Hospital cost-cutting forces Blood Center to lay off workers, change leaders

Health reform has forced hospital systems to find cost savings wherever they can.

Now those money-saving moves are starting to roll down hill to hospitals’ suppliers, like Indianapolis-based Indiana Blood Center.

The not-for-profit that supplies blood to central Indiana hospitals eliminated 27 jobs on Friday as part of a broad restructuring. It laid off 11 workers, most of them managers, and eliminated another 16 vacant positions.

It also revealed that CEO Byron Buhner will retire at year’s end, to be replaced on an interim basis by Dr. Dan Waxman, the Blood Center’s chief medical officer.

Also on Friday, the Blood Center announced it will join a consortium of Midwest blood centers that could help it find new customers for blood it collects each year from more than 100,000 donors.

In all, the changes are estimated to save $2.3 million per year, with about $800,000 of that coming from staff cuts.

Those cuts were necessary, Buhner said, to keep the Blood Center profitable next year when it will lose about one-third of its revenue when three hospital systems switch their main blood contracts to the American Red Cross, which offered substantially cheaper prices.

As IBJ reported previously, the Blood Center expects to lose its contracts with Indiana University Health, St. Vincent Health and Union Health System—and the $22.5 million a year in revenue those hospitals bring.

“These are difficult but necessary business decisions,” Buhner said. “This is really to secure the blood supply in central Indiana.”

The Blood Center expects to find plenty of demand for the blood it collects via the consortium it is joining, the Centers for Transfusion and Transplant Medicine. It was formed two years ago by the BloodCenter of Wisconsin, Michigan Blood and Heartland Blood Centers, which serves hospitals in the Chicago area.

Whereas the Indiana Blood Center provides blood to about 60 hospitals, the three other members of the consortium serve more than 200 hospitals. In addition, the BloodCenter of Wisconsin provides blood-related clinical services to more than 1,000 customers around the country and even some outside of it.

“This is excellent news,” said Buhner. “It sets the foundation for the Indiana Blood Center to regain its position in our community, and also to replace those units that were lost to an alternative blood provider.”

Buhner, 64, who has been the Blood Center’s CEO for 26 years, said his decision to retire was personal. He said he felt he was leaving the Blood Center in a good position financially and in the community. He said he planned to spend time with his four grandchildren and volunteering with community groups he’s previously served.

The Indiana Blood Center will search for a permanent replacement for Buhner. It will also keep its own board of directors intact, as have the other members of the consortium.

But several back-office functions will be centralized with other consortium members, including finance, IT, human resources, quality assurance, supply chain and legal.

“It makes us bigger in scale, which allows us to grow our purchasing power,” said Jacquelyn Fredrick, CEO of the consortium. “It allows us to learn from one another, share best practices. All that will help us increase, we believe, the value of the services we bring to customers.”

This is second time in as many years the Blood Center has announced job cuts. In 2013, the Blood Center let go of 45 workers because hospitals have found ways to use less blood during surgeries.

After this latest round of cuts, the Blood Center employs about 380 full-time equivalent workers.