Hospital corporate restructuring and financial performance

In the last decade, an important innovation in the organizational structure of acute care hospitals occurred. Many hospitals restructured by creating subsidiaries that segment assets or services into separate corporations. We know relatively little about the effects of such restructuring. This paper examines the association of restructuring with financial performance of not-for-profit hospital firms. The study uses data from all not-for-profit acute care hospital firms in Virginia, the only state for which the unique study data are available. We find that the consolidated financial performance of hospital firms is influenced by factors that affect the hospital’s financial performance (i.e., payer-mix, staffing and service mix) but not the number or size of non-hospital subsidiaries. Future research should examine the effect of restructuring on other types of performance.