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To determine the adjusted effect of hospital level of care and volume on mortality of very low birth weight (VLBW) infants in the state of California, where deregionalization of perinatal care has occurred.Secondary data analysis of California maternal-infant hospital discharge data from 1997 to 2002 was performed. Logistic regression was used to evaluate the odds of mortality among VLBW infants by hospital level of neonatal intensive care and volume of VLBW deliveries, in the context of differences in antenatal and delivery factors by hospital site of delivery.Both maternal and fetal antenatal risk profiles and delivery characteristics vary by hospital site of delivery. After risk adjustment, lower-level, lower-volume units were associated with a higher odds of mortality. The highest odds of mortality occurred in level-1 units with ≤10 VLBW deliveries per year (odds ratio, 1.69; 95% confidence interval, 1.43–1.99). In isolation, hospital volume, rather than level of care, had the greater effect.Although deregionalization of perinatal services may increase access to care for high-risk mothers and newborns, its impact on hospital volume may outweigh its potential benefit.