title: The performance of the leveraged buyout of the Hospital Corporation of America, Inc.
abstract: BACKGROUND
  A leveraged buyout (LBO) is a type of corporate reorganization and acquisition practice whereby private investors borrow a substantial amount of debt to acquire a firm by buying back its publicly held stock to go private. The Hospital Corporation of America, Inc. (HCA), went through its second LBO in July of 2006. A prior study on the performance changes of the first LBO found no significant changes in revenues, expenses, or profitability.
  
  
  OBJECTIVE
  In this study, we evaluated the changes in performance measures for HCA hospitals during the second LBO period. We looked at the effect of the LBO on financial and operational performance indicators, controlling for market and hospital characteristics.
  
  
  METHODS
  We identified 121 urban HCA hospitals that consistently reported data over a 4-year window from 1 year pre-LBO to 3 years post-LBO and evaluated their study performance changes during the period. Primary data for operational and financial measures are derived from Health Care Cost Report Information System data sets.
  
  
  RESULTS
  On the basis of this study, the LBO led to significant increases in cash flow margin, net patient revenues, and total asset turnover ratio. It also increased operating expenses significantly. However, it was not associated with changes in labor costs, staffing, and capital investment.
  
  
  CONCLUSIONS
  The management of publicly traded hospitals that consider an LBO should develop operating strategies to maintain a strong cash flow performance and find ways to boost patient volume. It also needs to determine if it would be able to continue investing in its facilities to keep physicians and patients loyal and to keep investing in the training and retention of employees, which ultimately improves the quality of care and enhances operational efficiency.
authors: Department of Hospital Administration, Graduate School of Public Health and Institute of Health Services Research, Yonsei University, Seoul, South Korea. thkim@yuhs.ac
authors: Tae Hyun
authors: TH
authors: Kim
authors: Michael J
authors: MJ
authors: McCue
mesh_terms: D002201:Capital Expenditures / Q000639:trends; D004465:Economic Competition; D017598:Efficiency, Organizational; D005377:Financial Management, Hospital; D006273:Health Facility Merger / Q000191:economics*; D006302:Health Services Research; D006777:Hospitals, Proprietary / Q000191:economics / Q000458:organization & administration*; D006786:Hospitals, Urban / Q000191:economics*; D006801:Humans; D010561:Personnel Staffing and Scheduling / Q000191:economics; D011362:Professional Corporations / Q000191:economics* / Q000706:statistics & numerical data; D012044:Regression Analysis; D012952:Societies / Q000458:organization & administration*; D013597:Systems Analysis; D014481:United States