Determinants of hospital closure in South Korea: Use of a hierarchical generalized linear model

Understanding causes of hospital closure is important if hospitals are to survive and continue to fulfill their missions as the center for health care in their neighborhoods. Knowing which hospitals are most susceptible to closure can be of great use for hospital administrators and others interested in hospital performance. Although prior studies have identified a range of factors associated with increased risk of hospital closure, most are US-based and do not directly relate to health care systems in other countries. We examined determinants of hospital closure in a nationally representative sample: 805 hospitals established in South Korea before 1996 were examined—hospitals established in 1996 or after were excluded. Major organizational changes (survival vs. closure) were followed for all South Korean hospitals from 1996 through 2002. With the use of a hierarchical generalized linear model, a frailty model was used to control correlation among repeated measurements for risk factors for hospital closure. Results showed that ownership and hospital size were significantly associated with hospital closure. Urban hospitals were less likely to close than rural hospitals. However, the urban location of a hospital was not associated with hospital closure after adjustment for the proportion of elderly. Two measures for hospital competition (competitive beds and 1-Hirshman–Herfindalh index) were positively associated with risk of hospital closure before and after adjustment for confounders. In addition, annual 10% change in competitive beds was significantly predictive of hospital closure. In conclusion, yearly trends in hospital competition as well as the level of hospital competition each year affected hospital survival. Future studies need to examine the contribution of internal factors such as management strategies and financial status to hospital closure in South Korea.