Richard Myers, chief executive officer of Durham (N.C.) Regional Hospital, is taking responsibility for financial discrepancies uncovered at the hospital last year by stepping down as CEO.
Myers will end his stint as CEO by the end of June and will retire Nov. 1. The 185-bed hospital is one of three within the Duke University Health System.
In the fall of 1999, Duke's auditors discovered that the hospital did not have contractual reserves for an overstatement of managed-care revenue in its financial reports. The resulting $8.8 million unfavorable adjustment contributed to the hospital's $12.7 million operating deficit during fiscal 1999. Moody's Investors Service anticipates a $15.7 million loss at Durham Regional in fiscal 2000.
"The person who is CEO has to be accountable for what happens during that administration, so I'm responsible for all of it," Myers said of the hospital's financial predicament. "I think the timing is actually right; identifying the leadership to go forward has to be done at the right time for the organization."
His decision to retire was not a forced one, he said.
In 1998, Duke University signed a 20-year lease for Durham Regional and later that year acquired 168-bed Raleigh (N.C.) Community Hospital. With these two and its flagship, 878-bed Duke University Medical Center, the system controls the entire acute-care market in Durham. But its expanding empire has caused some financial setbacks (March 13, p. 21).
Myers, 57, said he agreed to stay on at Durham Regional through a two-year transitional period after the hospital joined Duke in 1998. He said he is likely to use accumulated vacation time during the months between June, when he will step down as CEO, and November, when he becomes eligible for retirement benefits.
Michael Israel, the health system's vice president and chief of hospitals and clinical facilities, is expected to make a recommendation for Myers' replacement at Durham Regional's scheduled board meeting May 17.
Last month, Moody's affirmed its Aa3 rating on Duke's outstanding debt, but the credit-rating agency said its outlook remained negative because of the system's worse-than-projected operating performance.
Moody's called the financial performance at Durham Regional, which makes up 15% of the system's revenue, "disappointing."
The rating agency projects the three-hospital system will experience a $13.5 million operating loss in fiscal 2000. In the year ended June 30, 1999, the Duke system reported an $83.6 million profit, although it had an operating loss of $2.3 million on total revenue of $1.1 billion.
"This has been a particularly challenging and difficult year for Durham Regional because of the severe financial problems that were discovered following the health system's first annual audit of the hospital's books," Israel said in a written statement. "Given the unexpected financial challenges that surfaced this year, Rich (Myers) realized that an aggressive plan and long-term commitment are needed to get the hospital back on solid financial footing."
The hospital has already eliminated about 150 jobs and plans to eliminate at least 50 more, Myers said.
"It's time to stop looking backward and start looking forward," he said.