Why U.S. Hospitals Are Closing

Why U.S. Hospitals Are Closing

The video examines why U.S. hospitals are closing even as some large hospital systems earn substantial revenue. Since 2010, 121 rural hospitals have closed, and the National Rural Health Association says more than a third of rural hospitals are at serious risk of shutting down. Urban facilities have also closed, including Philadelphia’s Hahnemann University Hospital.

The growth and decline of hospitals

Hospitals expanded rapidly after the Civil War. Federal support through the Hill-Burton Act and Medicare helped drive further construction. Closures began increasing in the 1970s as medical advances made some hospital stays unnecessary.

From the 1990s onward, rising health-care costs also encouraged mergers and acquisitions. More than 750 hospital mergers and acquisitions took place between 2008 and 2014.

What affects a hospital’s finances

A hospital’s financial health depends heavily on its patients’ insurance and ability to pay. Private insurance generally reimburses hospitals more than Medicaid, while hospitals serving poorer or uninsured populations often struggle. Wealthier communities can also provide hospitals with more philanthropic support.

Hospitals may boost revenue by attracting international patients or offering high-priced specialties such as cardiac, cancer, orthopedic, and spine care.

Consolidation can give hospital systems greater leverage in negotiations with insurers, allowing them to charge higher prices. The video cites Partners HealthCare, a major Boston-area system whose hospitals had prices above the state median, according to a 2016 state report. It also notes that about 20% of U.S. hospitals are now in markets considered essentially monopolistic.

Hospital closures and their local effects

Mercy Hospital Fort Scott, Kansas

Mercy Hospital Fort Scott was a 46-bed nonprofit that had served its community for 130 years. It closed after financial pressures and declining reimbursements. Many of its patients had little or no insurance, and the hospital struggled to keep beds occupied.

The closure left people—including oncology patients and expectant parents—to seek care elsewhere. A clinic and emergency department now operate on the site.

Hahnemann University Hospital, Philadelphia

Hahnemann University Hospital, a safety-net hospital serving many low-income patients, closed in 2019 after years of financial problems. Its owner, American Academic Health System, had bought it in 2018.

The shutdown cost 2,700 employees their jobs and left nearby residents without a local emergency room. Community members also worried that the valuable land might be developed rather than used for health care. The company did not comment to CNBC.

The future of hospitals

The video suggests hospitals may continue shifting toward outpatient care as technology makes more procedures possible without an overnight stay. Analysts interviewed say the likely result is fewer, larger hospitals focused on specialized, intensive treatment. That could make care harder to reach and more expensive for rural and lower-income communities.

The report closes by arguing that health care is also a public good, not simply a business.

Presenters and Contributors

• Dr. Gugnani — Physician at the clinic serving Fort Scott after the hospital’s closure; the subtitles do not provide a first name.
• Joel Freedman — Investment banker who led the company that bought Hahnemann.
• Other interviewed analysts, community members, hospital workers, and local officials are not named in the subtitles.