Inefficiency in cadaveric organ procurement.

• Author: Beard, T. Randolph
• Position: National Organ Transplant Act of 1984

1. Introduction

   As most people are now aware, there is a severe and longstanding shortage of cadaveric human organs made available for transplantation in both the United States and abroad. Specifically, the supply of organs retrieved from cadavers--hearts, livers, kidneys, etc.--has failed to meet the demand by patients suffering organ failure for at least the past two decades. (1) As a result, waiting lists of potential transplant recipients now total over 80,000 patients in the United States alone. Of these, more than 6000 have died in each of the last three years because of the lack of a suitable donor organ, since still more patients were added to the list. (2) At current organ collection rates, it is expected that approximately half of the patients on that list will die before the needed organs become available.

   At the most fundamental level, there appear to be at least two important causes of this shortage and the tragic loss of life associated with it. Notably, both of these causes are directly attributable to provisions of the National Organ Transplant Act of 1984 (NOTA). (3) First, NOTA proscribes any payment to organ donors or their surviving family members in order to encourage an increased rate of consent for organ removal. (4) Thus, the acquisition price of organs is legally set at zero.

   Second, NOTA institutionalizes a set of firms known as Organ Procurement Organizations (OPOs) that are solely responsible for acquiring cadaveric organs in the United States. (5) Importantly, under NOTA, these firms are (i) set up as nonprofit organizations that are reimbursed at average cost and (ii) assigned exclusive geographic territories. Thus, the organ procurement system established by NOTA consists of a set of nonprofit monopsonists that are constrained to pay a zero price for this essential input. Clearly, this is not a system that is likely to maximize the procurement of cadaveric organs for transplantation. Indeed, it would be difficult to devise a system that would better ensure a shortage. (6)

   Fortunately, there now appears to be some emerging hope for significant reform of this system. In June 2002, the American Medical Association (AMA) passed a resolution allowing trials in which organ donors' surviving families would be offered a financial incentive (i.e., be paid a positive price) in exchange for their consent to allow the organs of the deceased to be removed for transplantation purposes. (7) The AMA action has been followed by several similar resolutions passed by other organizations within the medical community. (8) This growing support for experimentation with donor payments has sparked several bills in Congress that would fund trials and provide the necessary exemption from the legal ban on payments contained in NOTA. (9) Congress, however, has not yet acted on such legislation. As a result, the zero price policy remains in effect.

   Moreover, while the medical community appears to be relaxing its longstanding opposition to paying organ donors, it remains steadfast in its support for maintaining the existing market structure in organ procurement. That is, under all of the current proposals, the OPOs would maintain their nonprofit monopsony status. The only change would be removal of the zero price constraint.

   While that change is likely to have a significant positive impact on cadaveric organ collection rates, it is unlikely to fully resolve the shortage (or it will resolve it but at unnecessarily high prices) if that shortage is caused in part by inefficiencies inherent in the current, legislatively mandated structure of the procurement system. Such inefficiencies appear likely under that system, because the OPOs are presented neither the incentive (carrot) of profits nor the pressure (stick) of competition to improve their collection rates. As a result, their performance, even with removal of the zero price constraint, is likely to fall far short of that achievable with for-profit companies facing effective competition.

   The inefficiencies of the current system have recently assumed heightened policy relevance. Specifically, some opponents of proposals to pay organ donors have argued that such payments are not necessary to resolve the shortage. Noting the wide variation in relative performance across existing OPOs, these parties allege that the organ shortage can be eliminated by bringing the performance of all OPOs up to the observed level of those with the highest collection rates. (10) Such a proposal, however, rings hollow in the absence of a practical and effective method to bring about the necessary increase in performance. (11)

   In addition, it is questionable whether such an approach would succeed. That is, given the observed collection rates of the most successful OPOs under the current market structure, it is not clear whether, after controlling for demographic and other exogenous factors, bringing all procurement organizations up to that level would provide a sufficient number of organs to fully resolve the shortage. Consequently, the potential success of the proposed approach has an important empirical dimension.

   We address that dimension here. To do so, we employ a frontier estimation methodology to gauge the relative degrees of inefficiency exhibited by existing OPOs while controlling for exogenous determinants of observed collection rates. Our results show that, even if all of the relative inefficiencies could (somehow) be eliminated, the organ shortage would still be substantial. (12) This finding suggests that efficiency improvements that occur within the current organ procurement framework will be insufficient to address the dire shortage faced by patients.

   Our paper is organized as follows. Section 2 provides some background and institutional detail regarding the cadaveric organ procurement system in the United States. Section 3 then presents our empirical model of observed organ collection rates across our sample of OPOs. Section 4 describes our data and estimation results. Finally, section 5 concludes the paper.

2. Background/Institutional Setting (13)

   The current organ shortage has grown out of a public policy that was devised and implemented more by historical accident than conscious design. The earliest transplant operations were confined to kidneys. (14) Moreover, these operations were uniformly performed with living related donors. At that time, transplantation technology--in particular, the state of knowledge regarding immunosuppressive drugs--effectively precluded the use of cadaveric organ donors. Consequently, at that time, organ transplant patients brought the necessary donor with them when they checked into the hospital for the transplant operation. If there was no acceptable living donor, no transplant operation was possible. As a result, there were no waiting lists and no apparent shortage.

   Moreover, under the living related donor system, no obvious need existed for an explicit payment to encourage donor cooperation. The affection between relatives was generally thought to be sufficient to motivate the requisite organ supply. And, where it was not, any necessary payment (or coercion) between family members could easily be arranged without the sort of middlemen generally required for market exchange. Such intrafamily cajoling by emotional pressure or outright payments or both also remained out of sight of the transplant centers and attending physicians. Therefore, a system of altruistic supply seemed to make sense in such a setting, and reliance on that system did not seriously impede the use of this emerging medical technology.

   The situation gradually changed, however, as new drugs, improved tissue matching, and advanced surgical procedures led to both transplantation of cadaveric organs and greatly improved transplant success rates. Significantly, this newfound ability to make use of cadaveric organs expanded the application of transplant technology to vital organs other than kidneys. Although we have not been able to locate reliable data to pinpoint a precise time, probably sometime during the mid-to-late 1970s organ waiting lists began to appear as transplant candidates began to form queues for cadaveric organs. Those queues were generally managed by the transplant physicians located at the center where the operation was to be performed. In addition, the centers themselves generally coordinated the necessary organ procurement efforts.

   These emerging shortages began to increase rapidly during the 1980s as a result of at least three developments that greatly stimulated transplant demands. First, the above-noted advancements in immunosuppressive therapy improved transplant success rates significantly. (15) Second, third-party payment was substantially increased as the federal government initiated coverage for all kidney transplants and began to provide coverage, along with private insurance companies, for other organ transplants as well. And third, the federal government also began to provide coverage of dialysis treatments for all patients suffering renal failure, thereby keeping a larger number of potential kidney transplant patients alive for much longer periods. (16) Together, these developments have caused transplant demands to grow steadily at about 10% per year over the past two decades, while cadaveric organ donations have increased only marginally over this period. The upshot has been substantial annual shortages that, each year, have added to the stock of patients who are placed on the waiting lists.

   It was at the time these shortages were beginning to develop that NOTA was passed. (17) This legislation contains a number of substantive provisions affecting the transplant industry. Two in particular stand out. First, as noted earlier, NOTA codified into law the existing industry practice, inherited from the earlier era of living related donors only, of not paying organ donors or their surviving family members. That is, it set the legal...