Durham Regional Hospital teamed up with the Medical Center last July, and in its time at bat, the hospital has been thrown a few curve balls. But despite its growing pains, the hospital is alive and slugging.
Although Durham Regional has struggled with budget issues, including an approximate $1.4-million deficit, its board recently approved a $150-million operating budget for fiscal year 2000.
At the Durham Regional board meeting May 12, Medical Center administrators also discussed their decision to give Durham Regional a three-fiscal-year window to become acclimated to the partnership.
Officials from Durham Regional hope this leeway will give the hospital an opportunity for expansion-such as the ongoing construction of a physical rehabilitation unit.
"We are moving in the right direction, and people are starting to see that we are better off," said George Quick, chair of the Durham Regional board. Duke University Health System began to manage the hospital July 1, 1998, when a panel of Durham County commissioners voted 5-0 in favor of the plan.
The original proposal called for Durham Regional to meet a 1.5 percent operating margin in the first year and a 3.5 percent margin by the third year of the partnership. Operating margin requirements are calculated by dividing the hospital's total revenue into operating profits.
According to the new agreement, the hospital would have additional time to meet these standards. If Durham Regional is not up to par in a reasonable period of time, Duke could consider taking budgetary control.
In a May 11 letter to Quick, Israel said Duke would waive the requirements "in order to focus on maximizing the benefits derived from the Health System." Under the new arrangement, the benchmark indexes will only begin in fiscal year 2003. Israel could not be reached for comment.
Durham Regional officials said the current deficit does not reflect on performance standards and has nothing to do with operating margin requirements.
Some of the hospital's current financial issues result directly from its Duke affiliation, they said. In response to the partnership, the county made the hospital pay an annual $3.5-million lease. Until this year, Durham Regional Hospital had not been "in the business of supporting other entities to that extent," Quick said.
He said the leniency is a "reflection of the working relationship that the [Medical Center] administration has established with our board." He stressed, however, that even without the leeway, Durham Regional would have exceeded requirements within those three years.
By June 30, the end of this fiscal year, Quick said, the hospital will have an operating margin of approximately 1.6 or 1.7 percent, which is above the minimum.
Last week, construction began on the rehabilitation facility. With support from the Medical Center, the 30-bed unit-operational in January 2000-will provide therapeutic and support space.
The unit will "produce a great deal of revenue for us," said Richard Myers, CEO of Durham Regional Hospital Corp. "We're still going through growing pains, but in general, this has been an amazingly productive year."
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