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Closures Mainly Limited to Small Hospitals

Kate Traynor

Most of the 64 acute care hospitals that closed in 1999 were small and had low occupancy rates, reports the Office of Inspector General (OIG) at the Department of Health and Human Services.

"Hospital Closure: 1999" (PDF) is the latest in a series of congressionally mandated annual reports that OIG has prepared on this subject. OIG said that the findings from all 13 inquiries have been similar.

Although 21 more hospitals closed in 1999 than in the previous year, 22 hospitals opened or reopened in 1999. The number of inpatient beds decreased by 3,376 during the year.

People living near 47 of the closed hospitals could receive inpatient care at another hospital within 10 miles of the closed facility, OIG said. An alternative source of 24-hour emergency care was available within 20 miles of 54 of the closed hospitals.

OIG noted that the proportion of Medicare and Medicaid beneficiaries treated at the defunct hospitals was similar to the national average.

Reasons that hospitals closed in 1999 included financial woes, low occupancy rate, reorganization, merger, and competition. But 11 of the hospitals closed so that 10 new facilities could be built as replacements, said OIG. Half of the closed hospitals were transformed into other health-related organizations such as outpatient centers or long-term care facilities.

Only the 4,818 short-term, acute care hospitals that were qualified to participate in Medicare’s prospective pricing system were analyzed for the report.

In other hospital news, the number of mergers and acquisitions fell 22 percent last year compared with 1999, according to the seventh edition of Levin Associates' "Health Care Acquisition Report." Sixty-nine percent of the 86 hospital mergers and acquisitions last year involved for-profit companies, making 2000 the first year in which for-profit firms dominated these transactions.

The Levin report found that merger and acquisition activities among managed care groups declined to 49 deals last year, compared with 66 in 1999. No single transaction among managed care organizations has exceeded a value of $1 billion since 1998, said the report.