$830 million later, DUHS campus becomes cohesive

Editor's note: This is one of three articles on campus construction projects.

Although known for the medieval-era Gothic architecture on the Main Quadrangle, the University is continuously expanding and adapting to the modern age both in looks and functionality.

Duke’s campus has undergone massive changes in this summer alone. When students return to campus in the Fall, the Events Pavilion will be open and West Union will be closed. The Bryan Center will have a whole new look, as will the Gilbert-Addoms Down Under. All in all, the 57 construction projects are currently underway to revamp the Gothic Wonderland for students and faculty alike.

The Duke University Health System has also completed several major construction projects in the past couple of years. The Mary Duke Biddle Trent Semans Center for Education provides a physical home for the School of Medicine, and the Medical Pavilion allows the hospital to expand patient care.

Check out The Chronicle’s breakdown of campus construction and how it will change the face of Duke’s campus and downtown Durham for years to come.

Just five years ago, to walk across Duke’s medical campus, patients, doctors and students had to cross a railroad track.

Although first-time visitors to Duke’s medical center will now see an easy-to-navigate campus with striking facilities and top-notch equipment, this wasn’t always the case. Through years of planning, construction, hundreds of millions of dollars and a weathered financial crisis, DUHS transformed itself from a disjointed smattering of outdated buildings into a vibrant, cohesive campus that suits the needs and demands of students, physicians and a growing volume of patients.

When Dr. Victor Dzau became chancellor for health affairs and president and CEO of DUHS nine years ago, he saw Duke Medicine’s problems and issued a remedy—a master facility plan outlining all of the construction projects necessary for patients, students and physicians.

Financial crisis

Although the medical campus’ transformation is largely complete, such grand-scale projects were a long-way in the making. The master facility plan was launched in 2004, Dzau said DUHS did not begin putting the major construction projects, such as the Cancer Center, into motion until 2007—a year before the economic downturn. 

When the recession hit, Dzau was forced to go back to the drawing board to reevaluate which parts of his grand vision were feasible. Since DUHS employees were anxious about the future, he asked select people if they felt it was worth going through with the planned projects.

“They said, ‘You have to do this because you’re invested in the future,’” Dzau said. “It’s like tightening my belt to invest in my kid’s education.”

With the go-ahead from Dzau, DUHS slashed its budget by $50 million and began coming up with contingency plans in case “the world got worse,” Brown said. He looked at ways it would be possible to downsize the scale of a project in the middle of construction so that the buildings were completed at a cost DUHS could afford.

The financial crisis caused many plans across the country to be slashed, which drastically lowered construction and overhead costs, he noted. As a result, DUHS saved $100 million on the Cancer Center and the Medical Pavilion. 

Prior to the recession, DUHS had also begun an initiative to drive patient care up in order to increase their operating budget, said Kenneth Morris, senior vice president, chief financial officer and treasurer of DUHS. This gave DUHS some wiggle room to pay off the costs of these major projects.

“Some of the greatest universities were built during the Great Depression,” Brown noted, citing Duke as an example.

The health system has also begun moving employees into downtown Durham, at little cost to DUHS because developers are fronting the costs for the renovations and upgrades to convert warehouses into labs and office space. 

Of its major construction costs, DUHS was financially responsible for only the Cancer Center and Medical Pavilion because they were medical facilities. Since the Trent Semans Center was for medical students, the University took on those costs. 

Still, the Cancer Center and Medical Pavilion cost $830 million collectively and, to front costs like that, DUHS often takes out loans, Morris said. 

“Debt is a useful tool… especially for long-term assets,” he said. “A building addition has a use of 30 plus years, so it’s a good candidate to borrow money for.”

To pay off those loans, DUHS has already lowered its operating budget and plans to continue doing so for the next couple of years, Dzau said. 

“It’s not a major impact,” he said. “There is an impact to be sure, but our operating budget will be less in the coming years to pay off the buildings.”

Morris said DUHS is currently operating on $1.2 billion in debt that has accumulated over 30 years. He noted that for an organization of DUHS’ size that this is a very conservative debt amount.

 Going Forward

Although the DUHS has made significant strides, there is still work to be done.

The Cancer Center has been open for over a year now, however the program is slightly behind with its patient volume projection, Dzau said. Regardless, the Cancer Center is still financially performing well.

Because the Medical Pavilion is now complete, DUHS can now start renovations on Duke North without worrying about where to put patients, Brown said.

“We built Duke North when there were no computers—there is barely enough electricity,” he said. “It’s a $60 million project, [and] it’s easier to build a Duke Medical Pavilion than to do a retrofit.”

He noted that there is also discussion about making a pediatric care building, but that this is still in the development phase.

Overall, Duke’s medical campus has undergone a series of changes and does not plan on slowing down projects any time soon. 

“It’s not the building that makes a difference it’s what the people do inside,” Brown said. “This will all be a great change for us.”