healthy4u: blood banks

Blood Money at the Border - The Red Cross and a Local Blood Bank Fight Over Donors

Writing in our local Providence Journal, Felice Freyer <a href="http://www.projo.com/news/content/BLOOD_COLLECTION_DISPUTE_07-21-11_T5P9VUQ_v19.4357c.html">reported</a> on a story that becomes less bewildering when viewed in the context of how nominally not-for-profit health care organizations are now run.  The Border Dispute It seems that two such non-profits are having a border dispute: <blockquote>Two local charities are fighting for your blood. The Rhode Island Blood Center, long the sole blood-collection agency in the state, is objecting to incursions by the American Red Cross of Eastern Massachusetts, which recently started holding blood drives here. A war of words has resulted, with the blood center accusing the Red Cross of a 'campaign of misinformation,' and the Red Cross calling the blood center 'hypocritical.' The Hospital Association of Rhode Island entered the fray with a letter to blood donors urging loyalty to the Rhode Island center. The dispute might seem inconsequential to the typical blood donor, who is just trying to do a good deed and may not care or notice who collects the blood. But the Rhode Island Blood Center argues that it matters a great deal. The competition, blood center officials say, is threatening a carefully calibrated system that ensures a steady, predictable supply of blood. The hospitals in Rhode Island all rely on the blood center for 100 percent of their blood supply. The Red Cross says it just wants to give Rhode Islanders another way to support its mission. 'We are a humanitarian organization, a symbol of trust,' said spokeswoman Donna M. Morrissey. The Red Cross’ Rhode Island chapter does not collect blood. A chapter based in Dedham, Mass., started collecting blood here last fall. Since then, the Red Cross has collected 138 units of blood in Rhode Island — a drop in the bucket compared with the 90,000 units of whole blood that the Rhode Island Blood Center collects each year.</blockquote>High-Toned Missions On its surface, the whole thing is bewildering. Here are two non-profit organizations ostensibly dedicated to providing worthwhile health services for people in need. The American Red Cross' <a href="http://www.redcross.org/portal/site/en/menuitem.d229a5f06620c6052b1ecfbf43181aa0/?vgnextoid=f5195032f953e110VgnVCM10000089f0870aRCRD">mission</a> is to: <blockquote>provide relief to victims of disaster and help people prevent, prepare for, and respond to emergencies.</blockquote> The Rhode Island Blood Center's <a href="http://www.ribc.org/full/inner/annualReports.shtml">mission</a> is: <blockquote>to provide a safe, adequate and cost-effective blood supply for the patients and the hospitals we serve. </blockquote> Why can't we all just get along? Why should these organizations be fighting, especially over what amounts to market share? Wouldn't they be able to better support their missions by cooperating?  Where Does the Money Go? I cannot give a definitive answer to those questions. However, there are some clues. Let us look at the latest available (2008) US Internal Revenue Service <a href="http://www.guidestar.org/FinDocuments/2009/050/317/2009-050317817-066c6dad-9.pdf">form 990</a> from the Rhode Island Blood Center, and the latest available (2009) <a href="http://www.redcross.org/www-files/Documents/pdf/corppubs/ARC_990_2010.pdf">form 990</a> from the American National Red Cross, the parent of the eastern Massachusetts chapter. The ProJo article stated that the RI Blood Center collected some 90,000 units of blood last year. The most recent form 990 for that organization revealed that the RIBC had $33,043,096 in program service revenue from sale of blood or blood components for its 2008 tax year. Assuming that its blood collections were the same then as the ProJo reported, that means it got $367 in revenue per unit of blood it supplied. Note further that program service revenue accounted for about 88% of its total $37,478,357 revenue in 2008, revenue sufficient to create a $558,169 surplus So the sale of blood is lucrative. That may come as a big surprise to blood donors, who are unpaid, (and do not even get a tax-deduction for a charitable donation in the US). Now of course it may not be cheap to collect, test, store and distribute blood, that is, the core functions of the RIBC. But note further that in 2008, it was also lucrative to be an executive for RIBC. That year, Lawrence F Smith, the CEO, got $430,650 in total compensation; Scott J Asadorian, the COO, got $331,736, and Carolyn T Young, the CMO, got $273,052. Six other managers got more than $100,000. That seems to be very good pay for managers of a relatively small, regional non-profit whose revenues depend on voluntary donations of bodily fluids. There are parallels with the American Red Cross, parent organization of the local Massachusetts chapter. It got a whopping $2,219,161,636 in program service revenue from "biomedical products & services" in 2009, which was about two-thirds of its total revenue of $3,587,775,430, and which generated a $233,597,985 surplus. Being an executive of the American Red Cross was much more lucrative. In 2009, then CEO Gail McGovern received over a million in total compensation, $1,032,022 to be exact. Its President for Biomedical Services got $850,489. Its Executive VP for Biomedical Services got $596,309. Twelve other executives got more than $250,000. Of those, ten got more than $350,000. Summary This is all too reminiscent of a dispute we noted briefly <a href="http://hcrenewal.blogspot.com/2011/06/blogscan-another-health-care-foundation.html">here</a>, which involved threatened litigation by the large Susan G Komen For the Cure foundation against other charities that dared to use the word "cure" in their own campaigns to fight cancer. The current example does seem a bit more tawdry because the organizations in question depend for their revenue and to support their executives' posh pay on voluntary donations, not just of money, but of blood.  (And it is not the first example we have found that raises questions about non-profit blood banks, look<a href="http://hcrenewal.blogspot.com/2010/01/why-are-health-care-organizations.html"> here</a>.) We have gone on at great length about how health care organizations have been infected by the prevailing "greed is good" culture of US (and world) businesses. Some of the worst examples have come from for-profit companies, but nominally non-profit companies (NGOs, outside of the US) have become part of the epidemic. Instead of cooperating to do good works, some have taking to fighting over market share. We have shown numerous examples in which the leaders of health care non-profits got <a href="http://hcrenewal.blogspot.com/search/label/perverse%20incentives">incentives unrelated</a> to the degree they uphold their institutions' high-toned missions, (<a href="http://hcrenewal.blogspot.com/2011/07/being-non-profit-hospital-ceo-means.html">here</a> is a recent example) and seem happy to do what it takes to keep their compensation high. So, once more with feeling.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior. What Is to Be Done? Based on our ever enlarging file of cases on compensation of the top hired managers of non-profit health care organizations, let me make some concrete suggestions, based on my humble opinion. A step forward would be to make the finances and compensation arrangements of health care non-profit organizations at least as transparent as those of large public for-profit organizations. So my big idea is: Non-profit health care organizations above a reasonable threshold size should provide prompt, public, annual reports analogous and very similar to the reports required by the US Securities and Exchange Commission of public, for-profit companies. These reports should include, at a minimum, a summary of financial and operational status, an audited financial report, an explanation and accounting for any for-profit subsidiaries and any interlocking non-profit organizations, the compensation given to the CEO and some minimum number of the top-paid officers and employees, a detailed explanation and rationale for the pay of these individuals, and a listing of other affiliations and all conflicts of interest affecting them. If the need to supply such information causes non-profit health care organizations' hired executives and boards of trustees some cognitive dissonance, that would be a good thing.

Blood Money at the Border - The Red Cross and a Local Blood Bank Fight Over Donors

Writing in our local Providence Journal, Felice Freyer reported on a story that becomes less bewildering when viewed in the context of how nominally not-for-profit health care organizations are now ru…

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21 Jul 2011

Why Are Health Care Organizations' Ethics Codes News?

This just in <a href="http://www.orlandosentinel.com/news/local/os-blood-bank-senate-20100113,0,7104369.story">from the Orlando Sentinel</a>, <blockquote>The head of Central Florida's largest blood bank told Florida senators Wednesday that she has completely overhauled the operation — from the boardroom to the bloodmobile. 'Believe me, I get it,' an apologetic Anne Chinoda told members of a committee investigating the business ways of Florida's Blood Centers and other blood banks across the state. Chinoda said FBC now prohibits board members from doing business with the agency, has instituted nine-year term limits for board members and has put together a group to review executive compensation. She also unveiled a blood-donor bill of rights she promised to publicize. Sen. Don Gaetz, chairman of the health regulation committee that asked Chinoda to appear, said he was pleased by her testimony. 'What we saw today was an admission of inappropriate practices in the past and a promise they will be fixed,' he said. </blockquote> These new ethical standards were a response to a past controversy, <blockquote>Gaetz's committee has been investigating FBC, which generates $100 million in revenues annually, and the statewide industry since the summer. The inquiry was triggered in part by a series of stories in the Orlando Sentinel that showed FBC board members have sold millions of dollars in goods and services to the agency each year; that board members had no term limits; and that Chinoda was compensated nearly $600,000 annually. Her salary was not discussed at the hearing. Like others in the industry, FBC gets its blood for free from donors, tests and repackages it. FBC then sells the blood to 70 hospitals and medical facilities in 21 counties in Central and South Florida. </blockquote> How often do you hear pleas from local blood banks about urgent shortages?  How often do you donate blood, or feel bad because you did not or could not donate?  Many people who selflessly donate blood were likely unpleasantly surprised to find out that blood banks sell (at a high price) the blood they donated, and used the proceeds to pay their executives generous salaries, and pay vendors run by their board members. Here was another example of a previously revered local, not-for-profit health care institution run apparently for the personal benefit of its top insider leaders. Why was it news when the organization in question adopted a code of conduct that limited self-dealing by board members, limited board members to only(?) nine-year terms, and put in place some sort or organized process to set the CEO's compensation?  Do those not seem like they ought to be standard, and not  newsworthy practices? Similarly, an article<a href="http://www.nj.com/news/index.ssf/2009/11/hackensack_hospital_tightens_e.html"> in the Newark Star-Ledger</a> back in November recounted how  Hackensack University Medical Center in New Jersey, whose board members had been accused of self-dealing (see<a href="http://hcrenewal.blogspot.com/2009/04/hospital-board-members-with-juice-in.html"> this post</a>), and to which a New Jersey state legislator had been convicted of selling his services (see <a href="http://hcrenewal.blogspot.com/2009/04/new-jersey-legislator-found-guilty-of.html">this post</a>), had instituted "tightened ethics rules," including a provision that "board members will no longer be allowed to do business with the hospital."  Again, why should a rule like this be news?  One of the duties of board members of all not-for-profit organizations is the <a href="http://www.boardsource.org/Knowledge.asp?ID=3.364">duty of loyalty</a>, "a standard of faithfulness; a board member must give undivided allegiance when making decisions affecting the organization."  Overpaying crony executives and authorizing business dealings with one's own business seem to obviously violate this duty. We have noted how the business culture of health care organizations has increasingly come to resemble the larger business culture in an era of laissez-faire capitalism and the rise of new oligarchs and robber barons.  So it is telling that it was also news when UBS, a large international bank enacted a code of ethics for its employees that required them to actually comply with "foreign tax reporting rules," (<a href="http://www.businessweek.com/news/2010-01-12/ubs-asks-workers-to-sign-code-pledging-tax-compliance-secrecy.html">per Bloomberg</a>.) One would have once thought that health care organizations, given their responsibilities for human life and health, and their formerly sterling reputations, would have clear, comprehensive codes of ethics that are actually enforced.   But it is news when a health care organization develops such a code (and it still may be news when such a code is enforced.)  <a href="http://hcrenewal.blogspot.com/2009/10/organisational-ethics-policies-primer.html">This post</a> summarized some current thinking on organizational ethics policies.  In conclusion, I asked readers to think about whether their own health care organization had anything resembling such a policy.  I suspect few could identify such policies.  Health care professionals need to inquire why health care organizations, including drug, device, biotechnology and health care information technology companies,  health care insurers, to hospitals, academic medical centers, and medical schools, etc, almost never have real organizational ethics policies.  Of course, the suspicion is that lack of such policies makes it easier for insiders to direct the organization for their personal benefit.  At least if we could make such policies the norm, we could remind organizational leaders that they are supposed to be upholding the mission, not lining their pockets.

Why Are Health Care Organizations' Ethics Codes News?

This just in from the Orlando Sentinel,The head of Central Florida's largest blood bank told Florida senators Wednesday that she has completely overhauled the operation — from the boardroom to the blo…

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15 Jan 2010