American Red Cross Business Information, Profile, and History

Company Perspectives:

The American Red Cross, a humanitarian organization led by volunteers and guided by its Congressional Charter and the Fundamental Principles of the International Red Cross Movement, will provide relief to victims of disasters and help people prevent, prepare for, and respond to emergencies.

History of American Red Cross

The American Red Cross is a nonprofit agency with a long history of providing relief to individuals affected by war and natural disaster. It was first formed in order to aid men wounded on the battlefield. It evolved into a network of approximately 1,300 local chapters of volunteers who respond to flood, fire, earthquake, and drought. The American Red Cross has played an enormously important historical role in supporting American troops in the two world wars and in ensuing conflicts. It has also been instrumental in organizing relief in countless natural disasters, from the Johnstown Flood to the Great San Francisco Earthquake to many more recent catastrophes. The organization's national presence and prestige allow it to spearhead fundraising drives to benefit stricken communities, and it also often serves as the distribution network for funds or goods raised by other organizations or donated by the government. Though the Red Cross was formed in response to war and disaster, it also developed a coherent peacetime mission, including teaching first aid and life-saving, and running blood banks. The Red Cross controls about 50 percent of the blood services market in the United States. About half the organization's revenue comes from the sale of its blood products. The rest comes from charitable donations from individuals and corporations. It also receives money through the charitable fundraising organization United Way.

Inspiration of Clara Barton

The American Red Cross dates its formal beginning to 1881, but it was active before that. Its roots lie in Europe, where the International Red Cross was founded in Geneva in 1864. The impetus for the founding of the international group was a book published in 1862 by a Swiss businessman, Jean Henri Dunant. Dunant witnessed the horrific aftermath of a battle between Austrian and French forces near the Italian village of Solferino when he was traveling in the vicinity for business. Some 30,000 to 40,000 dead and wounded men lay on the battlefield, with no one to care for them. Dunant was so struck by the carnage that he wrote a book about what he had seen, and pleaded for the formation of volunteer civilian groups to aid wounded soldiers. Dunant spearheaded a group that soon formed the International Committee of the Red Cross. Though the United States sent an observer to the inaugural Red Cross conference, the U.S. did not at that time ratify what became known as the Geneva Convention. The United States was in the midst of its own Civil War, and paid little attention to this event in Switzerland. Yet battlefield relief for the wounded was vitally important. Clara Barton, a former schoolteacher and patent office clerk, became a one-woman force behind the Red Cross in the United States. Though she was not trained as a nurse and was a single woman of modest means, Barton had friends in high places in Washington, through her Patent Office work. She began a crusade to bring supplies and aid to the Civil War wounded, and went herself to the front lines, driving a mule-wagon of supplies, serving hot soup, and nursing, all as needed. After the war, she organized a search for missing prisoners of war. When ill health sent her to Europe for a rest, she became acquainted with the work of the Red Cross there. When she returned to the United States, she lobbied for a Red Cross in her home country, becoming a noted speaker all across the nation. With the war over in the United States, Barton had the idea of instituting the Red Cross as a disaster relief organization. Nothing like this existed at the time. Barton became the American representative of the International Red Cross in 1881, and in 1882, Congress finally ratified the Geneva Convention.

In its earliest years, the American Red Cross existed almost solely through the energy of Clara Barton. She shaped its mission, and it was her political connections that made things work. She was an extraordinarily driven and hands-on person. The Red Cross did little without her direct involvement. One of the organization's first major disaster relief efforts was the Johnstown Flood of 1889, which drowned over 2,000 people and displaced most of Johnstown, Pennsylvania's 30,000 residents. Barton and her small staff went to Johnstown immediately, and stayed for five months. The Red Cross raised cash, disbursed goods, and oversaw the building of temporary housing with donated lumber. The Red Cross became increasingly skilled at handling this kind of disaster, and the organization won great praise for its domestic work. The limits of the organization's duties were not clearly spelled out, however, and the Red Cross extended itself to wherever Clara Barton felt called. The Red Cross sent wheat to Russia to aid starving peasants in 1892, and Barton sailed to Turkey in 1896 to negotiate aid for the violently oppressed Armenians. During the Spanish-American War of 1898, the exact duties of the American Red Cross were not clear, leading to conflict with the Army Medical Corps. Though the Red Cross was usually seen as ultimately helpful, it was also criticized for overstepping bounds and sometimes for its accounting practices. Congress officially chartered the American Red Cross in 1900, but the group was nevertheless plagued with factionalism and lack of focus. Clara Barton was elected president-for-life of the Red Cross in 1901, but resigned in 1904 after an aborted investigation into diversion of funds.

Role in Peace and War

The group reincorporated under a new Congressional charter in 1905, which made it a semi-governmental agency with some of its governors appointed by the President of the United States. The Red Cross developed a 'peacetime' program around this time, defining a role for itself when neither war nor natural disaster threatened. It began training people in first aid and running courses in water safety. By 1917, the Red Cross had spread to 267 chapters across the United States. It had working funds of about $200,000 and a paid staff nationwide of 167 people. The group was exceedingly active in World War I, enrolling millions of volunteers to sew and knit clothing, roll bandages, and package food and supplies. The Red Cross sent thousands of nurses and ambulance drivers into the war, and raised millions of dollars in donations. After the war, the group was criticized for allegedly mismanaging funds and for taking on duties that properly belonged to the government. The Red Cross restated its mission in 1922, dedicating itself first to military welfare and to disaster relief. Promotion of public health was its third area of concern. In addition, the group spelled out its intention not to duplicate the work of other agencies. Membership grew and spread through the 1920s and 1930s, though the size of chapters and their level of funding varied considerably from place to place. By 1941, total American Red Cross membership had grown to over nine million people. During World War II, membership swelled dramatically. Members were counted as anyone who donated a dollar or more to the organization. There were over 36.6 million members by 1945, which was more than 25 percent of the U.S. population. The group had close to 4,000 chapters, and during World War II the Red Cross raised more than $666.5 million.

Rise of Blood Banking

The Red Cross began operating blood banks in 1937. In 1940 it began a 'Plasma for Britain' project to send blood to British soldiers. This was the first mass blood donation campaign, and the first mass production of blood products. The plasma campaign was overseen by a pioneer of blood bank science, Dr. Charles Drew. Drew, an African American, was a noted founder of blood storage technology. The U.S. military asked the Red Cross to provide blood for battlefield transfusion when the United States entered the war. Drew directed the Red Cross program for eight months, but resigned in outrage because the Red Cross continued to comply with the military's request that the blood of black and white donors be segregated. The Red Cross continued to segregate blood by race until 1950. During World War II, the Red Cross collected blood from over six million donors. Running blood banks became one of the most important missions of the Red Cross over the next 50 years. In 1948, with the war behind it, the Red Cross established a National Blood Donor Program to provide blood to hospitals. Blood was collected by local chapters, and processed through 28 regional blood centers. Over the next decades, Red Cross researchers pioneered key aspects of blood bank technology. A Red Cross researcher discovered how to process blood for an anti-hemorrhaging agent, and Red Cross scientists also crafted a method to process the clotting agent needed by hemophiliacs. The Red Cross's donated blood was at first given without charge to hospitals, but in the 1950s it began charging enough to recoup its costs. By the end of the 1970s, the Red Cross managed about half the nation's blood supply. It continued to hold this market share. By the early 2000s, sale of blood products accounted for about half the group's operating revenue, and the Red Cross provided just over half the blood products used in the United States.

The Red Cross continued its services to soldiers during the Korean War and after. Besides running blood banks, its peacetime mission largely consisted of disaster relief. Each year the organization set aside a specific sum in its budget to pay for its disaster relief work. Extra money was put in a reserve fund. Then, in case of extreme need on the heels of a particularly devastating disaster, the group mounted fundraising drives. Chains of disasters often spelled financial peril for the organization. For example, hurricanes, floods, and tornados of unprecedented strength in 1955, 1956, and 1957 all but wiped out the Red Cross's reserves. The group relied on extra fundraising campaigns to make up its losses. In 1985, the group budgeted $17 million annually for disaster relief. A succession of hurricanes that year forced the Red Cross to spend about $48 million, putting it severely over budget. In the mid-1980s, the Red Cross ran fundraising campaigns by mailing out so-called 'disastergrams,' which asked for money for victims of the latest catastrophe. Much of the charity's money came from the umbrella fundraising organization United Way. Money brought in by disastergram went to a general disaster fund. After the earthquake in San Francisco in 1989, the Red Cross allowed donors to specify that they wanted their money to go only to victims of a specific incident. This helped fend off allegations, which had been raised since Clara Barton's time, that money raised for a specific cause might end up being spent elsewhere.

Revamping Programs in the 1990s

The Red Cross spent an increasing amount of money on disaster relief through the 1980s. It started the decade spending about $50 million, and by 1989 was spending over $100 million. This spiked to over $224 million in 1990. Although the organization provided relief on a massive scale, it was often criticized for the way it carried out its duties. By the early 1990s, the group considered cutting back its services, since so much of its budget was taken up with extraordinary disaster expenses. In 1991, Elizabeth Dole, who had held cabinet posts as Secretary of Labor and Secretary of Transportation, became president of the American Red Cross. Dole vowed to turn the organization around. The Red Cross was financially troubled because of its recent massive spending on disaster relief. In addition, the Red Cross had been plagued since the mid-1980s with questions about the safety of its blood supply. The Red Cross used a test manufactured by Abbott Laboratories in the mid-1980s to test donated blood for the AIDS virus. Despite known problems with the Abbott test, it continued to use it into 1986. People who contracted AIDS through tainted blood transfusions later sued both Abbott and the Red Cross. The biomedical services division, as the Red Cross's blood bank operations were called, was cited repeatedly in the 1980s and early 1990s for problems with its record-keeping. A report by a Food and Drug Administration (FDA) investigator made public in 1990 recorded dozens of incidents of sloppy record-keeping and computer errors. The FDA investigator told a Congressional committee that ensuring the safety of the nation's blood supply was made difficult by the Red Cross's problems. The investigator also found Red Cross officials insufficiently concerned about mending its ways. When Dole took over the Red Cross, she announced a $120 million overhaul of the biomedical division's record-keeping, and scheduled improvements to staff training and blood testing. Eventually the revamping of the Red Cross's blood banks cost around $287 million. But the changes apparently did not go quickly enough. In 1993, the FDA filed suit against the Red Cross to force it to agree to make reforms. The Red Cross and the FDA settled the suit with a court-ordered consent decree outlining what the organization would do to improve. The Red Cross spent some $170 million to $180 million on computer systems, and built eight regional blood testing laboratories in a move to centralize its operations. The cost of these changes put the biomedical services division in the red. By the late 1990s, the division was in debt by about $300 million.

During this period, the Red Cross was nearing completion of its expensive overhaul of its biomedical services division. The division had evolved from a string of mainly autonomous regional blood centers to a much more centralized organization. An article in Modern Healthcare from June 22, 1998 averred that the division 'looks and feels more like a drug company.' The Red Cross had remade its blood banks, significantly improving the safety of its products. But the makeover had been very expensive. By 1998 the Red Cross was said to have about 46 percent of the nation's blood supply market share, or almost half of the $2 billion industry. The Red Cross vowed to increase its market share, aiming for 65 percent over the next three years. This move was made specifically to enhance the blood division's finances. In 1995, the division brought in $937 million, but was in the red by $113 million. For 1997, the division brought in $1.1 billion, but still ran a deficit. The Red Cross began a campaign of tough competition, moving into markets that had traditionally been served by other companies. Its main competitor was a loose network of community blood banks that operated under the umbrella of America's Blood Centers, or ABC. Blood banks had operated as virtual local monopolies since the 1970s, so that either the Red Cross, an ABC clinic, or a hospital blood bank, would serve a particular community. In the mid-1990s the Red Cross began moving into towns where it had been shut out of before, such as Kansas City, Dallas, and Phoenix. It was often only able to secure a tiny market share, for example 5 percent in Kansas City within two years of entering that market. But the Red Cross had changed the way blood products were marketed by introducing such direct competition. Some doctors and hospitals found that the new competitiveness brought prices down, while others worried that organizations vying for donors would ultimately scare the donors away. The new relationship between the Red Cross and its competitors became so acrimonious that the charity, ABC, and two other blood banking societies engaged a professional mediator to allow them to talk about their differences. The industry leaders formed a working group called the Blood Forum, and hoped to come up with rules that would allow them to compete gracefully. But the level of hostility was so high that an ABC official quoted in Modern Healthcare (June 22, 1998) claimed the Blood Forum was '... as bad as putting the Arabs and Israelis in the same room.'

Aside from its problems with its biomedical services division, the Red Cross continued to strain to respond to unusual catastrophes in the 1990s. Flooding in the Midwest in 1993 led to the organization's largest relief effort ever, when over 20,000 workers assembled to combat the water damage. The Red Cross's most expensive disaster relief operation came just five years later, when Hurricane George in 1998 cost the charity over $100 million.

Elizabeth Dole left the Red Cross in 1999 to pursue a run for president of the United States. Her successor was the first physician to head the agency in a hundred years, Bernadine Healy. Dr. Healy had been director of the National Institute of Health, had taught at Johns Hopkins University, and had unsuccessfully run for the Senate. On taking over the Red Cross, Healy had to deal with the organization's ongoing fiscal and regulatory problems. She aimed to cut administrative positions to contain costs and streamline management. She also wanted the group to spend more money on research and development. At the end of 2000, the FDA again announced that the Red Cross was not doing enough to ensure the safety of its blood products, and Healy moved to borrow $100 million to fund improvements. But the FDA acted more aggressively than it had in the past, and asked to be allowed to fine the Red Cross, which it said had been out of compliance with FDA regulations since 1985. Healy claimed to be amazed at the seriousness of the FDA's allegations of sloppiness, since the Red Cross was supposed to have made drastic improvements in its blood operations after 1993. Healy was also faced with the ongoing problem of sour relationships with its competitors. In 2001 a California blood bank brought an antitrust suit against the Red Cross, alleging that the group artificially lowered prices in its region in order to drive other blood banks out of business. Into the 2000s the charity seemed to be facing the same difficulties that had beset it since the 1980s.

Principal Divisions: Biomedical Services; Disaster Services; Armed Forces Emergency Services; Health and Safety Services; International Services; Community Services.

Principal Competitors: America's Blood Centers.

Chronology

• Key Dates:

• 1864: International Red Cross is founded in Geneva.
• 1881: Clara Barton and others organize American Red Cross.
• 1900: Organization receives official charter from Congress.
• 1937: Red Cross begins blood bank activities.
• 1957: Three years of disasters drain organization's finances.
• 1985: Red Cross begins screening donated blood for AIDS virus.
• 1993: Organization is under court order to improve blood services division.