Critical access hospitals and retail activity: an empirical analysis in Oklahoma

This paper takes an empirical approach to determining the effect that a critical access hospital (CAH) has on local retail activity. Previous research on the relationship between hospitals and economic development has primarily focused on single-case, multiplier-oriented analysis. However, as the efficacy of federal and state-level rural health subsidies come under increasing scrutiny, more comprehensive investigations can provide support for continued funding.

Data from 105 rural Oklahoma communities are used to explore whether the presence of a CAH impacts several measures of retail activity. The measures are: total retail sales, total number of retail establishments, and number of micro and small retail establishments. Ordinary least squares regression is used to evaluate the impact of a CAH after controlling for a host of other factors influencing retail activity such as local demographics, unemployment rates, and the presence of a Wal-Mart.

The presence of a CAH has a positive and significant influence on each measure of retail activity. The parameter estimates suggest that a CAH has a similar influence on rural retail sales as a Wal-Mart, increasing total retail sales by approximately 28% over towns without a CAH. Other model results indicate that a CAH presence significantly increases the number of total retail establishments and the number of micro and small business establishments.

The positive results provide additional evidence on the far-reaching economic development impacts of CAHs. The results also emphasize the importance of continued support for these rural institutions, including federal and state subsidies.