A feud at the Red Cross

D’ARCY JENISH September 9 1996

A feud at the Red Cross

D’ARCY JENISH September 9 1996

A feud at the Red Cross



The photo display, which commemorates the 100th anniversary of the Canadian Red Cross Society, speaks volumes about the proud past of a venerable national institution. Located in the society’s downtown Toronto Blood Centre, it is a tribute to the thousands of ordinary Canadians who have given the “gift of life,” and to the celebrities— from former prime minister John Diefenbaker to American jazz legend Louis Armstrong—who have supported the society over the years. But amidst the centennial celebrations, the Canadian Red Cross is facing an unprecedented crisis. Next week, federal, provincial and territorial health ministers will meet in Toronto to consider a proposal to turn over control of the country’s blood system to an entirely new, publicly owned, nonprofit corporation. In advance of that meeting, Maclean’s obtained confidential letters from senior Red Cross officers to top government officials, including federal Health Minister David Dingwall, which reveal that the blood collection service is beleaguered by mounting legal challenges, potentially huge financial obligations and growing hostility from senior health ministry officials across the country. Indeed, the problems have become so acute that even the society’s own managers admit that an overhaul is inevitable. “Decisions must be made,” Red Cross secretary general Douglas Lindores told Maclean’s. “This is the time to settle these things and get off to a clean, new start.”

That will be no easy task. The financial crisis confronting the Red Cross is rooted in the tainted blood scandal of the 1980s. More than 1,000 people were infected with the human immunodeficiency virus, which causes AIDS, after receiving contaminated blood or blood products from the Red Cross—a tragedy that caused Ottawa to pay more than $100 million in compensation to victims and led to a still-uncompleted public inquiry under Ontario Court of Appeals Judge Horace Krever. Now, according to the letters, the society faces new claims for compensation, which could exceed $230 million, from an estimated 12,000 people who contracted hepatitis C, a frequently fatal liver disease, through the blood supplies.

The letters also show that the Red Cross has been unable to obtain long-term financing from its principal lender, the Toronto-Dominion Bank, for $106 million in safety-related improvements to the blood system. “They’ve hit a stone wall,” said one medical professional who has worked as a liaison between the Red Cross and government, and who requested anonymity. “The banks won’t lend them the money they need to modernize their system.”

Besides outlining the magnitude of the organization’s problems, the Red Cross letters contain demands, threats and ultimatums. Senior

managers have repeatedly requested federal and provincial financial assistance. Alternatively, they have threatened to reduce blood supplies or cancel the safety-related projects. Finally, in a letter dated July 29, Lindores informed Dingwall that the Red Cross may get out of the blood business unless a solution is reached by Sept. 30. “We will do our best to ensure uninterrupted investment in the safety measures and no reductions in service levels,” he told the health minister. But he also added, ‘We will, of course, do whatever is necessary to force this issue to resolution.”

In fact, a potential resolution, prepared by a committee of civil servants, medical professionals and consumer groups for the Sept. 10 to 11 ministers’ meeting, could see the familiar Red Cross logo dis-

Confidential letters reveal a dispute 5 about blood policy

Can the system be fixed ?

A confidential poll conducted on behalf of the Canadian Hemophilia Society between June 22 and July 17 found that Canadians believe fundamental changes are needed to restore public confidence in the country's blood system. But the 2.015 respondents were more divided on what should happen to the Red Cross. Some key findings:

ûro/ iavor regular audits Ws /0 t0 ensure the safety of the

blood system

qao¡ favor developing strict t*1 '® medical guidelines on the

use of blood and blood products in Canada

0)0/ support fully releasing the ** /0 report of the public inquiry

into the blood system by Justice Horace Krever

/7)0/ favor allowing Canadians

to make self-directed blood donations for their own surgery or for family members of their own blood type

r A0/ support establishing "Pr '® a totally new organization to

administer blood collection in Canada; 45 per cent are opposed

appear altogether from the blood business. Maclean’s has learned that the committee has recommended that an entirely new agency take charge of the system. The committee has hired a national accounting firm to estimate the cost of purchasing the 17 Red Cross blood treatment and distribution centres. Alternatively, the Red Cross could operate the system as a subcontractor to the new agency. “The big question for the ministers,” said Durhane WongRieger, president of the Montreal-based Canadian Hemophilia Society and an adviser to the committee, “is What about the Red Cross? Is it in or is it out?’ ”

According to several sources, Red Cross officials have been vigorously lobbying federal and provincial health officials to preserve their current role. But some observers note that recent opinion polls, which show public confidence in the blood system diminishing in the

wake of the tainted blood scandal, may give the health ministers the resolve they require to oust the society. A confidential public opinion poll, conducted in July by Toronto-based Environics Research Group Ltd. and obtained by Maclean’s, found that one-third of Canadians have little or no faith in the existing system. The survey, commissioned by the Canadian Hemophilia Society, also revealed that fully half of Canadians believe the Red Cross should be replaced.

At the same time, senior management of the Red Cross has alienated another crucial constituency—the provincial civil servants who deal with the society on behalf of their respective health-care systems. In 1991, the federal government created the Canadian Blood Agency to replace the Canadian Blood Committee, and gave the new organization a clearer mandate to control costs and broader powers to negotiate the purchase of products from the Red Cross. (In fact, the CBA will spend about $176 million on such purchases during the current fiscal year.) But according to one former CBA official, the agency and the Red Cross have had a stormy relationship. “Their attitude was we don’t need you, we’re not going to pay any attention to you,” said the official, who asked not to be named. ‘When we posed questions, we were told to get lost. This was the blood business and they knew the blood business.”

Lindores attributes the problems to the inability of the blood agency’s provincially appointed board members to make decisions. ‘The time involved in negotiations and the speed of decision-making is unbelievably slow,” he said. “Most of the difficulties arose because arrangements, which we negotiated with the staff of the CBA, often with extreme difficulty, have not been approved by their board of directors. I have never negotiated an agreement that has been rejected by my board.”

Given the internal conflicts and financial pressures, the country’s health ministers announced last April that they were going to reform the blood system without waiting for Krever to report. The Toronto-based inquiry, which has cost more than $13 million to date, wrapped up two years of testimony in December, 1995, after hearing from 460 witnesses across the country. But it has been delayed for months because the Red Cross, the federal government, six provinces and 31 former health ministers launched a legal challenge—largely unsuccessful—to prevent Krever from blaming individuals in the scandal. £ Krever has now scheduled a final set of public 1 hearings for October, after which he will accept Ï submissions on the future of the system, and E write his report.

But some observers question whether anything useful will come out of the inquiry. “My concern is that Krever spent too much time analyzing the problems of the early 1980s and very little time on the current system,” said WongRieger. “He can draw some conclusions about what went wrong, but we need a new system.”

The problems with the status quo are abundantly evident in the correspondence between the Red Cross, the CBA and government officials over the past year. On Sept. 29, 1995, Lindores informed Scott Campbell, an assistant deputy minister of health in Ontario, that the Red Cross faced combined operating and capital deficits of $50.1 million in fiscal 1995-1996, even though the society’s funding—which comes from provincial governments—had been increased to $168.3 million thatyear, up from $151 million in 1994-1995. Lindores said the Red Cross had developed an emergency plan that involved reducing services at its 17 blood centres for the remainder of the fiscal

year and “could result in a 15to 20-per-cent cut in blood supply.”

In a letter dated Feb. 14, 1996, Lindores warned Kent Foster, an assistant deputy minister with Health Canada, that unless the Red Cross received additional funding of close to $40 million, it would suspend work on two critical safety-related projects, effective April 1. One involves the development of a new computer system that would allow the Red Cross to trace the flow of blood from donors to recipients and, if necessary, quickly halt the distribution of contaminated supplies. The other consists of the adoption of some 800 new operating procedures at the blood treatment centres to bring Canadian practices up to the level of American and other international standards. The cancellation of these projects could have dire consequences, Lindores said. “Canadians expect the Red Cross to meet modern industry standards,” he informed Foster. “An inability to do so would certainly call into question our willingness to continue as operator of the blood program.”

Lindores sent a copy of the letter to CBA executive director Bernard Doyle, who promptly fired off a testy response. “I do not understand your need to raise these issues with

Health Canada before they have been fully explored between the Red Cross and the CBA,” Doyle wrote back. “In fact, I find it puzzling that you have taken this alarmist action.” He went on to say that CBA officials attributed $10 million of the society’s $50-million deficit to “participation in the Krever inquiry, including not only direct legal fees, but also public relations exercises.” Moreover, the blood agency had concluded that another $7 million of the shortfall was due to a self-insurance fund the Red Cross set up without

CBA knowledge or ap-

proval. Finally, Doyle pointed out, the Red Cross had received a seven-percent increase in its operating budget for 1995-1996, and stable funding for 1996-1997 “in the face of massive, ongoing cuts to health-care expenditures across Canada.”

Outside consultants who recently assessed the Red Cross safety-related capital projects have raised a series of troubling questions about escalating costs. For example, the committee that is advising the ministers on restructuring the blood system hired an Ottawa firm, the CQI Group, to examine the new computer information system. A copy of CQI Group’s confidential report, made available to Maclean’s, reveals that the cost of the system has skyrocketed to $53.8 million from the original 1991 estimate of $10.5 million. “The project management has been poor,” the consultants concluded in their report. “The schedule has never been met since the start of the project. It is very likely that the project will overrun its budget, given past history.”

Finally, just as the country’s health ministers and their senior officials were digesting this information, the Red Cross hit them with another bombshell: it is seeking assurances that the provinces and territories will pay for damages that the courts may award to people who contracted hepatitis C through blood supplies. In an Aug. 8 letter, Red Cross president Janet Davidson informed all deputy health ministers that the number of lawsuits filed by victims in recent months has risen sharply. “It is estimated that the claims for which the society will be seeking reimbursement from the provinces and territories may be in excess of $230 million,” Davidson wrote.

Most observers agree that hepatitis C liabilities must be dealt with before a new national blood agency commences operations—if the country’s health ministers go that route. But as the acrimony and mounting financial woes in the Red Cross correspondence reveal, settling with the victims is just one of many hurdles that must be cleared before a new era can begin for Canada’s troubled blood supply system. □