I’m corresponding with a healthcare economist (that can’t be good) about framing the medical, insurance, and public health value of blood in light of historic and future safety and regulatory imperatives. The goal is to describe our business and how to make it sustainable. When Centers for Medicare and Medicaid Services (CMS) proposed cuts (≈30 percent on average) to outpatient reimbursement for blood were published in the Federal Register, adding to our fiscal miseries, my old pal asked:
“Why is the market for human blood not creating the efficiencies among the suppliers that the demanders want, yet leaving them a normal [sic] profit?”
My answer …
“I think what is happening, re: reimbursement is multifactorial. The new Hospital Outpatient Payment System cuts are egregious, but even under the best of circumstances updates to the market basket for blood take two to four years and don’t reflect our real costs. Also, maybe hospitals have provided bad data, CMS has applied their formulae wrongly, or that the sampling frame is biased, or all of the above.
More important, is that even if hospitals know what’s provided for blood in the CMS market basket, they don’t care. They will push for lower prices in contracts because that leaves them more of the pie. CMS paying THEM for what WE do is a big piece of the problem. But, it must be said, that we are suicidal – we tell docs to use less of our products and keep bidding prices lower to maintain hospital contracts and service relationships. The margins on the core of our business (components) are vanishing.”
The economist responded:
“There is suicidal behavior going on or something else … Rather than suicidal, it could just be stupidity … How come Boeing and Lockheed Martin can compete for contracts with overbearing government safety oversight and not put each other out of business?”
My response to his response: “Suicide is painless, it brings on many changes …” *
My bias is the “changes” to be brought include losing the comparison to Boeinget al. We don’t sell seats or make widgets. We shepherd a critical medical and public health asset; a safe and abundant blood supply appropriately seen as a public utility like electricity and water. We should figure out how to lose the “purely” market-based economic model. If we are correct in our insistence that we are “different” from other healthcare vendors, (in so many dimensions related to our donors, “products,” and services), then we need to make that case to those who hold the purse strings – third party payers and Congress.
*Apologies to M*A*S*H. 20th Century Fox and Aspen Productions. 1970.
Louis Katz, MD, Chief Medical Officer, email@example.com