Why are U.S. hospitals closing?

Wharton’s Lawton Burns discusses the closure of Philadelphia’s Hahnemann University Hospital and the trend of medical facilities shuttering nationwide.

Hahnemann University Hospital had been in failing health for years before administrators announced last month that the 496-bed academic facility in the heart of Philadelphia will close in early September.

Front facade of Hahnemann Hospital with large murals of patients standing and sitting and in wheelchairs and a toddler.
Hahnemann Hospital in Philadelphia is scheduled to close in early September.

With mounting debt and losses of $3 million to $5 million a month, the hospital was sold to an investor company last year and laid off more than 200 employees to cut costs. Out of options, the parent company has filed for Chapter 11 bankruptcy protection as it winds down operations at the facility. “Hahnemann University Hospital has been experiencing severe financial difficulties. Despite our best efforts to find solutions, none were found. The hospital cannot continue to lose millions of dollars each month and remain in business,” the hospital said in a statement.

The city surely will feel the absence of Hahnemann, which was founded in 1848 and employs 2,500 people. It serves some of the city’s sickest, poorest patients and has a Level 1 trauma center, which is the highest designation of surgical care for patients with traumatic injuries. 

Although closures such as Hahnemann’s have made headlines recently—often endemic of the larger problems facing the ailing American health care system—the closures are nothing new. Hospitals have been shuttering for several decades.

“This isn’t a seismic shift; this is more of a gradual decline,” says Lawton Burns, a Wharton professor of health care management, who referenced a 1981 book, “Can Hospitals Survive: The New Competitive Health Care Market.” “That book was prescient because it was looking down range and realizing that a lot of hospitals aren’t going to be able to make it over the long term. If you look at the number of hospitals in the United States, it’s gradually declined because the hospital inpatient business is a flat-liner at best. The future growth of the hospital business is not in inpatient care, it’s outpatient care. So, this is just part of a wider trend.”

Read more at Knowledge@Wharton.