The impact of budget cuts on individual patient health: Causal evidence from hospital closures

Abstract

Public finance constraints following the 2008 financial crisis in Europe often affected the hospital sector. This paper investigates i) the causal health impacts of reduced hospital supply, and ii) possible mechanisms to explain these. Using a staggered difference-in-differences framework, we study the effects of hospital closures on outcomes of all heart attack patients admitted to an Italian hospital between 2008 and 2015. Results show that closures increased in-hospital mortality by 10 % and length-of-stay by 0.3 days, but had no impact on readmissions. We explore potential mechanisms using different estimation approaches, and show that increased travel time following closures explains most of the mortality effect.