Hospitals Seek Share of Blood Industry

  1. The Nation;
    Hospitals Seek Share of Blood Industry;
    Health: Across the U.S., rising prices lead to regional challenges of Red Cross control....

    Copyright 2002 / Los Angeles Times
    Los Angeles Times...08/12/2002


    With health-care costs soaring and hospitals looking for ways to cut expenses, skirmishes are being fought from California to the Carolinas for control of a $ 2-billion industry: the collection and sale of blood.

    The need for blood remains fairly constant in the U.S., at about 34,000 pints a day. But the price has escalated dramatically, to nearly $ 200 a pint in some areas, and supplies are unsettlingly low in many regions in the wake of a traditionally slow summer donor season and a patriotic rush to donate, which turned out to be unneeded, after September's attacks on the Pentagon and World Trade Center.

    In protest against rising prices, 10 Charlotte-area hospitals last month took an unusual step that is likely to heighten competition and aggressive marketing in the blood business. They said they were breaking away from their traditional supplier, the American Red Cross, and forming their own center for collecting and processing blood in an 11-county area with a population of 1.5 million.

    The decision, hospital administrators said, was largely a business one, because the price per pint had almost doubled in the region since 1999. They believe they can market blood for $ 150 a pint, saving $ 3 million a year. They also want to keep control of the community blood supply in the community, and they said decisions made in Washington or St. Louis by a large, bureaucratic organization such as the Red Cross were not always in the best local interests.

    "In today's climate, hospitals have to watch costs in all facets," said David Anderson, vice president for ambulatory and ancillary services at Piedmont Medical Center in Rock Hill, S.C. "Blood is a product like anything else. We shop around to get the best price on everything. But with blood there was nowhere we could shop. It turned out the only way to compete was to do it ourselves."

    The last time a group of hospitals took such a step was in Springfield, Mo., seven years ago. The Red Cross responded by suing the new facility, charging theft of trade secrets and improper business practices. The case was settled confidentially in 1999 and the Community Blood Center of the Ozarks has emerged as the predominant supplier in southwest Missouri.

    Battles also have been fought in California, where HemaCare Corp. of Sherman Oaks--a for-profit company in a health-care sector still dominated by nonprofits--sued the Red Cross in 2000, alleging it undercharged for blood products in Los Angeles, where there is competition, and overcharged in areas where it had a monopoly. The Red Cross called the suit meritless; the case is pending.

    In Albany, N.Y., St. Peter's Hospital recently contracted with Coral Blood Services, a subsidy of HemaCare, ending a long relationship with the Red Cross. North Carolina hospitals in Raleigh and Winston-Salem are considering following Charlotte's lead in setting up community blood banks.

    "Ours was the first long-term move away from the Red Cross for many years, but I think this is just the beginning," said Tom Hassett, vice president of Carolinas Healthcare System in Charlotte. "We talked with the Red Cross and said the escalating prices were unacceptable and the product selection was not what we wanted. They basically said, 'Tough. You're free to seek blood elsewhere.' "

    Red Cross spokesman Rick LeGrand said the agency's average charge for a pint of blood last year was $ 182 nationally. He said the Red Cross supported moves that would get more people to donate blood but feared that Charlotte's blood center might just move donors from one group to another, thus not increasing the donor base. He also said blood collected in one of the agency's 36 regions was first offered to meet regional needs before consideration was given to moving it for out-of-area shortages.

    "Blood products represent less than 2% of a hospital's overall operating costs," he said. "If you start questioning $ 30 to $ 40 per unit of blood, when you may need three units for a $ 25,000 open-heart procedure, it seems a little out of context."

    What the nation's major blood suppliers--the Red Cross and America's Blood Centers, a network of 75 independent blood banks--do agree on, however, is that there is room for competition because the donor base is so small. Although 60% of the U.S. population is eligible to donate, only 5% does so on a yearly basis.

    Typically donors are middle-age or elderly; 94% are registered voters, according to surveys. But as traditional donors die or give blood for their own surgeries, younger Americans are not rolling up their sleeves to fill the gap, though in most states anyone who is 17 or older, in good health and weighs at least 110 pounds is eligible. The reasons they most often give are "never thought about it" or "too busy," a poll by America's Blood Centers found.

    Though hospitals like to have a three-to five-day supply on hand, some have found themselves this summer with only a one-day supply. Shortages have forced some hospitals in New England to cancel elective surgeries and have affected about half of the Red Cross' regions and a third of America's Blood Centers locations. With blood having a shelf life of only 42 days, the nation's major blood organizations issued an appeal for more donors in June, saying the shortage was significant and increasing.

    Three years ago the Red Cross publicly proclaimed its desire to capture 65% of the blood industry's market share. Earlier, it had been criticized by the federal Food and Drug Administration for quality and safety problems in its blood supply and had spent $ 287 million to overhaul its processing facilities. The overhaul included new testing for a host of blood-borne diseases and providing only leukocyte-reduced blood. The process of filtering out the white cells can add as much as $ 40 to a pint of blood.
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  3. by   sjoe
    Let the Red Cross focus on using the funds donated for disaster relief ON disaster relief, rather than providing stunningly high salaries for its administrators, very low salaries for its nurses, while mismanaging its blood donations (read "Bad Blood," for more on this). I'd encourage hospitals and clinics to compete, if they can, for donors. Why shouldn't they?
  4. by   oramar
    This is just going back to the way it used to be. I remember back in late 60s some of the hospitals in this area operated independant blood banks. The last 40 years everything in our society has moved toward bigger and more centralized everything. The only place to go now is in the other directions. I just read in local newspaper where they were considering going back to the old system. Also, they were considering returning to the system that demanded if you got blood friends and family had to anti up and replace it.