Gift of life worth millions to donation organizations
By Andrew Conte and Luis Fábregas
Published: Saturday, Aug. 31, 2013, 10:10 p.m.
When a donor dies, health workers rush to salvage what they can: a liver, a heart, skin tissue.
Each item has an important purpose — and a price tag.
Human body parts fuel a multibillion-dollar industry in which the fervor to save a life obscures the money-making opportunities.
Donor families get thank-you cards but not much else.
Their selflessness “makes it more difficult to come to terms with that profit-taking,” according to Dr. Byers “Bud” Shaw Jr., a transplant surgeon who trained under pioneer Thomas Starzl and is a professor of surgery at University of Nebraska Medical Center.
A Tribune-Review investigation of the nation's independent organ procurement organizations, or OPOs, reveals a lucrative trade with little financial oversight. Based on 2011 federal filings and tax documents, the Trib found:
• Nonprofits amassing wealth: Many organ procurement organizations post surpluses each year, padding their combined savings to $929 million. Tampa-based LifeLink Foundation, operating in Florida, Georgia and Puerto Rico, had $13 million in 2011; LifeNet Health in Virginia Beach led the nation with a reserve exceeding $95 million. Revenues for 51 OPOs totaled $1.2 billion, including nearly $947 million directly attributed to organs and tissues.
• Six-figure salaries: Top executives averaged $320,000 in total compensation in 2011. The president of Mid-America Transplant Services in St. Louis led at nearly $900,000, which included deferred compensation and a lump-sum payment.
• Nepotism and board members paying themselves: LifeLink paid its top two executives a combined $1.1 million and four relatives $600,000 more. Twin brothers who founded the Los Angeles nonprofit OneLegacy, and remain board officers, made a combined $142,000.
The Trib examined financial records for 51 of 58 U.S. procurement organizations. Seven organ recovery nonprofits exist within hospitals; the government could not provide detailed cost reports for them.
Susan Stuart, CEO of the Center for Organ Recovery & Education, the O'Hara-based organization serving Western Pennsylvania, West Virginia and one county in New York, insists organ and tissue recovery is highly regulated.
Each nonprofit's directors set salaries, reserve levels and spending priorities, she said.
Beyond that, the nonprofits police themselves voluntarily through the Association of Organ Procurement Organizations, a Virginia-based trade group. Stuart is its president.
Federal agencies provide minimal financial scrutiny, however.
The United Network for Organ Sharing and the Food and Drug Administration regulate organ and tissue policy but not how organizations spend money. The Centers for Medicare & Medicaid Services sets organ prices but does not dictate business decisions by procurement organizations.
If an organization does not follow “some core set of values,” Stuart said, the public should know and “that organization (should) not be able to continue to operate.”
But she worries that a perception of operating simply for profit could deter organ donors and exacerbate shortages: “Every time a family says ‘No' to donation, people die on the waiting list.”
“You don't want to look like these organizations are making a profit off of other people's gifts,” said Dr. Abhi Humar, chief of transplantation at UPMC.
Nearly 120,000 Americans await donor organs, and 6,433 people — about 18 per day — died last year while waiting.
About 8,100 eligible donors or their families choose to donate each year.
Organ procurement organizations emerged in the late 1960s when transplantation became possible and hospitals needed a fair, reliable way to acquire organs.
They relied on families willing to donate bodies out of good will – not to make money, which would dehumanize the process.
In 1984, the National Organ Transplant Act outlawed the interstate sale of human organs, and states followed with bans.
The law allows people who recover organs and tissues, handle or use them to collect “reasonable” fees, but it doesn't specify what that means.
As a result, a booming industry arose to identify, retrieve and match organs to transplant patients.
Patients and health insurers pay for organs based on a formula that accounts for expenses such as doctors, emergency rooms, chartered airplanes, administrative and other operating costs.
An organ procurement organization could collect an average of $130,000 for all organs from a single donor, but that rarely happens.
The work of the organizations stretches beyond organ retrieval. With consent from donors and families, they obtain many forms of human tissue: bone, cartilage, ligaments, tendons, corneas, heart valves, vessels, skin.
The human body contains more than 150 tissues that can be recovered, including 33 bones in the spine, 24 ribs, more than a dozen tendons and the lining of the heart.
Processing companies turn these into products that are marketed in full-color online catalogs.
Peter A. Clark, a medical ethics professor at St. Joseph's University in Philadelphia, wonders if “donor families even know that these people are making money off their tissues?”
“I don't think so,” he concludes. “Where's the fairness?”
In all but three states — Nebraska, North Carolina and Wisconsin — people who become organ donors automatically agree to give tissue.
CORE's two-page authorization lists 31 categories for items such as the liver, stomach, skin and tendons. Other parts are used only for research.
For most organ procurement organizations, revenue comes from recovery. In 2011, the 51 procurers examined by the Trib received $750 million for hearts, livers, lungs and kidneys; $127.5 million for skin and bones; and $4.6 million for corneas, according to cost reports filed with the Centers for Medicare & Medicaid Services.
Eighteen banked more than $1 million, tax records show; six listed negative balances.
A few nonprofits procure organs as part of a larger operation, such as a blood bank or tissue processing.
Mid-America in St. Louis, with a $10 million surplus, uses the money for donor education and to help offset organ price increases.
“Margins vary year to year and OPO to OPO, due to the unpredictability of activity and expenses,” said Thomas Mone, CEO of OneLegacy in Los Angeles, who wrote a 2002 research paper, “The Business of Organ Procurement.” For nonprofits, leftover money must go toward the charitable mission, he said.
Still, five top procurement administrators each received more than $500,000 in compensation for 2011.
Mid-America President Dean Kappel made the most, at $888,000; that included $346,738 in deferred pay and a lump-sum payment of $100,094 to bring his retirement benefit on par with other employees, spokeswoman Tammy McLane said. Kappel will make $377,847 this year.
BloodCenter of Wisconsin this year cut the pay of its organ procurement administrator by about half, from $531,478 in 2011, after two organizations merged.
Some administrators receive club memberships or housing allowances. Four senior executives at LifeNet received memberships in the private Virginia Beach Town Center City Club.
LifeNet Executive Vice President Douglas Wilson said in an email that tissue banks are “sophisticated, complex and highly-regulated” and need “talented … highly skilled” staff.
Stuart, once director of clinical operations at UPMC Presbyterian in Oakland, became CEO of CORE in 2004. She started her career at CORE and was married to its previous president, Brian Broznick, who died in 2003. She received $390,433 in 2011.
She declined to comment on salaries at other organizations but defended the need to pay competitively.
The trade group she heads conducts an annual salary survey of procurement organizations; executives' pay is typically based on those results and on comparisons to local health care agencies, she said.
“It's just not an arbitrary number that's picked out,” Stuart said. “... This is important work. So do you want to bring in a CEO for $50,000 who is not able to get the mission carried out?”
Stuart, who has a nursing degree and a master's in public management, said running an organ procurement organization is a 24-hour endeavor focused on saving lives.
The trade group does not examine members' finances but, to receive voluntary accreditation, they must adopt management standards. Each OPO's governing board should perform its own financial oversight, Stuart said.
At some nonprofits, however, board members pay themselves and hire family members.
OneLegacy paid Dr. Robert Mendez, its president and chairman, compensation of $109,209 in 2011 and reported that he averaged 10 hours a week. His twin, Dr. Rafael Mendez, who co-founded the nonprofit with him in 1977, received $33,271 for averaging two hours a week as secretary.
Tax forms do not reflect that the brothers are on-call around the clock, CEO Mone said.
“Those hours are not reported because the call frequency and utilization have varied through the year,” he said.
LifeLink paid its chairman, Dr. Dana Shires Jr., $603,510 and gave his son $285,800 to run its tissue bank, 2011 tax records show.
The nonprofit paid President Dennis Heinrichs $523,571 and compensated three of his relatives – $157,300 to his brother, $112,911 to his wife, and $58,590 to his daughter-in-law. It paid the son-in-law of another board member $159,722.
LifeLink spokeswoman Jennifer Krouse said an independent board committee bases compensation on market data. Medicare annually audits the organization and never has disallowed salaries or questioned family relationships, she added.
In a written statement, Krouse said comparing executives' compensation “is difficult” because the “cost of living differs significantly from New York to Wyoming.”
Surgeons might better control the money-making aspect of recovering and distributing organs and tissue, according to University of Nebraska's Shaw. He recalled hearing doctors in the 1970s talk about maximizing profits from transplantation.
“This is a shoe that some of us have been waiting to see drop,” he said. “Where is the leadership that should recognize the risk of all this profit-taking and says, ‘Although we can do this and get away with it, what if people start asking questions?' ”
Editor's note: This is the first story in a continuing series. On Monday, the Trib will examine how organizations' in-house organ and tissue recovery centers have changed the procurement process.
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