SALISBURY TWP., Pa. - Miller-Keystone Blood Center will no longer be the primary blood supplier for Lehigh Valley Health Network (LVHN) —a financial blow to an organization already trying to manage through a historic blood shortage.
Starting with the new fiscal year in July, LVHN intends to get the majority of its blood from the American Red Cross.
"We're not ending our relationship with Miller-Keystone, we value the relationship and we want to continue it. It's just they're not our primary supplier,” said Thomas Marchozzi, LVHN’s executive vice president and chief financial officer.
Marchozzi said for nearly a decade Miller-Keystone was LVHN's primary supplier with the Red Cross as a backup, but that will soon change in an effort to save money.
He said LVHN hired a new vice president for supply chain in 2022 to make sure LVHN was paying competitive prices for all products, not just blood. That’s when the health system conducted a narrow search and bid process.
"Miller Keystone came in with a substantial increase and the American Red Cross came in with a decrease over what we were currently paying,” Marchozzi said. "The differential in pricing over a three-year contract is about $10 million — it's about $3 million a year — and the way I look at that is, in theory, I could hire 30 more nurses for that differential in price for that three-year period."
Blood center 'deeply disappointed'
Established in 1971, Miller-Keystone is a non-profit community blood center that serves as a blood provider to more than 30 hospitals in eastern Pennsylvania and western New Jersey. The hospitals include the largest ones in the Lehigh Valley that are part of the Lehigh Valley and St. Luke's University health networks.
Last April, LVHN sent a termination notice to Miller-Keystone to inform it that it would no longer be the network’s primary blood source, according to Marchozzi. That was an 18-month notice as the contract is not up until the end of June this year, he said.
Miller-Keystone told LehighValleyNews.com the change will result in a significant hit. LVHN makes up about 20% of Miller-Keystone’s total business and was one of the founding institutions of the blood center.
"It's a significant portion of our business, so from a pure revenue standpoint, it's going to have an impact," said Miller-Keystone President & Chief Executive Officer Peter Castagna.
"We're deeply disappointed regarding the decision that they shared with us, they will no longer receive the blood supply from Keystone effective July 1, 2024.”
Lines of communication
Castagna said requests for communication on the issue have not been answered by LVHN and that Miller-Keystone was not given a request for proposal or a chance to submit a formal bid on the new contract.
"It was not a letter of termination. They did send us notification that they were not pursuing the auto-renew that we had in our agreement, but not canceling our agreement," he said.
"We requested opportunities to meet, discuss, understand, you know, provide pricing, you know, for the new agreement, but without any success at all,” Castagna said.
In response to that, LVHN released this statement: "LVHN and Miller-Keystone communicated extensively as longstanding partners about a new contract, including during an extended period of exclusive negotiations starting the Fall of 2022. When those discussions were unsuccessful, Miller-Keystone submitted a bid in April 2023 as part of a transparent bidding process. We went out of our way to give Miller-Keystone every possible opportunity to avoid this outcome."
Said Castagna: “They made a decision and they told us for purely financial reasons that they were moving their business to another supplier. There's been no discussion about a secondary supplier or anything in terms of what our relationship would be going forward."
“The differential between primary and secondary, sometimes is minimal. Sometimes it's substantial."Thomas Marchozzi, LVHN chief financial officer and executive vice president
Castagna said he hopes communication can be open between the two organizations, adding “ if Lehigh Valley calls us July 1, July 2, we're going to respond. If they need an emergency delivery, because it's going to take too long from where they're going to get it from, we're certainly going to respond.”
Said Marchozzi: “The differential between primary and secondary, sometimes is minimal. Sometimes it's substantial. You go to your primary first because that's what you promised them, and if they can supply it they supply it. If not, we go then to our secondary."
LVHN shares blood supply among the different campuses so that, as Marchozzi puts it, they don't waste a drop.
"I think this is the right thing to do for everyone involved," he said. "We want Miller-Keystone to be successful. We've helped create that, and will continue there. They'll be our secondary supply of blood."
Community impact
Miller-Keystone maintains several blood donor centers and is headquartered off Schoenersville Road in Hanover Township, Northampton County.
“Seventy-five percent of the volume that we distributed to (LVHN) last year is within 12 miles of our operation center where we keep the five days' (supply) of blood. So, it's within minutes of those hospitals," Castagna said.
He said the blood center Friday morning notified donors and blood drive sponsors of the change.
"As you can imagine, it's a very emotional issue," he explained. “People that donate blood — and they've done it for decades — they know the connection. We actually have people that are donors and patients of Lehigh Valley or St. Luke's, or whoever, that understand the connection between the hospital and blood center that are going to have a visceral reaction to this.”
A spokesperson for St. Luke's said the network gets its blood supply exclusively from Miller-Keystone. St. Luke's and LVHN were among the first two hospitals to support the blood center when it was founded over 50 years ago.
The change in partnership terms with LVHN comes as Miller-Keystone has put out multiple calls for blood donors amid what many have described as the most critical blood shortage in U.S. history.
Last month, which was National Blood Month, leaders of Miller-Keystone told LehighValeyNews.com that one of the main causes of the blood shortage was the impact of the COVID-19 pandemic.
While it's estimated that 65% of the U.S. population is eligible to donate blood, only 3% actually donate regularly. Additionally, fewer than 20% of blood donations come from diverse populations, and donations from individuals in the 19-24 age bracket have declined by more than 30% since 2019, according to the blood center.
EDITOR'S NOTE: Lehigh Valley Health Network is a financial supporter of Lehigh Valley Public Media and a founding supporter of LehighValleyNews.com. LVHN has no influence on our editorial or business operations.
