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Duke University Health System to Eliminate Up to 300 Jobs in Response to Reductions in Government Reimbursements

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Duke Health News 919-660-1306

DURHAM, N.C. – Duke University Health System (DUHS) will
eliminate up to 300 jobs in response to increasing budget
pressures caused by cuts in federal and state reimbursements,
DUHS officials announced today. The officials said the cuts
would not affect patient care adversely and emphasized that
DUHS would assist affected employees in finding new positions,
where possible. The cuts are projected to equal about 3 percent
of Duke University Health System's 10,000-person workforce.

"DUHS, like other academic health centers and hospitals, is
facing increasingly difficult budget pressures. We must take
steps to maintain our status as the premier health care
provider for our patients as well as meet the health needs of
our community," said William
Donelan, DUHS executive vice president. DUHS is a leading
provider of charity health care in North Carolina, providing
more than $35 million in unreimbursed charity care this
year.

The announcement follows similar reports of cutbacks at
leading teaching hospitals around the country. For example,
last month New York's Mount Sinai Medical Center announced 450
layoffs to cover a $25 million budget gap. This followed an
earlier announcement by Beth Israel Deaconess Medical Center, a
major teaching hospital affiliated with Harvard's Medical
School, that it was reducing as many as 700 positions, or 15
percent of its workforce, as a result of government cuts and
reduced third-party payments.

Donelan said the 300 positions would be in addition to
approximately 100 others that will be eliminated through
attrition.

"We are still in the early stages of determining what
positions might be eliminated, but we know they will be in
areas that will not adversely affect patient care," he said.
"To maintain high quality patient care and safety, we intend to
maintain our FY03 budgeted standards for nurse-to-patient hours
in areas of bedside and direct care."

He noted that the focus of the staff reductions would be in
areas in which the workforce exceeds DUHS' internal standards
such as the Patient Revenue Management Organization and some
areas within Duke University Hospital, the largest of the three
hospitals in the Health System. The other hospitals that
comprise DUHS are Durham Regional Hospital and Raleigh
Community Hospital.

During the last five years, DUHS has absorbed more than $200
million in cuts as a result of the federal government's
Balanced Budget Act of 1997. In addition, DUHS expects the
current state budget crisis to result in further reductions in
Medicaid reimbursements in the next fiscal year (FY03). These
cuts are expected to total as much as $25 million for DUHS.
Federal cuts in allowances for teaching activities will cost an
additional $6 million. In addition, Duke has faced rapidly
increasing costs for pharmaceuticals and insurance, the latter
due partly to the Sept. 11 tragedy.

"We can do little to change government reductions in
reimbursement or increases in drug costs and, therefore, must
look to take further expenses out of our operating budget,"
said Donelan. "The decision to consider reductions in staff
comes only after careful consideration of alternatives. Once we
know what positions will be eliminated, we will work with
affected employees and attempt to redeploy them within DUHS or
Duke University," Donelan continued.

The Health System already has implemented numerous
significant cost-saving measures, Donelan said. These include
changes in procurement efforts that have saved more than $16
million in office and other supplies, reductions in travel,
efforts to reduce temporary labor and a more stringent
hiring-review plan. Duke has modernized its billing practices
to capture more revenue faster. "But all of these positive
steps are not sufficient to compensate for the volatility and
cuts in government reimbursements," Donelan said.

Donelan said that eliminating 300 jobs and another 100
through attrition, combined with previous cost-saving efforts,
will enable DUHS to "continue providing outstanding patient
care and have the financial foundation to serve our community
and invest in the future. As painful as we find making staff
reductions to be, we must be good stewards of our resources and
plan as best we can to succeed in an environment that is
currently unforgiving."

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