Proposed FL Blood Bank Merger

Posted on August 29, 2011

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Not long ago I blogged about what I felt was an untenable situation for hospitals: blood supply.  Since then, I have learned a bit more about blood due to a proposed merger of Florida’s three regional blood centers:  Florida’s Blood Centers, Community Blood Centers of Florida, and Florida Blood Services. Together, they supply roughly 50% of the state’s hospitals with blood.

As a follow up to my last blog post, I found that hospitals get their blood from three sources:  blood centers, the American Red Cross, and local blood drives by the hospital; these sources supply 50%, 45% and 5%, respectively.

The proposed merger is making news because the three regional blood banks want to form one mega-supplier. And the three blood banks have not always been above-board with their blood recruiting actions and executive pay packages, which makes management of such a blood behemoth suspect. Despite these red flags, this proposal is being touted in the press as great news. Hospital leaders feel the new company would provider lower costs and fewer shortages of hard-to-find blood types.

I am not so sure. I support consolidation in a lot of industries, but the more I look into this, the less I can support consolidation in blood supply. Blood is, in effect, a tightly controlled, untradable commodity. One company with 50% market share, whose only rival is another non-profit, doing business with 80% of the state sounds well on its way to monopoly status. I advocate a meticulous anti-trust review on this one prior to approval.

The other aspect of this that gives pause is the price of blood, which I alluded to in my previous post. The facts on this proposed merger show the new, single, blood bank would collect about 1 million pints a year, selling them for an estimated $350 million. That makes the average pint worth $350. If it was not obvious before, it can be said with crystal clarity now:  there is money in blood. Now, the industry claims there is almost no margin on prices because 50% of the price of blood supposedly covers the labor needed to acquire it, 25% of the cost covers the required testing of the collected blood, and 25% covers the storage, transportation and administrative costs.

Maybe it is just naivete on my part, but I always thought the Red Cross and its ilk did blood drives to be a Good Samaritan, and that they ran on grants and donations, and gave blood away to hospitals. The thing is, these blood centers get their supplies for free, from blood drives in communities, churches, businesses and schools we all are a part of. A good bit of me feels “taken” with the lack of transparency—that the blood citizens give away are making some people wealthy. Sure, they are non-profits, but so are some health insurers, and part of the alleged impropriety in this Florida case is that blood bank executives were raking in salaries in the hundreds of thousands of dollars.

For sure I am no expert on anti-trust case law. But on gut feel, it seems a little easy for a new company to manipulate the supply and price of blood mainly because, save for the Red Cross, there are no other reasonable options for hospitals if things get sketchy. Hospitals cannot just instantly scale up their blood drives by a factor of ten and go get more from the community, and out-of-state suppliers are cost prohibitive. If there is so much scrutiny over alleged geographic monopolies of patient care by one hospital system when hospitals merge (isn’t that the consolidation everyone’s been asking for), I don’t see how this blood supply issue cannot receive the same intense review.

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