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Financial Problems Most Common Reason Cited for Recent California Hospital Closures

Findings in New Study Requested by Attorney General
Wednesday, May 9, 2001
Contact: (415) 703-5837

(BERKELEY, Calif.) – Financial problems were the single most common reason cited for the closure of 23 California hospitals between 1995 and 2000, according to a report by the recently established Nicholas C. Petris Center on Health Care Markets and Consumer Welfare at the University of California, Berkeley.

The new report, "California's Closed Hospitals, 1995-2000," commissioned by Attorney General Bill Lockyer, is the first close look at hospital closures statewide. The study focuses on reasons for the hospital closures, distribution of the closed facilities and the characteristics of the closed hospitals.

Lockyer requested the study for the Attorney General's Charity Health Care Task Force. The task force, comprised of 34 health care experts, was convened to advise Lockyer on emerging issues from nonprofit hospital sales and mergers. The sale or transfer of nonprofit hospitals are subject to review as charitable trusts by the Attorney General.

"While most recent hospital closures have been for-profit facilities, the trend noted in the Petris Center report raises concerns for nonprofit hospital operations and the potential impact on charity health care in local communities," Lockyer said. "The report provides a better understanding of the distribution, characteristics and reasons for recent hospital closures – important baseline information for health care planning and the development of policies to respond to the changing health care landscape."

The hospital industry – citing seismic retrofit requirements, managed care and shrinking reimbursements – has predicted that up to 150 of the state's hospitals will close in the next few years. The Petris Center report is designed to provide some context to evaluate those claims.

The 20-page study documents and describes the 23 general acute care hospitals that closed during those years. Among the findings:

The largest proportion of closures took place at for-profit facilities

Most closures occurred in urban areas and in Southern California. Financial problems were the single most common reason cited for closure.

Hospital chains Tenet Healthcare Corp. and Catholic Healthcare West were the most active closers of hospitals.

Small hospitals of less than 100 beds were more likely to close than any other kind.
"We've found in the study a significant number of closings, and given the seismic upgrade that is mandated, there will be mounting pressure on more hospitals to close," said Richard Scheffler, UC Berkeley distinguished professor of health economics and public policy and the director of the School of Public Health's Petris Center.

"The closing of hospitals is a serious concern for communities," he said. "There is a school of thought that says that California's hospital closures fit somewhat into the national trends, but we have increased concerns here because of the growth of the population and the diversity of the state. There is, on the other hand, some notion that hospitals that close are inefficient, and may need to be pruned from the system, so that other hospitals are more healthy."

The full report, "California's Closed Hospitals, 1995-2000," may be viewed on the Attorney General's web site: http://caag.state.ca.us, or a bound copy may be requested from the Petris Center by calling (510) 643-4102 or writing Nicholas C. Petris Center on Health Care Markets and Consumer Welfare, UC Berkeley, 2150 Shattuck Avenue, Ste 525, Berkeley, CA 94720-7830. An executive summary is available via fax from the UC Berkeley Media Relations, (510) 642-0702, Russell Hoyle or Jeremy Throne.

REPORT HIGHLIGHTS

The largest proportion of hospitals that closed, 11, or 48 percent, were for-profit enterprises.

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.

The Los Angeles area experienced the greatest number of closures — 11 hospitals (Columbia Westlake Medical Center, Desert Palms Community Hospital, Friendly Hills Regional Medical Center, Long Beach Community Medical Center, Martin Luther Hospital, Newhall Community Hospital, North Hollywood Medical Center, South Bay Medical Center, Washington Medical Center, Westside Hospital and Woodruff Community Hospital).

Four hospitals also closed in the San Diego area, (Calexico Hospital, Harbor View Medical Center, Kaiser El Cajon and Scripps Memorial Hospital East County), making Southern California the region with the greatest number of closures, at 15 hospitals, or 65 percent, of closures.

Five hospitals closed in Central California (Bloss Memorial District Hospital, Del Puerto Hospital, Sierra Community Hospital, St. Louise Hospital and Stanislaus Medical Center) and one each in Sacramento (Mercy American River), Santa Barbara (Valley Community Hospital) and Tulare (Lindsay District Hospital) counties.

Only four of the hospitals closed were in rural areas. They were Bloss Memorial District Hospital in Atwater, Calexico Hospital in Calexico, Del Puerto Hospital in Patterson and Lindsay District Hospital in Lindsay.

Nearly half of the closed hospitals (11) had between one and 99 licensed beds.

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 single year with the greatest number of closures was 1998, with seven.

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.

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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