Type of Document	Dissertation
Author	White, Mary Lois
URN	etd-11122003-204514
Title	Finding an Economic Niche for Rural Hospitals: An Empirical Analysis of Market Areas, Patient Flows, and Policy Considerations
Degree	Doctor of Philosophy
Department	Economics, Department of
Advisory Committee	Advisor Name Title Gary M. Fournier Committee Chair Marie Cowart Committee Member Tim Sass Committee Member Tom Zuehlke Committee Member
Keywords	Florida Hospital Profitability Hospital Services Patient Choice
Date of Defense	2003-10-24
Availability	unrestricted
Abstract This dissertation examines causes of poor financial performance in rural hospitals, including the determinants of patient choice of hospital and the hospital’s choice of service configuration. When rural residents choose non-local providers for inpatient hospital care this reduces the revenues of rural hospitals. Additionally, when rural hospitals do not provide an array of services that are desired by their local residents, hospital profitability will suffer. First, hospital market areas are constructed to identify the relevant product and geographic delineations. These market areas argue for the need to model the determinants of market share in a way that avoids the specification problem inherent in traditional market delineations that rely on arbitrary assignment of the population to the nearest hospital provider. Such specification is likely to overstate the actual market share that is achievable, and lead to errors in predicting the number of viable hospitals that can be sustained in the market. These market areas are then used to examine whether delineation affects the size of the potential patient population and the number of competitors in a hospital’s market area. Second, a model of patient choice is developed to determine the market, patient, and hospital characteristics that are important in determining whether a patient chooses to receive care at their local provider or an out of area provider, taking into consideration the fact that not every hospital is able to meet the needs of every patient. Small hospitals generally provide a narrower range of services and are thus unable to treat some of the patients residing in their local area. Such information, regarding the services available at rural hospitals and the determinants of patient hospital choice, is useful in understanding the financial difficulties faced by small rural hospitals and how one might avoid them. Finally, the question of how the choice of service offerings affects the economic performance of rural hospitals in Florida is examined, using alternative measures of their observed success. Several models examining the service configuration at rural hospitals, and the effect of a hospital’s service offerings on their market share and profitability are developed to determine an array of services that rural hospitals can provide without increasing their risk of closure due to poor financial performance. I argue that policy makers should consider these aspects of service configuration when altering the regulations rural hospitals face so they can better understand the implications of policy changes.
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