In this TEN Talk episode, Kansas City Fed Senior Economist Kelly Edmiston examines the closure of hospitals in rural areas and finds a sharp negative effect on jobs and wages in counties that have lost these “anchor” institutions. 

Jeremy Forkenbrock of Horton, Kansas, likes what he does for a living and where he is raising his family.

Unfortunately for Forkenbrock, working at a hospital in a small rural town has had significant consequences. He lost his job when the hospital where he worked for 22 years closed in March 2019. He found a job at a nearby hospital—but it came with less responsibility and less pay.

“We have thought maybe we aren’t meant to be here,” Forkenbrock said. “But this is our home.”

Forkenbrock’s situation is an example of developments Kansas City Fed Senior Economist Kelly D. Edmiston examines in “Rural Hospital Closures and Growth in Employment and Wages.” The research article was published in July 2019 in the Bank’s Economic Bulletin.

Edmiston’s research found that since 2011, 74 hospitals have closed in rural U.S. counties isolated from larger towns—counties without towns of 10,000 or more residents. His research concludes these rural counties with hospital closures saw meaningfully lower annual growth in employment and aggregate wages three years after the closure than similar counties without hospital closures.

Specifically Edmiston found that employment in counties with hospital closures fell at an annual rate of 0.5 percent in the three years following closure, while aggregate wages grew at a moderate annual rate of 1.1 percent. Similar counties without hospital closures had average annual employment growth of 0.7 percent and annual aggregate wage growth of 3.0 percent.

A hospital closing can be harder on small rural towns where the hospital is one of the largest employers, Edmiston found. Also, longer-term repercussions of hospital closures could further impede economic growth in counties with closures.

“Loss of access to care is arguably the most fundamental concern for communities facing hospital closures,” Edmiston wrote. “The effects of access to care on community health are well-documented, and poorer health may lead to economic consequences such as increased worker absences and lower productivity. In addition, access to quality health care is an important amenity—especially in rural areas—that households and businesses may consider in choosing where to locate.”

There are thousands of people in small towns in the Tenth Federal Reserve District and across the country who are experiencing the impact and effects of hospital closures. These people include local residents, displaced hospital workers, business owners, and civic and community leaders in places like Horton, Kansas; Tilden, Nebraska; and Eufaula, Oklahoma. These Tenth District towns are learning how to go on without a hospital.

When a closing hits home

Horton, a town with population of about 1,700, is in Brown County, about 60 miles north of Topeka. Horton had a hospital from 1906 until March 2019 when Horton Community Hospital closed.

When Horton Community Hospital closed, Forkenbrock immediately lost his job as director of radiology and EMS services. But that was only the beginning.

To make up for lost income, which included Forkenbrock working six weeks without pay in hopes the Horton hospital would stay open, his wife returned early from maternity leave to her job as a mammography technologist at nearby Hiawatha Community Hospital.

Hiawatha Community Hospital, about 13 miles north of Horton, is where Forkenbrock eventually was hired as a radiology technologist and safety and preparedness coordinator. To cope with a smaller paycheck, Forkenbrock had to make decisions that rippled out into the Horton economy: A major home remodeling project was scaled back; there were fewer impulsive purchases made for his three children, ages 4, 2 and seven months; and he no longer could enjoy having four of his five workday lunches at his friend’s nearby convenience store.

Forkenbrock was only one of many customers store owner Tim Lenz lost when the hospital closed. In addition to 24-hour gas pumps, Lenz Express has a full-line deli—both popular with staff members of an always-open hospital. The hospital employed about 50 people when it closed.

“These were paychecks from good-paying jobs,” Lenz said of the loss of the hospital employees. City Administrator John Calhoon agrees about the hospital closing’s effect on businesses in Horton.

“There were those employees who commuted to our city,” Calhoon said. “There were the vendors who were spending money here … buying lunch, purchasing gas.”

Longer term, Calhoon is concerned that a decline in business eventually may translate to a big decline in sales tax and real estate property values and taxes.

“Realistically, it’s going to happen,” Calhoon said.

Forkenbrock has seen how the hospital closure already is affecting real estate. A neighbor has placed a for sale sign outside his home.

“He told me, ‘I am of an age that I can’t be that far from a hospital’,” Forkenbrock said.

Forkenbrock said he told his staff that residents’ health likely would be affected not only because the hospital wouldn’t be there but because health care would become less convenient.

“Having a hospital is a big thing you had,” Forkenbrock said. “Maybe our hospital wasn’t that bi here in Horton—but we had one.”

Establishing a new economic center

In the five years since its hospital closed, Tilden, Nebraska, has learned to rethink its economic strategy. Although the town has suffered the loss of one of its biggest employers and jobs, the people have stayed.

When city-owned Tilden Community Hospital closed in July 2014, there were about 70 jobs lost, but the town’s population has remained around 1,000, according to Mayor Leo Botsford.

The closing greatly concerned residents, especially because a nursing home with a similar staff size closed just a few years earlier.

“It could have been devastating because we lost our two biggest employers,” Botsford said. “We were hurt for a while. It’s amazing. We perked up.”

Botsford said most hospital employees chose to stay in Tilden and commute to jobs at Antelope Memorial Hospital in Neligh—13 miles west—or Faith Regional Health Services in Norfolk—20 miles east.

Faith Regional opened a clinic in the building that had housed Tilden’s hospital. The city now has offices there too. A new assisted-living center since has opened. The amount of city sales tax revenue that was spent on the hospital was retained, and it now funds police, fire and rescue services, Botsford said.

Truthfully, Botsford said, Tilden doesn’t have a lot of choices for economic or job growth mostly because it is landlocked by private farms. A new school has opened since the hospital closed, helping secure Tilden’s new role of more of a bedroom community.

Bichlmeier customized the small fresh food orders from the hospital, which in turn, was a reliable, steady customer for the grocery store.

“They didn’t buy apples by the case, but rather bought 12 at a time,” he said.

Thankfully, Bichlmeier said, he didn’t have to lay off any employees from his small market in Tilden. That’s because he also owns a larger store in nearby Neligh.

“If I just had this one store, it would have been rough,” he said. “Overall, we would be a lot better if the hospital was open.”

Assuring economic stability, safety

About 580 miles south of Tilden is Eufaula, Oklahoma. Like Tilden, Eufaula lost jobs and wages when its hospital closed three years ago.

Unlike Tilden, Eufaula wasn’t looking for a new direction for its economy. The town of about 2,800 sits on the shore of Lake Eufaula, one of the world’s largest man-made reservoirs. Eufaula’s economy long has been based greatly on tourism and recreation. And, there is an increasing number of people who had maintained vacation homes in Eufaula and are retiring there.

Being on the shores of a large lake presents unique medical needs, said Pam Rossi, executive director of the Eufaula Chamber of Commerce.

“A hospital rounds out your community and puts people at ease,” Rossi said.

Eufaula has worked to address any concerns about medical and emergency medical needs after Epic Medical Center Hospital closed in May 2016.

Rossi said most of the hospital’s 15 employees found other jobs or retired.

A medical clinic expanded when the hospital closed. Two doctors have practices there that are open a couple of days a week. There is an area ambulance service. The two pharmacies in town expanded after the hospital closed, offering more medical equipment.

“Other things kicked in when we didn’t have anything,” Rossi said.

When there are large events at the lake, the clinic stays open late. And, an ambulance is stationed in Eufaula ready to make the 30-mile drive to McAlester Regional Health Center, which serves southeastern Oklahoma.

Rossi said trying to lure other businesses to offset losses from a hospital closure can be tough for small towns.

“You try to hang on with what you can, the best you can and see what incentives you can offer,” she said. “There aren’t a lot of incentives a small town can offer. You need all the sales tax you can.”

Yet securing a financially viable hospital is a worthy pursuit because that hospital can be central to strong economies of small towns and rural counties, Edmiston said.

“In many cases the local hospital is one of the biggest employers in the county,” Edmiston said. “Most of the hospital’s suppliers would likely be out of town, but there may be some goods and services supplied locally, so there is an effect there. Any income losses, such as would occur in losing one’s job, would be expected to affect other local businesses because those with income losses have less to spend in these local areas. This is especially pronounced for providers of servicers, which are usually largely local.”

The vitality of rural economies is linked to the access those communities have to health care, said Jon Chiappe, director of research at the Oklahoma Department of Commerce.

He said a robust health-care system includes hospitals, clinics, pharmacies and nursing homes.

“Each of these health-care industries contributes jobs and payroll to the local economy, and, more importantly, they improve health-care outcomes for the local population,” Chiappe said. “In turn, these improved outcomes affect the workforce productivity with fewer hours absent from work and can also impact school attendance. It is these broader impacts to productivity that are considered by companies when they assess where they want to invest or expand.”

For Eufaula, the land where Epic Medical Center Hospital once sat is being redeveloped into condominiums.

Rossi is, of course, pleased there will be a viable business on the site, which overlooks Lake Eufaula.

“I would also love to have a hospital,” she said.

Read Kelly D. Edmiston’s full Economic Bulletin article.