Duke Hospital announced a 170-position cutback yesterday as part of an initiative to improve internal efficiency and confront the changing national health-care environment.
Although no one is being laid off, 94 employees who do not provide direct patient care will have their positions eliminated.
Hospital officials stressed that these employees will be moved around within the Health System or the University to comparable jobs, or have the opportunity for new job training.
In addition, 76 jobs that are not presently filled will be slashed.
The cutting of these support personnel positions reduces the Hospital's workforce by 2.8 percent and saves it about $7 million annually.
Decreased reimbursements from Medicare and managed care companies led directly to the decision. "The reality is you've got to live within your means," said Michael Israel, CEO of the Hospital. "We are like a family who has had its income cut back from $50,000 a year to $35,000 a year-we have to make modifications."
The affected employees run the gamut from information desk operators to people in top-level senior administrative staff positions.
Many of the jobs to which people will move are currently covered by the use of overtime, temporary employees or expensive contract labor.
Human Resources officials will work with these individuals to help them pursue their options within the Health System or the University.
"This is a job elimination and a redeployment. This is not a layoff," Israel said. "I want to work with every affected individual to get them reestablished within the organization."
However, he acknowledged that the affected individuals who are higher up in the organization have fewer options for transfer. All of the shifts will happen within the next 60 days, Israel said.
The structural changes announced Wednesday will help the Hospital avoid several financial pitfalls that are plaguing other academic medical centers.
As a result of the Balanced Budget Act of 1997, which led to significant reductions in Medicare reimbursements, the Hospital faces a budget crunch-approximately $170 million less revenue than necessary over a five-year time period, Israel said. The ongoing shift from indemnity insurance to managed care has also changed the Hospital's financial state, and Israel said not enough money currently exists within the Health System to compensate health care providers adequately.
"Five years ago, if we had a lousy managed care contract, when 5 percent of your patients are managed care, you can live with it," Israel said. "Today, with 26 to 27 percent of your patients are managed care, they're very difficult to live with."
In addition, drug costs are increasing 20 percent annually, leading to more constraints. "The patients who come in here and the federal government who comes in here expect us to deliver the exact same service," he said. "We are one of the few university teaching hospitals that continue to be in the black-but barely in the black-by a few million dollars."
The same financial pressures have ravaged several other academic medical centers, including the University of Pennsylvania Health System and Georgetown University Medical Center.
According to The Chronicle of Higher Education, Georgetown lost approximately $120 million over a two-year period while Penn has lost more than $300 million during that time.
"They're in draconian straits, I would say, those other institutions, and Duke has not been on the same level as them," Kenneth Morris, the Health System's chief financial officer, said last week. "But we're dealing with the same economic factors that have contributed to their problems."
In fiscal year 1999, the Health System posted a $2.3 million operating loss, although income from investments exceeded this deficit.
Officials maintain that the problems plaguing Durham Regional Hospital have nothing to do with the Duke-based initiative announced yesterday. In October, Durham Regional officials discovered that an auditing error made what looked to be like a $1.2 million surplus into a $5 million deficit. Durham Regional has hired a consulting firm and has been moving with trepidation ever since.
In addition, Israel said Raleigh Community Hospital, also a part of the Health System, is experiencing significant growth in its overall size. Durham Regional's consultant is also in place at Raleigh Community to look at staffing and ensure that the hospital changes with the growth.
Even after the cutbacks take effect at Duke, Hospital officials will continue to look for means to maximize efficiency-which will in turn help the entire Health System's financial status. Besides the job eliminations, the Hospital is also trying to cut the amount of money its spends on supplies.
"We will be looking at the entire operation and working very hard to dedicate the appropriate resources where resources are needed," Israel said, noting that all of the hospital's programs will be reviewed.
Israel stressed that eliminating positions was not a painless decision. "This is really personal," he said. "Two of the people that I walk past... every day are two of the affected people," Israel said.
Richard Rubin contributed to this story.
Get The Chronicle straight to your inbox
Signup for our weekly newsletter. Cancel at any time.