The following message is from Shaun Gilmore, President and Chris Hrouda, Executive Vice President, Biomedical Services: American Red Cross Biomedical Services must move aggressively and creatively to retain its place as an industry leader and become the low?cost provider of choice for hospitals, given the significant financial challenges that continue to plague the entire blood banking industry. Our prediction is that demand for blood products will likely continue to decline before leveling off around 2018, as will the cost?recovery fees we receive from hospitals. Biomedical Services is forecasting a loss of over $100 million in fiscal year 2015. That shortfall will grow substantially by FY20 if we don?t take action now. We need to adjust our capacity and infrastructure to align with what the forecasted demand will be. This decline in demand and what hospitals are willing to reimburse blood bankers began in 2012 and have both continued to the present time. As a result of previous re?engineering efforts, we are on track to reduce costs by $250 million. While this is significant progress, we must continue to scale our operations to fit the projected reduced demand we expect over the next five years. We will face these financial challenges head?on, using core principles to help guide our cost reduction efforts over the next few years: Biomedical Services will move to a more functional structure. Over the past few years, we have demonstrated the effectiveness of the functional model in several key areas, such as Manufacturing, Testing and Marketing and Communications. As we move forward, all resources necessary to plan and execute a specific function will now report directly to that function?s leadership structure. A functional structure will bring us more opportunities for standardization, while also improving donor, hospital and employee satisfaction. It will also strengthen the alignment between those who develop and manage processes and the teams who execute those processes, while broadening the span of control for managers in functional areas. Over time, we plan to more closely align support functions with the operations they support. Following is an overview of leadership for our new functional structure, which we will transition to over the next 60 days: 0 Collections: Paul Sullivan, currently Vice President, Field Operations Support Strategy, will become Vice President, Collections. His team will include three Chief Collections Executives with responsibility for all Collections and Apheresis activities. Current CEO of the Southern, Alabama Central Gulf Coast and Puerto Rico Regions, Jerry Tiliery, will oversee the East Division; current Vice President of Testing, Integrated Systems Operations and Change integration Bob Roggeman will oversee the Central Division; and current Southern California Region CEO Darrin Greenlee will oversee the West Division. Collections Directors and Apheresis Directors will report to one of these three Chief Collections Executives. A transition plan is in progress for those employees who currently report to Bob Roggeman, and we will share that when it is available. Tony Procaccio will also report to Paul, and will fill the role of Chief Process Executive, Collections. 0 Volunteers: Blood Region Volunteer Coordinators will report directly to Wendy Vara, Director, Volunteers. Wendy will report to Paul Sullivan, Vice President, Collections. 0 Recruitment and John Taylor will remain the Senior Vice President, Recruitment and Field Marketing. Much of his team?s structure will remain the same, with the three Recruitment Vice Presidents, Mike Chaplo, Cliff Numark and Howie Waiz reporting to John. Acquisition, Planning and Scheduling Directors and Donor Recruitment Directors will report directly to the three Recruitment Vice Presidents. Biomedical Services will remove layers of management from its structure to bring the front-line workforce and all layers of oversight closer to its lifesaving work. Biomedical Services Division Vice President, Regional CEO and Community CEO positions will be eliminated as we functionalize the roles for our donor-facing teams, collections and recruitment. Biomedical Services will engage all aspects of the Red Cross in suggert of its lifesaving mission. As we look to the future, we have a distinct advantage over our competitors - the size and strength of the entire Red Cross organization. By joining with Humanitarian Services employees and volunteers in Red Cross chapters, Biomedical Services can leverage existing Red Cross assets to cut costs, while building stronger relationships with our hospitals, blood drive sponsors, blood donors and financial donors nationwide. In an important shift, Biomedical Services will improve its integration with and leverage the entire Red Cross organization to gain scale and share costs and resources with other program areas. For example, Biomedical Services will continue to manage the day-to-day functions of its operations, while gaining support from the Regional Chapter Executives for many of the external~facing relationships currently managed by blood region CEOs. The 62 Regional Executives will be the face of the entire Red Cross mission in their local communities, and will now provide Biomedical Services support with local blood donor, sponsor and hospital relationships as appropriate. We believe the leadership of our Humanitarian Services nationwide chapter network will enable us to increase our sponsor support for collecting blood. Our volunteer Biomedical Services Regional Boards of Directors will work with our Regional Chapter Boards of Directors to create a ?One Red Cross" local board. This will strengthen our community presence and represent the entire Red Cross mission. Our Biomedical Services mission remains the same. The safety and availability of the nation?s blood supply is our top priority. Local blood services regions will continue to recruit sponsors and donors, host blood drives, operate blood donation centers and provide lifesaving blood products to hospitals for patients in need. Management of Biomedical Services Operations and regulated activities will remain within the Biomed structure. Chapter services will not be affected by these changes to Biomedical Services operations. While change is not easy, we must seize this opportunity to build a stronger Biomedical Services business and truly take advantage of One Red Cross local and assets. We understand that staff will have many questions. We are still working through this process, and we do not have all the answers yet. However, we are committed to updating you as we move forward and have more information to share. Some additional information may be found in talking points and a question and answer document on The Exchange. Should you receive any media inquiries, please direct them to Karen Stecher, Director, Biomedical Communications, at 202?304-4133 or karen.stecher@redcross.oro. Thank you for your hard work and dedication to the Red Cross.