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UC Berkeley Press Release

Hospitals change service offerings to adapt to market pressures, new report finds

– Short of an outright closure, many hospitals have adjusted their service offerings in response to economic pressures, finds a new report on such changes in California hospitals.

And despite fears that cutting such services as obstetrics would harm patient health, the report's authors found no evidence of significant negative impacts for health care consumers.

The report, released today (Tuesday, April 26) by the University of California, Berkeley, Petris Center on Health Care Markets and Consumer Welfare, is the first systematic study of inpatient service changes in California hospitals.

"Hospital closures make news headlines, but there are many responses to financial pressures short of closing down that we wanted to document," said Richard Scheffler, UC Berkeley professor of health economics and public policy, director of the Petris Center and co-author of the report. "What we found in this study is that hospitals, like many other dynamic organizations, change to meet the demands and needs of their consumers. We're seeing a natural evolution of the industry."

The authors used patient discharge data from the 368 general acute care hospitals open in California during the study period of 1995 through 2002. They looked at changes in 48 hospital service categories, including obstetrics and rehabilitation.

They found that during the study period, 88 hospitals closed one or more inpatient services, with - more a closure defined as a 95 percent or greater decrease in patient discharges for that service. Twenty-eight hospitals closed obstetrics, the category most impacted by service decreases.

Yet the authors found no evidence that these changes in services for labor and delivery affected delivery complications or the rate of cesarean births. In addition, they found that the distances traveled by expectant mothers to the hospital for childbirth only increased by two-tenths of a mile.

"Despite concerns about access to care, closures of labor and delivery units do not appear to have had an alarming impact," said Paul Kirby, research associate at the Petris Center and lead author of the report. "Among patients whose nearest hospital closed obstetrics, nearly 86 percent were already bypassing that hospital for childbirth prior to the service closure."

Kirby said patients may prefer traveling farther to get to larger, more urban hospitals. They found that 78 percent of obstetrics patients in California forego the nearest hospital to give birth, suggesting that proximity is not the primary concern when choosing where to have a baby.

The researchers did not study the impacts on closures for other services, but they suspect that some of the categories, such as chemotherapy, reflected changes from inpatient to outpatient services.

Only 10 hospitals closed four or more services. Most of those closures occurred at facilities that were predominantly small, rural and financially troubled.

The report's authors also found that 123 facilities opened one or more services during the study period. The most common increase came in the category of inpatient rehabilitation.

"Fifty-seven hospitals added rehabilitation services, which most likely reflects the needs of an aging population," said Scheffler. "A hospital is a changing, breathing organization that not only responds to the economic climate, but also to what people need."

Kirby added that until recently, rehabilitation has been reimbursed more generously by Medicare than other services. "That has since changed, so it would be interesting to see whether hospitals scale back on this service," he said.

The researchers pointed out that even though they did not find negative health impacts as a result of obstetrics service closures, the effects of further closures on patient care should be monitored routinely.

"If too many hospitals close this essential service, access to care and birth outcomes could be negatively affected, particularly in rural areas, where travel distances can be quite long," said Kirby.

Other co-authors of the report are Joanne Spetz, associate director of the Center for California Health Workforce Studies at UC San Francisco; and Lisa Simonson Maiuro, a consultant at the Medstat Group in Sacramento.

This research was supported by a grant from the California HealthCare Foundation, an independent philanthropy based in Oakland.

A copy of the full report is available online at http://www.petris.org.