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Closing Hospitals Saves Money: A Failed Theory

“…many a beautiful theory was slain by an ugly fact.” Thomas Huxley

One of the many reasons for the closing of St. Vincent’s Hospital is that health policy experts in Washington, Albany, and even New York City, and the politicians who listen to them, believe that closing hospitals will save substantial amounts of money. This theory is wrong. Both common sense and academic studies indicate this.

Those of us who can remember back to the 1970s in New York City, know that medical costs were blamed for part of the crisis of that period. The city had many more hospital beds than most of the country, in proportion to population, and medical care was a great deal more expensive here. Policy makers said that these two facts were related and so if hospital beds were decreased, so would overall medical costs. According to a study done for the Committee of Interns and Residents by Alan Sager and Deborah Socolar of Boston University, there were 119 hospitals in the city in the 1970s and 55 in 2006. However, during this dramatic drop in hospitals, costs kept increasing, and New York City is still a cost outlier when compared to the rest of the country.

As far as the rest of the country in concerned, total hospital beds peaked in 1980 and fell by about 35% by about 2004. Yet, during this same time, U.S. medical spending took off and now is 50% higher then the next most expensive system, while quality of care ranks us somewhere around 20 or 30th in the world, depending on what measures are used. Massive cuts in hospital beds did not improve cost control or quality. The theory is wrong. Yet, in a recent interview for NY 1, Stephen Berger, who heads the commission that advocates closing New York hospitals, insisted that more closings are needed to decrease costs and improve quality.

There are many reasons why this approach does not save money. Many hospitals that close are smaller, less expensive ones, sometimes much more efficient ones also, and the larger expensive hospitals expand to take up the slack. New York City has a very high number of teaching hospitals that educate a disproportionate number of medical students and residents, and teaching hospitals are usually much more expensive then non-teaching ones. Doctors continue to practice medicine the same way and will still want to hospitalize patients who they believe need it, and these will go to the overburdened remaining hospitals. Remaining hospitals have less competition and can raise prices significantly, which they have done.

There are many reasons why this approach does not improve quality. Out-patient facilities are supposed to provide more care while in-patient beds decrease. However, most hospitals have out-patient clinics that care for people who have fewer options (poor, uninsured, homeless, etc.) and closing the hospitals closes these clinics, leaving potentially sick patients with decreased access to care. Some will be able to arrange new medical access and some won’t have that option. A disproportionate number of closed hospitals are in poorer black and Hispanic neighborhoods and so a geographic segregation occurs in health care access.

When these facts are pointed out to hospital closing proponents, the response is usually that more hospitals need to be closed, even though it hasn’t helped before, and more out-patient facilities should be opened, even though they do not always reach people who need them.

There is one other measure to show that this theory is wrong. Other industrialized countries with developed health care systems also have a lot of hospitals. According to some international surveys, as many as 25 other countries have as many or many more hospital beds then the United States does, and their systems work just fine. They are all significantly less expensive than ours and significantly of higher quality then ours.

The facts presented here are just a few, there are many more that disproves the theory. Its proponents, and the politicians who support them are desperately doubling downing on this approach in the futile hope that maybe they can somehow get it to work in the future. How many more St. Vincent’s Hospitals have to close before they abandon this failed theory?

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