The performance of Hospital Corporation of America and Healthtrust hospitals after leveraged buyouts.
The authors examine performance changes after two leveraged buyouts (LBOs) in the hospital industry, one an employee stock ownership plan (ESOP) and the other a managed buyout (MBO). The findings show that hospitals owned by HCA, the MBO firm, and Health Trust, the ESOP firm, did not increase revenues, decrease operating expenses, or improve profitability after the LBOs, relative to other hospitals in their local markets. Nor were the numbers or salaries of employees at these facilities decreased. Although performance incentives associated with LBOs did not change performance at the hospital level, incentives to meet debt payments did result in corporate changes. More specifically, the LBOs led to corporate downsizing through the sale of hospitals and subsidiaries.
Clement
J P
JP
Department of Health Administration, Medical College of Virginia, Virginia Commonwealth University, Richmond 23298-0203, USA.
McCue
M J
MJ
D002201:Capital Expenditures / Q000639:trends; D017598:Efficiency, Organizational; D004649:Employee Incentive Plans; D005375:Financial Audit / Q000706:statistics & numerical data*; D006273:Health Facility Merger / Q000191:economics* / Q000706:statistics & numerical data; D006302:Health Services Research / Q000379:methods; D017721:Hospital Costs / Q000458:organization & administration / Q000706:statistics & numerical data; D006777:Hospitals, Proprietary / Q000191:economics / Q000458:organization & administration* / Q000706:statistics & numerical data; D008330:Management Audit / Q000706:statistics & numerical data*; D010067:Ownership / Q000191:economics / Q000458:organization & administration / Q000706:statistics & numerical data; D012044:Regression Analysis; D014481:United States