Over the last several years, US healthcare has been experiencing what may be the greatest restructuring and reorganization since the implementation of Medicare and Medicaid in the 1960s. It impacts every level and type of care, including companies in the transfusion medicine industry, which already faces unique issues that make successfully navigating the ongoing evolution even more challenging.
This is true even for large companies such as Blood Systems, Inc., a nonprofit organization based in Scottsdale, Arizona, that delivers blood products in twenty-four states and provides about 12 percent of the country’s blood supply. It also distributes specialty plasma-derived pharmaceutical products in forty-eight states through its BioCARE operations and, through its joint venture, Creative Testing Solutions, tests roughly 35 percent of the country’s blood supply.
Similar to other sectors of healthcare, blood service providers deal with the ramifications of reduced reimbursement and customers’ increased focus on cost of services. But there is also pressure to shift away from its traditional local community focus to meet the requirements of hospitals that are joining systems that cover larger geographic areas. At the same time, the overall blood donor base has eroded as baby boomers age and travel restrictions prevent donations from individuals returning from areas where diseases such as the Zika virus and mad cow disease are present.
According to Bhavi Shah, Blood Systems’ executive VP and general counsel, these circumstances compound the differences in legal and regulatory compliance issues that blood service providers face compared to other healthcare organizations. “Blood products are different from pharmaceuticals or medical devices, and there isn’t a lot of established case law. So, we work closely with federal regulators and constantly review applicable law and regulations to figure out how they apply to our industry,” Shah explains.
Blood Systems has addressed the shrinking donor population and changing demands of clinical customers through a combination of improved operations and a focus on mergers and acquisitions to help bolster capacity, its geographic footprint, and economies of scale. Its Supply Chain Optimization for Performance Excellence (SCOPE) program, for example, has helped streamline ongoing business activities. Donations collected at nearly one hundred locations are processed and manufactured at centralized facilities, and final products are returned to individual centers for local delivery. This approach optimizes production, maximizes capacity, and enables Blood Systems to meet the needs of large regional and national healthcare delivery networks.
“Blood products are different from pharmaceuticals or medical devices, and there isn’t a lot of established case law. So, we work closely with federal regulators and constantly review applicable law and regulations to figure out how they apply to our industry.”
Mergers and acquisitions activity also helps broaden company bandwidth, but produces additional challenges for Shah and her legal department. In 2014, when Shah joined the company as a department of one, she closed two new affiliations, one joint venture, and one asset purchase. At the start of the third quarter of 2016, Blood Systems had closed three mergers and had four more transactions scheduled by year-end. Annual revenue was projected to be about $1.1 billion, a 35 percent increase since Shah joined the company. Her team has also grown to include a second attorney and a paralegal.
With each transaction—such as a stool bank (fecal microbiota transplant for the treatment of C. diff), source plasma, and an umbilical cord storage program—Shah is responsible for assimilating new lines of business and their corresponding compliance requirements. But she also has to maintain system and administrative consistency. “Along with the level of activity that goes with mergers and acquisitions, the legal department also has to integrate systems and update and create templates that can be used across all our different business units,” she points out.
Shah began her career as a litigator, focusing on pharmaceutical and medical device product liability and medical malpractice. However, she was interested in becoming more of a corporate generalist. Shah took a position with Cold Stone Creamery, which was acquired by Kahala Corp. This move gave her experience with a national food franchisor, an interesting new challenge. However, she discovered that she missed healthcare and eventually moved to become assistant general counsel at Phoenix Children’s Hospital.
Before being considered for her current position, Shah had been unaware of Blood Systems’ extensive range of products and services, even though the company was a local community provider to Phoenix Children’s Hospital. “I discovered that I could bring my litigation and corporate experience to the company’s focus on diversification and expansion. And the opportunity allowed me to stay in nonprofit healthcare and be part of a
mission-driven organization,” Shah recalls.
As she assesses the challenges that lie ahead, Shah says the company will have to decide whether to preserve local community brands (some of which have existed for seventy-five years), cobrand, or rebrand nationally. It will also need to focus on recruiting the next generation of blood donors and building internal legal and governance infrastructures to keep pace with company growth.
Shah sees herself as looking out for Blood Systems’ best interests in every domain. “I’m the eyes and ears of the organization when we’re assessing new opportunities, accomplishing strategic business objectives, and mitigating risks,” she says.
Shah notes that she did not have extensive M&A or governance experience when she joined the company. However, her network of outside resources and trusted mentors enabled her to develop essential expertise in these areas and to become a highly effective “protector” and problem-solver in the midst of the always changing healthcare landscape.