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Multi-Million Dollar Contract(s) Up For Grabs
Calling all health tech builders...
When it comes to technology, it’s no secret healthcare still has a long way to go. It’s the reason so many of us are excited about building, advising, and investing in emerging health tech companies. But looking back at the last couple decades, we also have to appreciate just how far the industry has come… at least in aggregate.
That said, there are some discrete pockets of healthcare that have been completely left behind. One notable and largely under-appreciated one is the organ transplant space. And each year, those shortcomings are costing tens of thousands of lives and driving billions of dollars in dialysis costs to taxpayers.
Luckily, things are starting to change as awareness of and scrutiny over the problems grow. The last several years, in particular, have been characterized by unprecedented and continually rising pressure to effectuate substantial legislative and regulatory reform. And now with HHS’ recent announcement, the powder keg finally seems to be erupting.
So I spoke with transplant industry experts Greg Segal (“GS”) and Jennifer Erickson (“JE”) to outline just what the announcement means, why health tech builders should care, and how interested parties can get involved.
In my opinion, true transformational overhaul will take years, if not decades. But there’s no doubt in my mind that at some point in the next 10, 15, 20 years, the whole transplant industry will look, feel, and operate radically differently than it does today - saving more lives and better serving patients across the country.
That is… if health tech builders step up to the plate.
Greg Segal is the founder & CEO of Organize, a patient advocacy non-profit which served as Innovator in Residence in the Office of the Secretary of Health and Human Services (HHS). Greg began his career in venture capital before watching his father wait 5 years for a heart transplant.
Jennifer Erickson is a Senior Fellow at the Federation of American Scientists, where she leads the Organs Initiative, focused on applying innovation and data-driven solutions to the organ donation shortage. Jennifer previously served in the White House Office of Science and Technology policy, and started her career at Bain & Company and the Bridgespan Group.
Disclaimer: The views expressed in this interview are solely those of the individual being interviewed and do not necessarily reflect the views of the author or publisher.
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MM: Get us up to speed. What’s the OPTN contract? Who’s UNOS?
GS: The Organ Procurement and Transplantation Network Contract (“OPTN contract”) is the federal contract to manage the U.S. organ donation system. The OPTN contractor is involved in everything from policy (e.g., which patients receive priority on the waiting list) to health IT to logistics to patient safety issues. Since the Department of Health and Human Services (HHS) issued the first OPTN contract in 1986, the only contractor to ever hold, or even bid for, the OPTN contract is the United Network for Organ Sharing (UNOS).
JE: UNOS is currently the subject of a bipartisan investigation from the Senate Finance Committee, which issued a report in August 2022 concluding, “from the top down, the U.S. transplant network is not working, putting Americans’ lives at risk.” Senators have highlighted deadly failures at UNOS, including its antiquated technology that connects the U.S. donation and transplant system, concluding “UNOS lacks technical expertise to modernize the OPTN IT.”
MM: Give us some context. Why is the role of the OPTN contractor so essential?
GS: How well or poorly the OPTN contractor functions directly impacts the health outcomes of thousands of patients in need of transplants, including whether or not those patients receive transplants or die while waiting. There are also major health equity implications for racial minorities as well as patients living in rural areas.
Over its almost 40 year history as the OPTN contractor, UNOS’s failures are myriad. Its technology is woefully outdated and insecure, including tech outages when organs recovered for transplant cannot be matched with patients and sensitive patient data is highly vulnerable to security breaches. Its logistics systems are essentially nonexistent, with Senators Elizabeth Warren (D-MA) and Chuck Grassley (R-IA) highlighting that UNOS is 15 times more likely to lose or damage a lifesaving kidney in transit as an airline is your luggage.
JE: Senators have also highlighted that UNOS has abdicated its oversight responsibilities, turning a blind eye to abuses such as criminal kickback schemes, patient deaths resulting from basic errors, racially biased care provision and "improper use of Medicare funds."
The New York Times editorial board said it best: “An astounding lack of accountability and oversight in the nation’s creaking, monopolistic organ transplant system is allowing hundreds of thousands of potential organ donations to fall through the cracks.”
MM: UNOS has been the sole OPTN contractor for 40+ years. Why is that?
GS: There are two problems, and they compound:
The structure of the OPTN contract has always been monopolistic, which has crowded out innovative new entrants who may want to compete for some, but not all, of the OPTN functions.
UNOS has, candidly, been an incredibly bad faith actor. Dating back to 1999, Forbes described UNOS as a “cartel” and outlined how it “uses a heavy-handed mix of litigation, lobbying and bullying of its opponents, UNOS to solidify its position as the federal contractor.” As recently as the August 2022 Senate Finance Committee hearing, industry witnesses testified about how UNOS retaliates against doctors, researchers, and whistleblowers who speak out about UNOS’s failures.
But these problems are now finally being addressed. A report from the United States Digital Service, titled “Lives Are At Stake”, detailed the history of the OPTN contract. Specifically, the predecessor organization to UNOS lobbied heavily to create a contracting structure which always gerrymandered the OPTN contract back to UNOS. The recently announced HHS reforms correct for that, and allow, for the first time, for truly open competition. It’s a very exciting time.
JE: Based on its track record, UNOS has been incompetent in serving as the OPTN. But until the recent Congressional investigations, the industry has never gotten the scrutiny it deserves, in large part because of incessant misinformation campaigns. And I think Americans have so much goodwill towards organ donation that until the recent investigative reporting and Congressional oversight, it’s been hard to grasp that the organization we’ve entrusted to manage organ donation could be so flagrantly failing. I’m so grateful that this is finally changing.
As the Washington Post editorial board wrote in favor of these reforms: “With no competition, performance suffers. Independent reviews have found big problems, particularly in the technology UNOS uses to get organs from organ procurement organizations to the right patients at the right transplant centers, which critics complain still relies excessively on manual data entry. The system is prone to crashing, as it did for 40 minutes in February. This sort of failure could render a freshly procured organ unhealthy if it meant a delay in transporting it.”
MM: Why could this year be different?
GS: The federal government - via the Health Services Resources Administration (HRSA), the agency responsible for awarding the OPTN contract - just released a statement announcing its intention to break up the OPTN monopoly and to ensure fair, open and meaningful competition for various organ donation functions. And, just this month, the House Energy & Commerce Committee introduced bipartisan legislation to further support HRSA in OPTN contract reform.
This didn’t happen in a vacuum. Over the past few years there has been a litany of research and investigative reporting detailing UNOS’s failures and abuses, as well as a damning, bipartisan Congressional investigation from the Senate Finance Committee.
JE: Lives are on the line, and the Biden administration answered the call from Congress to introduce basic competition in patients’ interests. The story was covered across the country (see CNN, NPR, the Washington Post editorial board, and the New York Times), and Carole Johnson, HRSA’s Administrator, has called organ donation reforms a “top priority.” This is all great news for patients.
MM: What part(s) of the contract is(are) actually up for grabs? What’s the estimated contract size?
JE: The OPTN contract expires this fall, so I’m sure HRSA will say more soon about how OPTN functions will be open to competition. The Senate Finance Committee was clear in calling for HRSA to “Promote innovation in all OPTN functions,” which, broadly speaking, has included functions related to technology, policymaking, patient safety and member compliance, and logistics. What’s exciting is that with the contract broken into different functions, the best of the best can show up to fix what’s broken, and save lives.
GS: Historically HRSA has directly paid the OPTN $6.5M annually, and then the OPTN was also allowed to collect fees from transplant centers (ultimately reimbursed by government) for each patient placed on the organ transplant waiting list. That means the total contract value can fluctuate each year, though it is now generally about $65M in annual revenue.
That said, the Biden administration also announced plans “to more than double investment in organ procurement and transplantation,” so we’ll have to see what that looks like. Keep in mind though, HRSA and HHS have every reason to get this right.
First and foremost, this is literally a life and death issue. Additionally, most patients waiting for transplants are waiting for kidneys, where dialysis drives $36 billion/year to Medicare. (John Oliver explained that kidney failure is unique in American healthcare in qualifying patients for Medicare, saying “it’s like your kidneys, and only your kidneys, are Canadian.”) Now consider that UNOS failures are contributing to an astounding one in four kidneys recovered from American organ donors being thrown in the trash every year. Again, we have every reason to fix this.
MM: What would it take to win?
GS: There is an excellent onboarding roadmap that explains the current system published by BloomWorks. All past five Chief Technology Officers of HHS wrote the foreword, and the report serves as a zero-to-sixty background document for any innovators who want to get smart fast on this.
There is also no shortage of potential partners with industry subject matter expertise, and HRSA has said it “intends to engage with a wide and diverse group of stakeholders early and often to ensure a human-centered design approach”, so I’m sure we’ll hear more soon about how great organizations and experts can engage in the process, and ultimately compete for these critical contracts.
JE: Patients deserve excellence in each area of the organ donation system. When it comes to different functions of the OPTN, UNOS will try to run on its track record. But if you look at how UNOS has performed piece by piece, it’s a track record of failure.
Consider technology, for example: last year, the Washington Post ran a front page story about UNOS tech failures. And as recently as February 2023, UNOS’s matching system went down for almost an hour, and Senators Ron Wyden (D-OR) and Chuck Grassley (R-IA) noted that “[d]uring this outage, lifesaving organs could not be matched… leaving patients’ lives at risk.” There is no reason for that kind of system failure in 2023, and there are absolutely other entrants that can do it better.
The critical piece now is for America’s top innovators to start engaging in this process. I expect HRSA will say more soon about the process, and how new entrants can best prepare.
MM: What else would you like health tech builders to know about this?
JE: It’s hard to think of a more tangible, fixable problem than organ donation reform. Consider this: if the U.S. organ donation system were operating efficiently, there would not need to be a waiting list for livers, hearts, or lungs within three years, and the kidney waiting list would be significantly reduced. Thousands of lives every year are on the line.
If you think your super skills can be part of the solution, please consider what this could mean for some of our most vulnerable neighbors.
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