THE PERFORMANCE OF HOSPITAL CORPORATION OF AMERICA AND HEALTHTRUST HOSPITALS AFTER LEVERAGED BUYOUTS

The authors examine performance changes after two leveraged buyouts (L BOs) in the hospital industry, one an employee stock ownership plan (E SOP) and the other a managed buyout (MBO). The findings show that hosp itals owned by HCA, the MBO firm, and Health Trust, the ESOP firm, did not increase revenues, decrease operating expenses, or improve profit ability after the LBOs, relative to other hospitals in their local mar kets. Nor were the numbers or salaries of employees at these facilitie s decreased. Although the performance incentives associated with LBOs did not change performance at the hospital level, incentives to meet d ebt payments did result in corporate changes. More specifically, the L BOs led to corporate downsizing through the sale of hospitals and subs idiaries.