Association for Public Policy Analysis & Management

The 2010 Patient Protection and Affordable Care Act (ACA) increased hospitals' expectations of insurance prevalence by creating private insurance exchanges and committing to expand Medicaid eligibility by 2014. Hospitals' expectations shifted again when the Supreme Court ruled in 2012 that Medicaid expansion could not be mandated. The focus of this study is the impact of these different expectations of Medicaid expansion on hospital closure. We use a novel panel dataset on hospital finances to examine the effect of the ACA from 2006-2014 on hospital closures. We estimate difference-in-differences model, as well as estimate an exact matching algorithm. Findings are robust to alternative specifications. We find higher closure rates in expansion states and lower rate of hospital growth (fewer hospitals in operation relative to the trend) than non-expansion states. Geo-spatial analysis indicates that closed hospitals were only slightly farther from the nearest competitor than hospitals that remained open.  Although these effects may be short-term adjustments, hospital closure is typically permanent; even transient effects limit emergency care access in the long-term.