This article applies a financial ratio model and a behavioral model of health services use' to examine inner-city hospital closures. We use Medicare Cost Report financial information and demographics to find evidence that hospitals with high debt, less severity of illness, and lower occupancy rates are more likely to close, as expected. We also find that urban hospitals with a high elderly population are more likely to remain open. However, hospitals in our study with a high proportion of Medicare patients and a high minority population are more likely to close. This last finding may have important public policy consequences for access to health care for vulnerable populations, particularly in a recessionary economy under health care reform.
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