Urban Hospital Closings Q&A

PHX Perspectives | September 26th, 2018

In preparation for his upcoming webinar, “Why should we care about urban hospital closings?“, we asked Dr. Alan Sager about the context surrounding survival, need, and efficiency of hospitals in urban communities.

What characteristics of hospitals can indicate survival? What’s the differences between hospitals that survive and those that are forced to close?

Decade after decade, smaller and mid-size hospitals and those located in African-American neighborhoods have been much likelier to close. Larger teaching hospitals, and those in White neighborhoods, have been much likelier to survive.  These findings rest on analyses of 1,200 hospitals in 52 US cities over 75 years.

What happens to the communities impacted by a nearby closing hospital?

Access can suffer.  Over the decades, the cumulative loss of hospitals in African-American neighborhoods creates medical deserts.  Closing the hospital takes away not only inpatient care but also the emergency room and the outpatient clinics.  And it undercuts the remaining doctors in private practice, many of whom depart after a hospital closes.

Travel time to obtain health care rises.

And, cost rises.  In many US cities, the closing of large numbers of community hospitals and the growth of teaching hospitals means that urban health care is increasingly dominated by large tertiary institutions.  These are very expensive places.  This means that the large numbers of low-income urban residents are forced to obtain care at the world’s costliest hospitals.  This boosts costs to Medicaid and other programs that finance care for lower-income patients.  And those high costs are a barrier to financing health care for all.

How can you distinguish between hospitals that are really needed and those which are closing because they are ostensibly unneeded?

First, we need to have a serious discussion about how many hospitals, ERs, and acute care beds are needed and where they need to be located in order to ensure people have access to physicians.

Second, for decades, hospital closings have been advocated as a method of saving money.  Arguably, as a result, we’ve closed less costly hospitals and have therefore obliged urban Americans to resort to costly teaching hospitals to treat ordinary problems.   Similarly, many have urged dehospitalization of care—to ambulatory surgery centers, nursing homes, and home health care.  It is far from clear that these changes have saved money.  We may be guilty of simply moving the cost problem from one location to another.

Third, many people believe there exists a functioning competitive free market that passes fair judgments on hospitals, rewarding needed or efficient hospitals with rich surpluses and bankrupting inefficient or surplus hospitals.  This is foolish.  Hospitals are likely to be bankrupted by inadequate Medicaid payment rates, location in African-American neighborhoods, inability to attract enough doctors in private practice—not owing to lack of need.  None of the requirements of a functioning free market are present in health care generally or hospital care specifically.  Competent government action is rare—except in financing coverage for more people.  No genuine market or informed public action causes some hospitals to close or protects others.

Recognizing these three things, we have to begin the messy job of identifying needed hospitals and assuring they are paid enough to finance efficient delivery of needed care to all Americans.

Having allowed, and even forced, so many smaller and mid-sized hospitals in African-American neighborhoods to close, and having observed that the pattern of hospital closings has boosted hospital costs, we should demand that those who advocate or tolerate further closings should shoulder the burden of proof that Hospital X is not needed.

In the past, you have said that “efficiency in hospitals doesn’t predict survival.” Can you please elaborate on this?

In a functioning competitive free market, in theory, we’d expect lower cost hospitals (more efficient hospitals) to survive.  In reality, though, more efficient hospitals are actually somewhat less likely to survive in most decades.   Hospitals that have accumulated more wealth are more likely to survive.  This is not equality of opportunity.  It might be called “survival of the fattest.”

If it is true that efficiency doesn’t predict survival, should hospitals focus on developing characteristics that will make them more competitive and able to survive?

Unfortunately, a hospital that is needed and efficient may be forced to close because a) it lacks money to invest in developing profitable lines of business and b) more importantly, too few patients covered by high-paying private insurance use vulnerable hospitals or live near them.

Until all payers pay the same price for the same care—meaning that Medicaid will pay more in the future than it does today, and private insurers will pay less than they do today—many needed hospitals will continue to close.

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