HOSPITAL CLOSURE - AN EFFICIENCY ANALYSIS

Logistic regression analysis was used to test the hypothesis that mark et forces have led to recent hospital closures. Specifically, ineffici ent and underutilized hospitals in competitive markets were hypothesiz ed to be at greater risk for closure. While past studies used crude me asures of hospital efficiency to predict closure, this study used data envelopment analysis to construct an efficiency index. Mixed support was found for the market forces hypothesis; however, contrary to expec tations, inefficient hospitals were not shown to be at increased risk for closure. In fact, efficiency proved to be a weak, but positive, pr edictor of closure.