Hospital diversification: corporate restructuring as a survival strategy.

Corporate restructuring of hospitals as a strategy for survival and continued success is described. Health-care providers' traditional orientation has been toward service and mission; now, profits and new markets in health care must be considered also. To remain competitive, hospitals must be prepared to act rapidly on opportunities. Corporate reorganization, the creation of new corporate entities that perform diversified medical and nonmedical functions, may provide the flexibility needed for quick action. Legal and accounting costs will be incurred by corporate reorganization. Tax issues, staff morale, community support, and effect on hospital managers and board members should be considered. Hospitals can cut costs through vertical integration of existing services; in this system-building strategy, new services can be added to broaden the patient base. Corporate reorganization is more important for diversification--the extension of a hospital's medical and health businesses--than for system building. Guidelines for diversification are offered. Corporate reorganization is a technique that should be considered in an institution's planning process.