Howard University Hospital is laying off workers because of budget shortfalls, an indication of fiscal problems that could raise new questions about a $400 million medical complex the university and city intend to build in Southeast Washington.

No Howard official was available yesterday to discuss the action, first reported in the Washington Times. The paper quoted a university spokeswoman as saying the cuts of about 125 employees were "to get revenues and expenses in line" and would not affect discussions on the proposed National Capital Medical Center.

City Manager Robert C. Bobb agreed yesterday that the layoffs would have no bearing on any deal. "Howard made a tough but necessary decision that was made independent of our negotiations," he said. "In terms of the NCMC, we are confident that the right staff will be in place when the time comes."

The joint venture, to be built on nine acres just off 19th Street and Massachusetts Avenue SE, would include a 250-bed "world class" hospital, doctors' office building and research space. The city and university would share the cost of the hospital's construction, but Howard would own and operate it.

Others are not so sure of the dismissals' irrelevance. "We have to know the financial strength of our partner," said D.C. Council member David A. Catania (I-At Large). "If these layoffs are the result of improved efficiencies, then they are less concerning. If these layoffs are driven by the bottom line, it certainly casts doubt on Howard's ability to operate two hospitals."

The parties are up against a deadline that Bobb said Tuesday absolutely cannot be missed. By Jan. 1, they must complete a detailed agreement on funding, operating and governance issues to present to the council. Bobb said he expected Howard's updated financial figures on the current and prospective hospitals "within the next few weeks."

Howard's is the third District hospital to cut workers in recent months, a signal of the continuing tough times in local health care.

A recent report by the District of Columbia Hospital Association showed that it and three other facilities ran deficits in fiscal 2004. In the same year, Howard University Hospital delivered $46 million in care to patients who had no health insurance.