PHILADELPHIA (AP) _ The University of Pennsylvania fired the chief executive of the financially ailing Penn health system on Thursday.

Dr. William N. Kelley, who also served as dean of the School of Medicine, was dismissed by school President Judith Rodin. He will remain a faculty member.

Dr. Peter Traber, a gastroenterologist and chairman of the medical school's Department of Medicine, was installed as interim dean and CEO until ``we undertake a thorough, formal search for permanent leadership,'' Rodin said.

Rodin also asked Kelley to take on an expanded role as executive vice president for health affairs at the university. Kelley has not accepted that position yet.

Traber is ``an exceptional researcher and clinician whose knowledge of UPHS is broad and deep. He has our full confidence,'' Rodin said.

Penn Health System, the Philadelphia region's second-biggest health system, lost more than $300 million, or nearly half its cash reserves, in the last two years under Kelley. The losses forced the largest reduction in the system's history _ cuts of 2,800 positions, or 20 percent of its work force, by June.

Some analysts said the cuts could have been prevented if Kelley had not chosen to expand aggressively. In the last few years, Penn bought more than 270 doctors practices and took over two ailing city hospitals, Pennsylvania Hospital and Presbyterian Medical Center, which had to be nursed back to health at considerable cost.

Kelley has blamed the system's situation on lower Medicare and Medicaid reimbursements, reduced payments from insurance companies and rising costs of health care technology and pharmaceuticals.

Within Penn, many faculty also were critical of Kelley's salary, nearly $1.3 million in 1998, more than double the $548,000 that Rodin made.