Authors:

Abstract

The Petris Center on Health Care Markets and Consumer Welfare studied shortterm general acute care hospitals that closed in California during the years 1995 to 2000. We identified 23 closures, 11 of which took place at for-profit facilities. The vast majority took place in urban areas, and they were most often in southern California. More than half of the closed hospitals had fewer than 100 licensed beds. Ten of the closed hospitals had changed ownership within three years prior to their closure. All the closed hospitals claimed, and demonstrated, financial distress prior to closing.

To create this report, we first set out to document and verify the closures. We then described the closed hospitals, in terms of tax status, location, bed size and other factors. We analyzed the financial status of the group of closed hospitals in the three years prior to closing. We looked for public reactions or objections to the closure, as best we could find them from press reports and other public information. We further assessed what happened to the vacant facilities, and the location of other nearby hospitals. Using this information, we then were able to draw some overall conclusions about California's closed hospitals. Highlights of our findings are presented in the bullet points below. A complete report of the project follows.

• 23 California general acute care (GAC) hospitals closed between 1995 and 2000.
• The largest proportion of those that closed, 11 hospitals or 48 percent, were for-profit enterprises. Statewide, however, for-profits made up less than a third of hospitals in both 1996 and 1999.
• Only four of the hospitals closed were in rural areas.
• The Los Angeles area experienced the greatest number of closures: 11 hospitals. Four hospitals also closed in the San Diego area, making southern California the region with the greatest number of closures, at 15 hospitals or 65 percent of closures. This clustering is illustrated in the state of California map that follows the executive summary.
• Nearly half of the closed hospitals, 11, had 1-99 licensed beds. These are small hospitals. Statewide, the largest proportion of hospitals in 1999, 33 percent, fell into the 100-199 bed category.
• Ten of the closed hospitals had changed ownership at least once within the three years prior to closure.
• Each of the closed hospitals experienced declining reimbursements, income per bed and utilization in the year prior to closure. As a group, they performed worse financially than the state's operating general acute care hospitals did in 1999.
• More than twice as many closures took place in the second half of the period studied, when 16 hospitals closed, as in the first, when seven closed.
• The total number of hospital beds eliminated in the 23 closures represents 3.3 percent of licensed hospital beds and 3.6 percent of available hospital beds statewide in 1999.
• In two cases, the hospital closure removed all hospital care within a 15-mile radius. In another two cases, the remaining open hospital facilities grazed the edge of that circle.
• Though there were many actors closing California hospitals during the mid to late 1990s, two hospital systems were the major players. Tenet Healthcare Corp. was the most active, participating in at least five closures during the period studied. Catholic Healthcare West was the second most active, closing three hospitals.
• A public reaction or objection to the hospital closure was recorded in seven of the 23 cases. These included concerns about the reduction or elimination of reproductive health services, complaints about the short-notice of closure, questions about whether the remaining facilities would adequately be able to handle a higher patient load, anticipated problems connected to longer travel time to an existing hospital, and fundamental criticisms of the hospital owner's commitment to the community.

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