California blood banks operating in the red; testing costs blamed.

Blood banks in California warn that if federal Medicare reimbursements don't increase, they will be unable to continue meeting the blood needs of hospitals. Managed care, increased testing costs, and dwindling donor support have all combined to dramatically inflate the overhead of their business, and California--traditionally a precursor of healthcare tends for the rest of the nation--has seen its blood suppliers hemorrhage millions in the past few years. Blood banks nationwide face the same issues, and those in the industry fear the woes may spread.

One of the major problems the banks are facing is increased testing costs mandated by the federal government. Before 1985, the FDA only required blood banks to test blood supplies for hepatitis B and syphilis (The Wall Street Journal, June 7, 2000; California edition). Since then, additional testing has increased expenses by about 450%, according to the Blood Centers of California, a coalition of the state's blood banks.

Since 1992, the cost of testing blood from each donor has risen $56.75, according to Cathy Bryan, CEO of the Blood Bank of the Redwoods, a nonprofit blood bank in California. Antigen tests for HIV cost $5; antibody tests for hepatitis C cost 25 cents; the nucleic acid tests for HIV and hepatitis C cost $10; California OSHA needle safety orders cost $1.50; leukocyte reduction to remove white blood cells costs $30; and quality assurance practices cost $10. With nearly 900,000 transfusions in the state, California blood banks are experiencing cost increases of $51 million, and are being reimbursed for none of them. The result is that since 1997, when Medicare cuts were approved, the state's 15 nonprofit blood centers, which supply 95% of the state's blood, have lost a total of $33 million. Furthermore, the FDA has plans to introduce new mandated tests in the near future.

"We have to charge more," says Bryan, "otherwise, there won't be any blood." She notes that blood banks do not bill Medicare for expenses. Hospitals charge Medicare for what they pay the blood banks. Byran's and other blood organizations are working to partner with hospitals and physicians to ask Congress for higher reimbursements for blood units. Byan adds that the problem affects all aspects of healthcare, not just blood banks.

Worsening the problem, California's heavily managed care market keeps the price of blood low, so blood banks cannot charge hospitals more for their product.

Following hearings on the matter, the California state legislature passed a resolution asking their Congressional representatives and Senators to petition the federal government for a solution to the problem. The resolution asks for the "the federal government, through the Health Care Financing Administration (HCFA) to ensure that adequate reimbursement measures be implemented for all mandated safety initiatives imposed on California's blood centers, in order to preserve the public health and safety of all Californians."

Responding to the situation, blood banks have laid off workers, cut hours, and have taken out loans to survive. Unfortunately, these measures have also led to decreased access to donors. Bryan says the lack of funds corning into her organization has made it necessary to cut back on marketing efforts to recruit donors. In today's information-laden environment, there are numerous ways to reach out to potential donors, but the California banks have not been able to take advantage of them because of a lack of cash. "We're behind the eight ball," says Bryan.

Executive Director of the Delta Blood Bank in Stockton told the Wall Street Journal that currently "because of the complexity of modem life and the demands on people's time, we have to spend more" on telemarketing and promotional incentives.

Additionally, increased awareness of bloodborne pathogens is increasingly ruling out huge segments of the population as potential donors. For example, in April the FDA prohibited from donating blood those who had spent six consecutive months or more in the United Kingdom between 1980 and 1996. This measure is an effort to reduce the transmission of mad cow disease.