Rural Hospitals:

Factors That Affect Risk of Closure

HRD-90-134: Published: Jun 19, 1990. Publicly Released: Jun 19, 1990.

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Pursuant to a congressional request, GAO reviewed the factors making rural hospitals vulnerable to closure.

GAO found that: (1) between 1985 and 1988, the hospital closure rate was 29 percent higher in rural than in urban areas, and over three-quarters of rural hospitals had occupancy rates of less than 40 percent; (2) 3 years prior to their closures, both rural and urban hospitals had substantial and increasing financial losses on patient care; (3) in the year prior to closure, the median cost per discharge was 24-29 percent higher for rural hospitals that closed than for rural hospitals that remained open, primarily due to low occupancy rates; (4) between 1985 and 1988, Medicare was not a major factor contributing to the financial decline and closure of most rural or urban hospitals, and overall Medicare losses were primarily due to relatively high costs per discharge; and (5) multiple factors contributed to rural hospitals' closures, including location, occupancy rates, size, ownership, and area wages.

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