The American Red Cross is warning hospitals that the price of blood will soar on July 1 in an attempt to catch up with 10 years of underpricing.
Although the costs will vary by region and hospital, a unit of blood, which on average sells for $130, will jump by 31% to $170, said Jacquelyn Fredrick, senior vice president of biomedical services at the Washington-based Red Cross.
The not-for-profit blood service, which collects about 6.5 million units of blood annually and supplies half of the nation's blood needs, has been a break-even operation for much of the past decade, Fredrick said.
Because the pricing has barely covered costs, the Red Cross has borrowed more than $300 million to fund improvements, she said. The blood services division operates on a $1.8 billion annual budget.
Seeking marginal improvements
The Red Cross would like to have a 5% operating margin-much the same as what most hospitals are averaging, Fredrick claimed. Under the new pricing, the projected budget for the fiscal year beginning in July will have an $80 million cushion-a 3% margin, "which is still well under hospital margins," Fredrick said.
"As a not-for-profit, we all have to be responsible financially," Fredrick said. "This increase will set us on the road to financial sustainability. We need the margin to invest in the future. There are huge challenges facing blood in the next decade."
Regina Logan, supervisor of the Red Cross-supplied blood bank at 370-bed Cooper Health System in Camden, N.J., said her organization is facing an overall 16% increase, although she won't know the details until early this week. Logan said she has seen small increases in the price of blood in the past 10 years, but "nothing this big."
"It's a real big increase that is going to have a big impact on the budget, and I don't know how insurance companies are going to react to that," Logan said.
The price increase is just one part of a three-pronged national strategy for the Red Cross. In addition to the price increase, the blood supplier is looking to squeeze $100 million in ongoing savings from its operations in the next few years, Fredrick said. The Red Cross also will be soliciting the philanthropic community for funding, she added.
Until now price increases for blood have been "flat to declining" and well under the medical price index-"nowhere near the cost increases we've seen in pharmaceuticals," Fredrick said. Meanwhile, the blood services division has been steadily adding new and costly tests to ensure the safety of the blood supply. In 1985, two tests were routinely performed-for syphilis and hepatitis B-she said. Today there are a dozen tests screening the supply for HIV, hepatitis C and several viruses. And more tests are in the pipeline.
A national movement toward filtering white blood cells from the blood supply, called leukocyte reduction, accounts for part of the increase (Feb. 19, p. 60). Although the process can add as much as $40 to the cost of a unit of blood, the Red Cross is filtering about 80% of the blood it collects and already had raised its prices to reflect that-though not sufficiently, Fredrick said.
The price increase has nothing to do with operational changes that came after a 1993 court-enforced consent decree after an FDA probe of the Red Cross' quality and safety practices, Fredrick said. Also, some independent blood centers charged several years ago that the Red Cross undercut their prices in a bid to dominate the market, but the Red Cross vehemently denies that there ever was such a strategy.
"That's ridiculous. This is not about market share," said Chris Thomas, a Red Cross spokesman. "We were trying to provide safe and available blood."
Smaller hikes at independents
The nation's independent blood centers, which supply the other half of the nation's blood needs, are working under the same constraints as the Red Cross, said Jeanne Dariotis, president of America's Blood Centers, Washington, an affiliation of the nation's independent, community-governed blood banks. But rumors of the "substantial" price increase planned at the Red Cross are a concern, she said.
No such price increases are planned for Southeastern Community Blood Center, Tallahassee, Fla., the blood center where Dariotis is chief executive officer, she said. The cost of a unit of red blood, now selling for $82, will increase slightly to $84 on June 1 to cover the cost of a research test to screen for early cases of HIV and hepatitis C.
Similarly, James Rutledge, president and CEO of Coffee Memorial Blood Center, Amarillo, Texas, said the rumored increases seem way out of line with what independent blood centers such as Coffee are charging.
Coffee, which draws 25,000 units of blood each year to supply 24 counties in the Texas panhandle, plans a small increase on June 1 to $122 per unit from $119.50 to defray the costs of leukocyte reduction, Rutledge said.