Blood Bank CEO: Export contract about inventory control, not financial benefits

In early summer, California blood banks had more Alaskan O negative blood than Anchorage.

After moving into its $45.7 million, 57,000 square foot building earlier this year, the Blood Bank of Alaska entered an agreement with LifeStream, a California blood center, to sell 100 pints of blood per week, all the while ramping up recruitment for more donors in the face of sporadic statewide shortages.

The building was funded with $32.8 million from the state capital budget, an $8.5 million loan from the Alaska Industrial Development and Export Authority, and a $3 million donation from ConocoPhillips.

As recently as mid-June, Alaska had only five units of O negative blood across the state, according to Karen Lakey, Alaska Regional Hospital’s lab director. She said the hospital had no reserves, and nothing but a hope and prayer.

“We don’t have the room to store a lot,” Lakey said. “The Blood Bank of Alaska was calling on partners in the Lower 48, and they were experiencing shortages as well. We were crossing our fingers that we didn’t have anything catastrophic happen. It’s really scary.”

The situation is not uncommon, according to both Lakey and the Blood Bank of Alaska.

“That has happened a couple of times this summer,” said Lakey. “That’s not unusual. A couple times a year there’s a perfect storm where hospitals all over the state are experiencing odd things happening.”

Throughout the summer, the bank has asked Alaskans to step up donations through advertisements on local television channels including a Fox 4 news spot from June.

“According to the Blood Bank of Alaska, an increase in local area traumas has caused a critical need for all blood types,” read a July 14 article on YourAlaskaLink. “They say there is a particular need for blood donors with type O negative, the universal donor.”

Bob Scanlon, who has been the Blood Bank of Alaska’s CEO since 2012, said the export agreement makes money, but only for the increased costs of recruiting more donors and drawing their blood.

“If I had to do this again, I would sign the contract again. It’s the responsible thing to do,” said Scanlon. “What we did is indicative of what any blood center would do in the strategy of how to pursue proper management of the blood supply.”

Type O negative and export agreements

The Blood Bank of Alaska is shipping blood to a California blood center, LifeStream, which has centers in San Bernardino, Riverside, Ontario, High Desert and La Quinta.

According to Scanlon, the contract began May 1 and ends in September. LifeStream purchases 100 units of blood from BBA per week, to be delivered from Alaska to California.

In the last four years since Scanlon took over as CEO, BBA has not had any export agreements, though Scanlon notes that there have been such agreements in the past.

“There have been other export contracts in the history of the blood bank,” said Scanlon. “This is very, very routine and very, very normal.”

Blood centers treat the price of blood as proprietary business information and do not reveal prices. In 2014, ABC News reported that the national average price per pint of blood was between $130 and $150, though costs are known to vary widely across the nation.

LifeStream’s CEO, medical director and president Dr. Frederick Axelrod said these types of agreements are common for blood centers in urban areas like New York City, Los Angeles, Washington, D.C., or San Francisco, where the need for blood outweighs the local supply.

Apart from BBA, LifeStream buys blood from three other blood centers in less densely populated areas like Denver, Minneapolis, or Idaho, where donors are more plentiful in comparison with the demand.

Because blood has a shelf life of 42 days, Axelrod said these purchase agreements can benefit the selling party.

“This really ensures that the BBA almost has no expiration of the product given by Alaska donors,” he said.

Scanlon gives the same explanation. Because blood expires, BBA has to manage inventory carefully and uses a statewide inventory rotation system much like a grocery store dairy fridge rotation following FIFO, an industry jargon for “first in, first out.”

The Anchorage facility circulates a mix of blood types to hospitals. To rural health centers, it delivers only universal donor O negative blood.

Rural hospitals don’t always use their blood, however. When supplies near their expiration date, BBA asks them to send their blood back to the center.

LifeStream buys this blood, which Scanlon calls a win-win situation.

“The hospitals don’t necessarily want these because they’re fully stocked,” said Scanlon. “It makes sure that that gift is used responsibly. And it ensures we can recoup some of the costs we took on when we ramped up our collections. Even though we didn’t use it, we still took on the cost of recruiting donors, processing. We are able to recoup some of our cost, which means the blood supply here can remain at less cost.”

Shortages

Lakey of Alaska Regional said she has not sensed any rise in trauma injuries this summer, while BBA and Providence Medical Center say they have seen evidence.

Alaska hospitals typically see increases in injuries during summer months, according to Mikal Canfield, director of communications for Providence Medical Center. This year there have been more injuries than the year before, but Canfield said that does not necessarily correspond to an increased need for blood.

“We have seen an 8.5 percent increase in traumas from January through June over last year,” said Canfield. “Important caveat: a person who’s a trauma patient isn’t always who will require blood. Hip injuries, broken bones, they’re all considered trauma patients. The increase doesn’t necessarily mean they require blood.”

Regarding instances of blood shortages for hospitals, Canfield issued a separate statement.

“Some of the information you requested is included as part of Providence’s contract with the Blood Bank of Alaska and so is proprietary information,” reads the statement. “What we can say is the Blood Bank of Alaska and Providence Alaska Medical Center have an excellent relationship and collaborate to meet the needs of our patients.

“Providence regularly communicates with the Blood Bank of Alaska, informing them of product needs or increased usage. Blood Bank of Alaska maintains inventory to ensure Providence patients receive the lifesaving blood they need.”

Both in the state and nationally, blood centers and hospitals are short on type O negative blood, the “universal donor” type in highest demand by medical centers across the country.

Anyone can use O negative blood, but O negative blood type patients can only receive blood from another O negative donor. AB positive blood, in contrast, is the “universal recipient” blood type.

As part of the 100-unit per week agreement with LifeStream, BBA sells 12 units of O negative blood per week along with a mix of other blood types.

An Alaska Industry Development and Export Authority loan application projected Alaska’s need at 25,000 units per year, or roughly 2,083 units per month, though Scanlon said the bank is revising that number.

Combined with the 400 units per month now under contract with Lifestream, BBA must now collect about 2,483 per month.

Scanlon said the typical monthly blood input is 2,300 to 2,400 units, or about 92 percent to 96 percent of its total need for the projected state supply and its contract.

In short, the BBA must take in about 19.2 percent above the total projected need for Alaskans to meet its contract with Lifestream.

Scanlon would not release any documents to the Journal to support the estimate of monthly donations, claiming both proprietary and confidential information.

“We just don’t release that kind of information,” he said.

Scanlon said the agreement does allow for BBA to withhold portions of its delivery if needed. However, the bank does have to make up the difference in later deliveries to account for an overall 100 unit per week total.

“It’s only when there’s not a use for that blood that we export it,” said Scanlon. “There are times where we’ve shipped out less than the 100 units to LifeStream because there was usage. Then in later weeks there isn’t so much usage and we can ship out the surplus rather than having to throw it away.”

New building

and AIDEA loan

BBA’s export contract with LifeStream coincides with the bank’s move to a new building and the attached costs.

The Blood Bank of Alaska has received more than $47 million in grants and loans from the state and corporations for the construction of a new facility on Airport Heights Drive near Alaska Regional Hospital.

Between 2008-2014, the State of Alaska granted $32.8 million to the Blood Bank for the facility’s construction.

The Alaska Industrial Development and Export Authority, or AIDEA, awarded another $8.5 million to BBA after “anticipated funding source not materializing,” according to BBA’s loan application referring to state funding that was denied.

Former Gov. Sean Parnell used his line item veto to reduce proposed capital budget appropriations for the BBA building by a total of $10.8 million over two of the five fiscal years it was funded.

ConocoPhillips gave BBA $3 million in grants to be paid out over a period of years ending in 2017.

After a recent $300,000 grant from the M.J. Murdock Charitable Trust, Scanlon said the loan is down to $8.2 million.

According to the AIDEA loan numbers, the monthly interest-only payment was as high as $46,000 recently, but lowered after having the $300,000 Murdock grant applied to the principal.

“We are in the process of paying on that interest,” said Scanlon. “It comes to around $40,000.”

Once they sell the old building and receive the rest of the scheduled ConocoPhillips payments, Scanlon said the outstanding loan balance will go down to $3 million.

“We have another grant in the wings. All of that is capital that we’ll receive,” Scanlon said.

The old building has been on the market for several years and does not yet have a buyer. Scanlon said he has “several interested parties.”

Certain cash-making operations are also not yet up and running.

In its loan application to AIDEA, the Blood Bank said it would establish a donor testing facility in the new building as a revenue generator. BBA currently has to ship samples of its blood to Minneapolis for testing, leaving a two-day testing lag from the time of initial donation. With an in-house facility, the bank could test its own blood as well as host other tests for hire.

“The donor-testing lab would open up new sources of revenue for BBA by potentially serving blood banks in Hawaii and the Pacific Rim countries,” according to a whitepaper presented by the Blood Bank of Alaska in 2016. “Testing services for one additional blood bank would create annual revenue in the amount of approximately $700,000-$1,000,000.”

The Blood Bank has not yet bought this equipment nor begun hiring staff for its management. Scanlon said the state donor testing facilities are in the works, and that they were not a deciding factor for any of the grants or loans BBA received.

“That was not the intent from the very beginning,” Scanlon said. “When we went to the Legislature we explained that to them. The building facilitates us having our own donor testing facility in house. We’ve already had discussions on that.

“We’ve also met with industry. We’ve pretty much decided on the first platform we will purchase in order to facilitate being an in-house testing facility. The effort kicks off in November. We’re very rapidly moving to bringing the donor testing and getting it up and running. From start to finish, anywhere from a year and half to two years to get that up and running.”

Need for a new building

BBA had appealed for the new building for the better part of a decade, both as a contingency against emergencies and as a release valve for ever-tightening federal regulations.

According to U.S. Food and Drug Administration records, some regulations seemed particularly problematic in the old building. Workflow in the old building was cramped, and blood often crossed paths of possession in designated zones. The new building is more in line with FDA regulations.

“It’s up to FDA specs,” said Scanlon. “They’ve been here, they were happy with it. The staff are happy. The most important thing is that it makes it more efficient. We’re not having to layer work effort over each other. We no longer have four locations spread out among town. We have to have an orderly progression and orderly handoffs.”

In the past decade, Alaska’s only blood bank received a relatively greater number of Food and Drug Administration citations than the rest of the state’s medical institutions, with a higher average citation rate than other blood and tissue centers in its FDA industry category, including 10 from the 2015 inspection.

Last year’s citations are largely procedural, and range from failing to fix a printing system malfunction to technicians performing multiple blood tests using techniques they’d previously failed to qualify for in proficiency tests. Blood Bank of Alaska representatives said the violations were mostly due to documentation flubs or in some cases regulations clashing with the old building’s design.

Ashere Chait, a media representative for the blood bank, said the violations are neither severe nor indicative of a recurring pattern of negligence or malpractice, and that the spike in the 2015 citation rate comes from BBA using a new tracking system for its blood components.

“Every citation is a big deal,” said Chait. “But in the time I’ve been here I don’t think we’ve ever had what could be considered a serious violation. In 2015, we switched our operating system that fuels everything we do from collections to tracking our blood from the source through all the steps along the way. With that there were many process changes from BBA. That had bearing on some of the documentation issues.”

Some violations directly related to BBA’s appeal for a new building.

BBA’s old building was constructed prior to the 1980s AIDS outbreak when FDA regulations for blood management changed. Over the years it underwent four renovations to keep up.

Scanlon said certain violations would have been entirely eliminated in a new building where the floor plans follow a “figure eight” flow design to avoid blood being crossing too many areas after being taken.

“It’s really hard to reorient without the space,” said Scanlon during a tour of the new building while it was still under construction in 2015. “Technology has a square footage. The building we’re currently in just does not make the grade.”

By Scanlon’s admission, the new building will not lower healthcare costs for Alaskans. Fiscal savings aren’t the point as much as ensuring up-to-date, earthquake proof building, he said.

• DJ Summers is a reporter for the Alaska Journal of Commerce. He can be reached at daniel.summers@alaskajournal.com.