When a Neighbor Closes: Ownership and Hospital Profits

Abstract How nearby hospitals adjust financially after a neighboring closure may depend on ownership incentives, yet existing research has not examined this variation by ownership type. Using publicly available cost report data from the National Academy for State Health Policy Hospital Cost Tool for short-term hospitals from 2011 through 2022, we compare hospitals with exactly two neighbors within sixty miles that experienced a neighboring closure to those retaining two neighbors, ensuring comparable baseline market structure. For-profit hospitals show the largest post-closure increases in Charge-to-cost, though pre-closure trends make this pattern suggestive, while the for-profit Net-profit-margin gain is the best-identified result and is comparable in size to the non-profit gain. Governmental hospitals show changes indistinguishable from zero, motivating ownership-differentiated policy responses.