Nearly half the members of Loudoun Healthcare Inc.'s board of directors have stepped down or decided not to serve another term to make room for new members, a move aimed at restoring the community's faith in the board and its ability to save the financially ailing institution.

Having new members on the board "will bring more objectivity," LHI interim chief executive Joseph Ruffolo said. "It's something we've lacked in the past." In addition, he said, the board has attempted to remove "any appearance of conflicts of interests;" only two doctors remain as board members.

The hospital is recovering from a $27 million deficit over the last two years. During the summer, LHI hired Louisiana turnaround company Pitts Management, which presented to the board a report three weeks ago suggesting several courses of action. Among them was restructuring the board, which has been criticized for failing to recognize the gravity of the hospital's financial condition sooner.

"We are sorry for what occurred, we do feel that we have some ownership for it," said board chairman Joseph Ramos, "and are committed to turning it around."

The report urged the hospital to open the process of selecting board members. "Pitts went out and surveyed quite a number of people in the community," said Ramos, who is remaining on the board. "There was a perception that the process was more closed than it was in actuality."

The board voted Tuesday on which members would remain, choosing seven. In addition, one new member was added, Loudoun businessman Daniel McGinnis. McGinnis retired last January as head of the Tellabs Network Enhancing Technologies Solutions division in Ashburn, formerly Coherent Communications, and is now president of SOTAS.

Two physicians, Thomas Mancini and John Archer, agreed Tuesday to step down from the board. LHI officials said one board member, businessman John Wallace, stepped down earlier. Four others--Carl Emswiller, Sylvia Robinson, Deborah Welsh and Marilyn Naylor--stepped down earlier when their terms expired.

The decision to retain some board members came after much debate, Ramos said.

"We had a lot of discussion on starting over from scratch," he said, "and the sense was that with all of the complexities of managed care today, and the whole health care environment, trying to bring [an entirely new board] up to speed in a very short period of time would not be practical."

Within a year, LHI plans to add six additional board members and has created a nominating committee for the purpose. The committee is made up of current board members and America Online executive Mark Stavish, who also serves on the Loudoun County Chamber of Commerce's board.

During a meeting yesterday, the Loudoun Board of Supervisors endorsed a resolution requesting representation on the hospital's board. Ramos said "that is not in the plan," although he said he had not seen the resolution. However, he said he had sent a letter to the Board of Supervisors stating that the LHI board would like to have a "formal liaison" between the hospital board and the supervisors.

LHI has taken several steps to recover its losses. In the last five months, it has eliminated about $5 million in its payroll through layoffs and by not filling vacant positions. It also closed its urgent care center in Purcellville and made other cost cutting moves.

In addition, Inova Health System has agreed to extend the life of its $5 million loan to Loudoun Healthcare. The loan, for which Loudoun's former hospital grounds in Leesburg were used as collateral, was to expire in mid-January, but Loudoun Healthcare will now have until July to repay it.

LHI is awaiting approval of a $3 million loan from Mercantile & Potomac bank, some of which would be used to pay back the Inova loan, Ruffolo said. The rest would be used for operating costs.

In addition to McGinnis and Ramos, president of Rubbermaid, the remaining board members are Joseph Boling, president of the Middleburg Bank; Mark Lowers, president of AMSEC International; Russell McDow, a physician; Michael Megeath, principal of C.S. Monroe Technology Center; Elizabeth Miller, publisher of the Loudoun Easterner; and Elisabeth Simms, a physician.

Orthopedic surgeon James Gable, LHI's new chief of staff, and Ruffolo will serve as ex-officio members.