically will choose a newer, 

better equipped facility over one which shows its age. 

� Competition Among Hospitals Is Intense. 

Even in rural areas, 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-pressed to compete with newer or larger hospitals which aggressively market 

their services, maintain a healthy capital reserve, and offer higher, more competitive 

salaries to nursing and technical staff. 

� Practice Patterns Are Changing. 

Medical advances and new technology have allowed some procedures which formerly 

required a hospital stay to be performed on an outpatient basis. 

�	 Medicare Peer Review O~anizations (PRO) Are More Carefully Scrutinizing the 

Necessity Of Hospital Admissions. 

The PRO’s are responsible for reviewing hospital admissions for appropriateness. The 

PRO may sanction individual physicians for unnecessary hospitalization. As a result, 

physicians are more cautious in admitting marginally ill Medicare patients. Such 

patients might have been admitted before the advent of PRO review. 

Why Are RevenuesLa@!ng? 

� Ikrurers Are Better Controlling Their Costs. 

Both public and private insurers are pressed to control their hospital outlays. Some 

have reduced the percentage of hospital charges or costs that they will reimburse. 

Other have changed from charge-based reimbursement to paying a scheduled amount 

per case, usually based on a diagnosis and intensity of care required. 

Many hospital officials pointed out that, with these changes, payments from some 

insurers no longer cover the actual cost of care. Several mentioned Medicaid in 

particular. 

10

When payments do not cover costs, hospitals must either recoup the difference from 

patients, shift the cost to another payor, or take a loss. 

�	 Patients Without Hospital Insurance, Or With Inadequate Insurance, Create 

Substantial Losses For Hospitals. 

When hospitals admit patients with no insurance or only minimal coverage, hospitals 

accept losses which appear on the books as “charity” and “bad debt”-- uncompensated 

care. Historically hospitals covered these losses by “cost shifting” to patients who were 

insured or could afford to pay. Hospitals set their charges for the better-insured 

patients high enough to cover the cost of their patient’s care ~ a portion of the 

uncompensated care. More and more insurers are refusing to accept these cost shifts. 

k	 Payment Differentials Based On Hospital Location Generally Resulted In Rural 

Hospitals Receiving Lower Payments 7han Urban Hospitals. 

Although this practice is ending, rural hospitals received less in Medicare 

reimbursements than did urban hospitals during the time of our review. 

why An? costsRiYirlg? 

� New Medical Technolo~ Is A Major Capital Expense. 

While beneficial in speeding up diagnosis and treatment, technology is very costly. If a 

hospital fails to provide this modern equipment to physicians, they will take their 

patients elsewhere. Small hospitals, with fewer patients to share the cost of such 

equipment, can least afford such purchases. 

� Labor Costs Are Increasing And Nuning And Technical StaflAre 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 

hospitals to attract professionals. 

w	 Deteriorating Facilities Require Major Capital Investments To Renovate and 

Modernize. 

Many hospitals that closed during 1987 through 1991 were old facilities in need of 

repair and renovation. Such alterations are expensive. 

11

IMPACI’ OF RURAL HOSPITAL CLOSURE 

In rural communities where hospitals closed during 1987 through 1991, we assessed 

the availability of inpatient care and emergency setices. 

k Inpaiien/tire Avai.kdk? 

� In l%ree-foufihs Of The Rural Communities Studied, Another General Hospital Is 

Located U%hin 20 Miles Of Closed Hospitak. 

As the chart shows, most people had 

inpatient care available to them nearby 

after the hospital closed. 

Prior to the closure, many residents and 

physicians were already bypassing the local 

hospital and traveling to other nearby 

facilities for care. 

Residents of 15 of 193 (8 percent) rural 

communities where a hospital closed must 

travel more than 30 miles for inpatient 

care at another hospital. 

Are EmergencyServicesAvailable? 

DISTANCE TO INPATIENT CARE 

Number of lioapitak 

w In 82 Percent (159 of 193) Of The Rural Communities Where Hospitals Closed, 

Eme~ency Facilities Were Available 

When a hospital closes, the community 

loses not only inpatient beds, but also 

emergency services. 

As the chart shows, most residents of 

communities which lost a hospital had an 

emergency care facility available within a 

20 mile radius. 

Residents of 3 of 193 (1.5 percent) rural 

communities which lost their hospital 

during 1987 through 1991 must travel 

?Wthin20 Miles Of Closed Hospitals. 

DISTANCE TO EMERGENCY SERVICES 

more than 30 miles for emergency services Numbar of Hospltala 

at another hospital. 

12

WhatAbout Access To Hml.thCareIn RuralCommudiis ThatDo Not Have A 

H-l? 

�	 Rural Communities U4thout A Hospital Can Provide Local Access To Health 

Care. 

Although most residents in communities which lost their hospitals had inpatient and 

emergency care available nearby, some residents had problems accessing medical care. 

Several communities created alternatives to a hospital for providing access to health 

care. In a separate OEI inspection, we studied six alternatives, which we called 

“initiatives.” These communities assumed responsibility and demonstrated inspiration 

and innovation in creating a new way for providing access to health care. Each 

initiative was tailored to meet the needs and the resources available in its community. 

In another OEI inspection, we studied the Medical Assistance Facility program, which 

is a special hospital alternative developed by the State of Montana and HCFA. It is 

currently used to provide access to inpatient and emergeney medical care in several 

sites in eastern Montana. We discuss the results of these studies in two companion 

reports. They are (1) “Access to Rural Health Care: Successful Community Initiatives” 

(OEI-04-92-O0730), and (2) “Medical Assistance Facilities” (OEI-04-92-00731). 

suMMARY


Our study of rural hospitals which closed during the 5-year period 1987-1991 showed 

the following. 

193 general, acute care rural hospitals closed. 

Most rural hospitals that closed were small and had low occupancy rates. 

Because of the small size and low occupancy rates of hospitals that closed, few 

patients were affected. Most patients had emergency and inpatient medical 

care available within 20 miles of the closed hospital. 

Some rural communities have developed successful initiatives to maintain access 

to health care services after a hospital has closed. 

13

EN DNOTES


1.� Larry S. Gage, Dennis P. Andrulis, and Virginia Beers, America’s Safety Net: A 

Repoti on the Situation in Our Nation’s Metropolitan Areas. National 

Association of Public Hospitals. October, 1987. 

2.� 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 rural hospitals’ occupancy rates, divided by the number of rural hospitals. 

3.� Average Medicare utilization of closed rural hospitals is defined as the percent 

of Medicare patient days compared to the total patient days for each hospital, 

summed and divided by the number of hospitals. National average Medicare 

utilization is the percent of Medicare utilization of each hospital, summed and 

divided by the total number of rural hospitals. 

4. Medicaid utilization is calculated in the same way as Medicare utilization. 

14

APPENDIX A


METHoDomGY


Extent Of Ruml Hqital Cikuue 

To determine how many rural hospitals closed during 1987 through 1991, we surveyed 

State licensing and certification agencies, State hospital associations and State health 

planning agencies. We also compiled Health Care Financing Administration (HCFA) 

data on terminated providers in 1987-1991. When a closed hospital met the study’s 

definition or when there were questions, we contacted officials associated with the 

closed hospitals, officials associated with hospitals nearest to the closed hospital, and 

local public officials. 

To determine the number of hospitals in the United States, we used the Hospital Cost 

Report Information System (HCRIS) maintained by HCFA. We included only 

general, short-term, acute care hospitals under Medicare’s Prospective Payment 

System (PPS) in the universe. 

Charactenkia Qfl?ural HospitalClosure 

To analyze characteristics of closed hospitals, we used HCFA’S HCRIS data. We used 

the latest pre-closure cost reports. For example, if a hospital closed in May 1991 and 

its accounting year was on a January-December cycle, we used the provider’s January 

1, 1990 to December 31, 1990 report. 

ReasonsFor And Impct Of RuralHmpitalClbsure 

We obtained data for our analysis from interviews with the following sources.


� Former hospital administrators, board members, and/or staff of closed hospitals


� Hospital administrators and/or staff at the nearest hospitals


F Local police and health officials


F Local government officials


E State health planning agencies


� State certification and licensing agencies


� State hospital associations


A-1

APPENDIX B 

1987-1991 RURAL HOSP~XL CLOSURES 

II Number Of Closures Ranked By State II 

B-1