Having bought two nearby hospitals within the past two years and with an $83.6 million total profit for fiscal 1999 under its belt, times appear to be good for Duke University Health System.
But the Durham, N.C., system's officials recently announced they plan to cut 170 jobs, or about 2.8% of the system's workforce, saving about $7 million annually. Ninety-four of the jobs are filled, and the employees will likely be placed in other jobs within the system. It's all in the name of operational efficiency.
"Quite frankly, our operating income this year has been less than acceptable," said Michael Israel, the system's vice president for hospitals and clinical facilities and chief executive officer of Duke University Hospital.
Despite the system's seemingly ample profit, it reported an operating loss of $2.3 million for fiscal 1999 ended June 30.
Israel blamed the Balanced Budget Act of 1997 and austere managed-care contracts for some of the pressures on Duke's budget.
In addition to cutting jobs, Duke is renegotiating managed-care contracts and standardizing processes to cut costs.
Within the past two years, Duke has added two hospitals to its system. In addition to its flagship in Durham, 878-bed Duke University Hospital, the system signed a 20-year lease for 185-bed Durham Regional Hospital in June 1998 and later that year acquired 168-bed Raleigh (N.C.) Community Hospital from Columbia/HCA Healthcare Corp.
With these additions, Duke locked up the acute-care market in Durham, but it still competes with 692-bed Wake Medical Center and 534-bed Rex Healthcare, both in Raleigh.
Israel said acquiring Durham Regional and Raleigh Community hospitals has saved Duke millions of dollars.
Still, the system-like others that have incorporated other facilities-has experienced some growing pains.
One particularly acute pain struck last September when Durham Regional officials discovered that what had at first blush appeared to be a $1.2 million surplus for fiscal 1999 was actually more like a $12 million loss for the hospital. The accounting blunder resulted in the rapid hiring of consultants, and Israel said the hospital is now turning around based on their recommendations.
All of the planned job cuts are administrative or support positions.