The hospital industry's 1994 protest against the Joint Commission on Accreditation of Healthcare Organizations may have hurt the JCAHO's image, but it didn't hurt its wallet.
In the year after the trouble began, the Oakbrook Terrace, Ill.-based accrediting agency posted record revenues and near-record profits.
The protest, though, was felt in the JCAHO's executive suites, where the organization's top managers paid for the crisis with small pay increases.
The JCAHO's 1995 financial results are detailed in the organization's annual tax filing with the Internal Revenue Service. The filing, known as Form 990, is public information because the JCAHO is a tax-exempt organization.
The filing deadline for Form 990s is July 15, but the JCAHO got a filing extension from the IRS and didn't submit its return until Nov. 15-the last day tax-exempt organizations legally can file their Form 990s with the IRS. MODERN HEALTHCARE reviewed a copy of the JCAHO's form last week.
The JCAHO reported profits of $3.5 million on total revenues of $96 million. A year earlier, the JCAHO earned $1.1 million on total revenues of $95.6 million.
Last year's $3.5 million profit is the second-highest annual net earnings total for the JCAHO, following 1993's record of $5.2 million (See chart).
Total revenues grew less than 1% last year, but the JCAHO was able to pump up profits by cutting its expenses nearly $2 million. Total expenses dropped about 2% to $92.5 million in 1995, the JCAHO reported.
The JCAHO trimmed its expenses by reducing spending on a number of mundane line items such as travel, printing and postage and shipping costs.
It also spent less money on lobbying federal and state lawmakers. Those costs totaled just $134,685 last year. By comparison, the organization spent more than $500,000 in 1994 trying to influence federal and state healthcare reform measures (Nov. 20, 1995, p. 5).
Also keeping costs to a minimum were next-to-nothing raises for the commission's three highest-paid executives, who worked a full year at the JCAHO in 1994 and 1995.
Of the three, JCAHO President Dennis O'Leary, M.D., received the smallest hike. His compensation rose 1.2% to $367,500 last year. But he also received more than $36,000 in expense account allowances and contributions to his employee benefits plan.
Karen Timmons, the JCAHO's executive vice president, earned $243,685 last year, or 2.8% more than she was paid in 1994. Paul Schyve, M.D., the JCAHO's senior vice president, received a 2% raise last year, earning $215,250, the JCAHO reported.
O'Leary, Timmons and Schyve received compensation increases of 4%, 8% and 7%, respectively, in 1994.
Muscling onto the JCAHO's highest-paid list last year was Charles Bair, hired in late 1994 to lead the JCAHO out of the hospital industry's woodshed. Bair, a former hospital executive, earned $252,190 last year.
In 1994, festering hospital resentment of the JCAHO boiled over. Some hospitals dropped out of the organization; many state hospital associations threatened to pull their hospitals out en masse; others sought alternatives to JCAHO accreditation; and the American Hospital Association's board issued a vote of no confidence in the JCAHO.
Irked hospital executives felt that the quality of the JCAHO's services and programs wasn't worth the money they paid for them. They particularly didn't like the JCAHO planning to require hospitals to use a JCAHO-designed system to collect and analyze clinical indicators of care.
The backlash forced the JCAHO to take a number of corrective actions in 1995, including exploring new ways to accredit hospitals, restructuring its management ranks, implementing service improvements and dropping mandatory use of its clinical system.
The JCAHO said it performed 7,997 accreditation surveys last year, up from 7,644 in 1994. The number of surveys performed in 1995 was the second-highest one-year total ever, behind 1990's record of 8,064.