The local Red Cross Blood Services division lost $832,000 in the first three months of the current fiscal year, prompting the nonprofit agency to impose an across-the-board wage freeze, five layoffs and other savings measures.
The losses were outlined by Executive Director David L. Simms in a Sept. 30 letter that also included some cost-saving proposals.
Mr. Simms' letter said Red Cross Blood Services of the Greater Chesapeake and Potomac Region was facing "serious financial difficulties." The agency lost $747,000 in July and August, he said. And he warned that if the trend continued, the agency would lose $4.5 million over a year -- a loss "from which we would be unable to survive."
Yesterday, the losses were downplayed by agency officials, who said the financial picture brightened considerably in September and continued to improve this month.
Spokeswoman Pat Lakatta said Red Cross Blood Services, which covers northern Virginia, Maryland and central Pennsylvania, has implemented cost-saving measures since the letter was mailed. For example, it has cut out leased autos and car phones for managers, eliminated outside consultants and barred catering for staff functions, she said.
She said the agency also has laid off five of its 800 employees -- all management-level positions -- and will let an undetermined number of other vacant positions go unfilled. Two other employees have been demoted, she said.
Ms. Lakatta said the agency expects to save $900,000 by streamlining its work force and that the pay freeze will save $600,000.
"I think people are optimistic that we're putting everything into check," she said. "Hopefully these measures will curtail some of the spiraling costs."
Mr. Simms could not be reached for comment. He is vacationing this week in Jamaica, an official said.
In his letter, Mr. Simms said he would meet payroll expenses with a $1.9 million line of credit extended to the agency. He also said $1 million would be saved by improving the efficiency of blood-collection practices.
Red Cross Blood Services is negotiating a three-year collective bargaining agreement with Teamsters Local 311, which has 50 members who drive and assist on mobile units, and work as supply clerks in storage facilities.
The Red Cross is asking the union to accept a pay freeze for all three years of the proposed contract, said Local 311 negotiator Bryan Griffin. He said the agency also wants to use outside contractors for some of the work currently done by union members.
A federal mediator is working with the parties.
"We have, at this point, been willing to accept a pay freeze for one year, but not for three years," said Mr. Griffin, adding that the agency complained of financial problems during the last negotiations. The current three-year pact expires Monday.
He said Red Cross Blood Services has run into difficulties because it does not operate efficiently.
"They're running in the red, they have a deficit, and they're
asking everyone to share in biting the bullet," Mr. Griffin said. "However, they speak in large generalities."
Mr. Simms' letter blames the current fiscal problem on three factors: a reduction in overall demand by area hospitals in July, a drop in the orders for products such as platelets and plasma, and the unprofitable sale of red blood cells.
The demand for platelets -- small particles that help the blood to clot -- declined in July but has since returned to previous levels, said Sue Wright, technical director for the hemapheresis center at Hopkins. Hemapheresis is the process by which platelets are withdrawn from blood, and the remaining blood components returned to the donor's bloodstream.
In July, demand was about half the level of the previous July, but it has increased in each subsequent month. Platelets are used primarily to help cancer patients endure chemotherapy.
She said there is no apparent reason for such fluctuations in demand. "We are in a business that doesn't know seasons."
Hopkins, the region's biggest user of platelets, supplies about half its patients needs through its own collection, and purchases the rest from the Red Cross. When demand suddenly dropped in July, it bought little from the Red Cross. Since then, its purchases have rebounded.
Dr. Paul M. Ness, the blood operation's principal officer, said the drop in demand from the 80 hospitals served by the agency in July was an aberration. He said demand in creased in September and again this month.
Dr. Ness, who also is director of transfusion medicine at Johns Hopkins Hospital, said hospitals are trying to reduce their need for blood. One measure is to use a drug -- erythropoietin -- that helps the body produce red blood cells.
"What Red Cross Blood Services has to do is to continue to try to meet demands, using as many efficient processes as it can . . " he said.