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Durham Regional expects 2003 profit

For the first time in half a decade, Durham Regional Hospital will see black instead of red on its annual accounting sheets.

The community hospital, which the Duke University Health System acquired under a 1998 lease agreement, expects to post a $1.3 million profit for the fiscal year 2003, which concludes at the end of this month.

The profit comes after years of staggering losses ranging from $16.9 million three years ago to $2 million last year. Since DUHS gained control of the hospital, administrators have worked to eliminate excess costs and increase productivity. Officials largely credit Richard Liekweg, former CEO of Durham Regional, with trimming the budget to a manageable size. Liekweg resigned in February to become CEO of the University of California at San Diego Medical Center.

"What happened is [Liekweg] set the stage for this hospital to grow, and what you're starting to see is the fruits of that labor," said Kevin Sowers, acting CEO of Durham Regional and associate vice president of DUHS.

Surgical volume, which is up 11 percent, has led this year's growth, said CFO Mark Miller. The newly-developed bariatric services unit--which performs stomach stapling and other anti-obesity surgeries--has swept more than 300 patients through its doors since it opened this year, and the department expects to grow even more next year.

The endoscopy unit has also seen an unexpected increase in volume. "A lot of that growth comes from the screening for [colon] cancer, and the insurers are paying for that more," Sowers said.

The greater flow of patients in these high-profit-margin areas has enabled Durham Regional to defy the $3.3 million shortfall that was projected at the beginning of the year. The hospital was also aided by a $950,000 gift from the Durham County Hospital Corporation and an additional $400,000 from a lease agreement with Select Medical for space in the hospital.

Despite turning a profit this year, Durham Regional is not completely out of the woods. The hospital, a non-profit enterprise, must yield approximately 3.5 percent profit in order to be fiscally stable, officials said. This year's profit is only about 0.8 percent of total expenditures. Next year, the hospital is not expecting any substantial gifts from organizations like DCHC and anticipates a profit that is only 0.7 percent of expected expenditures.

The hospital continues to grow but is still struggling with several chronic financial problems such as diminishing Medicare reimbursements and the high cost of temporary nurses, necessitated by an inability to attract a full-time nursing staff.

When DUHS took over Durham Regional, it hoped to bring profit margins to a sustainable 3.5 percent level within three years, but hidden debts and costs at Durham Regional forced DUHS officials to reevaluate their plans.

After four years of working with the hospital to cut costs--by means including the closing of two specialty clinics--DUHS is satisfied with the progress of Durham Regional, said William Donelan, executive vice president and COO of DUHS.

"We're continuing to try to move it to that level of performance," Donelan said. "This represents some economic stability for the hospital."

Donelan added that next year's projected dip in marginal revenue percentage is not a cause for concern, as the hospital continues to invest in future programs. "[The dip is] to be expected in terms of where Durham Regional is right now."


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