Saturday, July 24, 2010

United we stand? (Musings on competition for blood donors)

This blog examines a recent news item on the effects of a poor economy and increased competition for donors among blood suppliers in the USA and muses on economic basics, as applied to blood suppliers. The blog ends with a silly skit suggesting what competition for donors might look like in Canada, where Héma-Québec reigns supreme in La Belle Province and CBS has a monopoly in the Rest of Canada. The title derives from an old hit song by the British pop group, Brotherhood of Man.

Unlike fractionated blood products, where commercial drug companies "duke it out" across the globe, competition in providing blood and blood components is something foreign to Canada and many other countries. Hence, this item from the USA recently caught my eye:

Apparently, in Pennsylvania competition for donors has become fierce: the Pittsburgh-based Central Blood Bank (a division of the Institute for Transfusion Medicine) has increased the number of blood drives in Erie County, although it doesn't supply blood to hospitals there.

"The turf battle came to a head July 1 when Community Blood Bank held an impromptu blood drive outside the Sheraton Erie Bayfront Hotel, while the Central Blood Bank was holding an indoor one. Employees from each blood bank exchanged heated words, but the two organizations haven't talked since then...."
A Community Blood Bank spokesperson is reported as saying,
  • "It's a shame. We used to work together on projects. Not anymore."
  • The Central Blood Bank declined to return the reporter's phone calls requesting comment.
So, competition for blood donors seems to have taken a nasty turn in the USA. The news item goes on to report that, with the current struggling US economy, the Community Blood Bank will lose money in 2009-10. It has not laid off employees but has increased its blood prices.
Pointedly, Community Blood Bank's website specifies that it "only draws from the areas in which it supplies."
Writing a blog on the blood system as a business in which blood suppliers compete was further promoted when the latest Journal of Blood Services Management issue came out, prefaced by a letter explaining that it cannot meet its planned quarterly schedule. In reviewing the types of articles wanted, competition was listed as a suitable topic. For more on JBSM, see last July's blog, "Transfusion lite" - Back in the USSR?

For interest, you can now read the first JBSM issue free online.
What follows is a simplistic take on complex economic issues. I'm totally unqualified on the subject, being a mere, somewhat cynical observer of private sector machinations to generate profits. But, hey, why let ignorance stop one from voicing opinions.
Canadian Blood Services (CBS) and America's Blood Centers (Héma-Québec, but not CBS, belongs) are non-profit organizations (NPOs). By definition, NPOs use profits, if there are any, to pursue goals, rather than distributing them to owners or shareholders.
To survive, NPOs and other businesses must be profitable in most years or at least break even. That means that revenues must exceed expenses. Successful companies increase revenues or decrease expenses or do both.

Decreasing expenses involves strategies such as
1. Decreasing overall staff (a significant cost) via automation, centralization, regionalization, e.g., CBS's move to only 3 blood testing centres for all of Canada and one National Contact Centre for booking donor appointments

2. Decreasing staffing costs, achieved by hiring less qualified staff who can be paid less, e.g., CBS's move to use "donor care associates" in donor screening (as opposed to RNs)
3. Hiring more part-time and casual staff whose health care, pension, and other benefits do not need to be contributed to by the employer (statistics are hard to obtain and are not usually publicly accessible)
4. Forming consortia (or merging with others) to facilitate volume purchases by the group, e.g., Group Services for America's Blood Centers
Companies can increase revenues via increased sales volume or increased prices. In Canada (and other countries with mainly government-funded national blood suppliers), increasing revenues is not an option except by negotiating with relevant governments and who knows what goes on in those dark and dirty meetings, certainly not I.
In general, strategies used by companies to increase revenues may include the following. Some of these may apply to US blood suppliers.
  • Create a demand for products, if none exists, or an increase demand (e.g., commercial umbilical cord blood banks such as Alpha Cord and Pacific Cord .The latter offers 'concierge service'!)

  • Get ahead of the curve by moving into emerging, 'latest/greatest' in-demand products, and charging more for them (so called value-based pricing) e.g.,human cells, tissues, and cellular- and tissue-based products
  • Produce a better product than competitors, preferably at a competitive price, or argue for your product's value-added benefits (e.g., leukoreduced red cells, double red cell collections, improved customer service)
  • Increase distribution area so that the number of potential clients increases (rapid, reliable long distance transportation)
  • Increase clients with loss leaders ("Like our cheap RBC? Now have we got a deal for you...."), and later promote products with high profit margins (e.g., inexpensive or free instrumentation with costly, ongoing reagents)
  • Entice more clients with a positive corporate image, e.g., promote impressions of quality products and services via public relations campaigns and community involvement
  • Develop an effective and easily recognizable brand identity for the organization, e.g., CBS's logo and tag line, It's in you to give
  • From the website: "Canadian Blood Services has updated all key brand positioning elements and personality traits. The result is a focus on positioning Canadian Blood Services as the trusted place where Canadians can share their health and vitality to help others regain theirs."

    Since it's summer, and the city where I reside had its "silly summer parade" on Canada Day (July1), here's a skit that I hope makes you laugh. It's totally tongue in cheek and written with affection for the characters involved. My apologies to all concerned for taking such liberties.
    Just as the Pittsburgh's Central Blood Bank made an apparent raid into the territory of the Community Blood Bank, I could not help but wonder, WHAT IF Héma-Québec made a similar raid from Hull, Quebec across the river into Ottawa, Ontario, the site of CBS's head office? (Rough translation follows the skit.)
    • Graham (shocked): "Francine, quelle surprise! Mais, que fais-tu ici?
    • Francine (playful): "Bonjour, Graham. Ça Va?"
    • ===================================
    • Graham (puzzled but now more formal): "Mais, pourquoi, Francine? Vous êtes sur 'my turf'!"
    • Francine (smiling): "Oui, mais nous sommes toutes les canadiennes, n'est-ce pas?"
    • ===================================
    • Graham (ashen-faced): "Merde, Francine! J'accuse! N'avez vous aucune pitié?"
    • Francine (chuckling with a wicked gleam in her eyes): "Graham, c'est un signe des temps. Vive le Héma-Québec! ...(long pause...) Vive le Héma-Québec libre!"
    • ===================================
    • Graham (sweating profusely): Mindy, aidez-moi, s'il vous plait! Notre amie, elle est....'bonkers'! Il doit être son expérience avec ces Européens fou au ISBT!"
    • Mindy (ruefully shaking her head and with a mischievous glint in her eyes): "Désolé, mais vous êtes vous-même, mon ami! Voulez-vous le numéro de téléphone de Heather?"
    • Graham (shocked): "Francine, what a surprise! But what are you doing here?
    • Francine (playful): "Good day, Graham. How goes it?"
    • ===================================
    • Graham (puzzled): "But why, Francine? You are on my turf!"
    • Francine (smiling): "Yes, but we are all Canadians, no?"
    • ===================================
    • Graham (ashen-faced): "Sh_t, Francine! I accuse! Have you no pity?"
    • Francine (chuckling with a wicked gleam in her eyes): "Graham, it's a sign of the times. Long live Héma-Québec! ...(long pause...) Long live a free Héma-Québec!" (see historical relevance in Canada)
    • ===================================
    • Graham (sweating profusely): "Mindy, please help me! Our friend, she is....bonkers! It must be her experience with those crazy Europeans at ISBT!"
    • Mindy (casually shaking her head and with a mischievous glint in her eyes): "Sorry, but you are on your own, my friend. Do you want Heather's phone number?"
    .............END OF SILLY SKIT.........
    Doesn't a donor competition scenario, in Canada or anywhere, seem nuts? Everyone knows the maxim, united we stand, divided we fall, but is a Pennsylvania blood center ignoring it? Here's a sugar-sweet song version of the axiom:
    Another scenario comes to mind. WHAT IF the Brits made a raid across the Atlantic to poach American blood donors. As you ponder, consider lyrics for an updated version of this catchy Johnny Horton mega-hit, The Battle of New Orleans (funky version from Ed Sullivan show)
    For a serious glimpse into CBS's view of its business management strategies:

    1. The transformation of CBS. Strategy management to create results .....[Source: Sophie de Villers, Balanced Scorecard Forum in Dubai, UAE , March 2010]
    2. Embedding a results-based management culture / Moving modern management forward (Speaking notes) ....[Source: Ian Mumford, Performance and Planning Exchange Conference, May 2003]

    As always, the views are mine alone. Comments are most welcome BUT, due to excessive spam, please e-mail me personally or use the address in the newsletter notice.