Publications

Abstract

Hospitals face serious financial challenges in the current healthcare marketplace. In response to these challenges, they may alter their service offerings, eliminating services that are perceived as money-losing or adding new services in areas where profitability is expected to be greater. Although research has examined hospital closures, the more subtle phenomenon of hospital service changes has not been systematically studied. This issue is important because different types of hospital service changes could have different effects on hospital financial viability: extensive service closures could contribute to a downward spiral leading to hospital closure, whereas adding new services might help improve a hospital's finances. This article' examines changes in hospital service availability in California general acute care hospitals between 1995 and 2002. Our major findings indicate that many California hospitals made changes in their service offerings during the study period, although few made extensive changes. Altogether, about half of the hospitals in our study population either closed or opened at least one service. Nearly one-fourth of the hospitals in our study population closed one or more services, whereas just under one-third opened one or more new services. However, the vast majority of the hospitals that closed or added a service made only one or two such changes. In addition, few hospitals both closed and opened services. The service closed most frequently was normal newborn labor and delivery (obstetrics), whereas inpatient rehabilitation was the most frequently opened service. Hospitals that made the most service changes tended to be small, rural, and financially troubled at the start of the study period. Among this group of hospitals, service closures were associated with continued financial deterioration, whereas new service openings were associated with improvements in key financial ratios.