Richard Davidson's total compensation as head of the American Hospital Association neared $1 million last year, while the Chicago-based association continued to shrink in size.
Despite declining revenues, Davidson and his team have been able to keep the AHA in the black by controlling the association's expenses.
Overall, the AHA earned $940,018 on total revenues of about $79.3 million last year. That compares with a $730,544 profit on total revenues of about $80.8 million a year earlier.
Those figures don't include dividends from the AHA's for-profit subsidiary, AHA Services.
Davidson's compensation package and the AHA's 1996 financial results were disclosed in the association's annual filing with the Internal Revenue Service. The filing, known as a Form 990, is available for public inspection. The AHA filed its Form 990 for its 1996 fiscal year on Aug. 15.
Davidson was on vacation last week and unavailable for comment.
According to the IRS filing, Davidson earned $614,470 in salary last year, up just 1.8% from the previous year. However, a generous contribution to his employee benefits plan pushed his total compensation to almost $1 million.
The filing disclosed that the AHA contributed $270,230 to Davidson's benefits plan. The bulk of the contribution-nearly $250,000-was a previously unpaid perquisite that was part of his original employment agreement with the AHA, said Richard Wade, the association's senior vice president for communications.
The agreement requires the AHA to "make whole" his retirement plan at the Maryland Hospital Association as if Davidson had retired there.
Davidson, now 61, had been president of the MHA for 22 years before he took the top AHA spot in 1991.
The contribution to Davidson's retirement plan "was supposed to be done over a five-year period, and for whatever reason it was not," Wade said.
"It was a part of his original employment agreement, which isn't uncommon," Wade continued. "The notion at the time was that, if he left the AHA, he couldn't go back to Maryland, and it would be security for him and his family."
The lump-sum payment to Davidson represents the third time in recent years that a top AHA executive has received a windfall.
In 1992, the AHA paid $250,000 to former President Carol McCarthy, to whom the association owed a previously undisclosed annuity contract. A year later, the AHA paid Davidson an extra $58,000 after it found that it underpaid him in 1992.
Employee benefits consultants said such a lump-sum retirement payment was likely negotiated by the AHA board in 1991 to get Davidson to commit to the organization for at least five years.
"It's extremely common," said Bill Strahan, a consultant with the Philadelphia office of William M. Mercer.
Still, Davidson's total compensation package of $946,268 last year is sure to raise eyebrows given that the AHA itself is continuing to downsize. Other top AHA executives got hefty raises last year as well for managing a smaller operation (See chart).
According to the IRS filing, the AHA paid almost $3.1 million in executive compensation last year, up from about $2.9 million in 1995. At the same time, salaries and wages paid to nonexecutives dropped nearly 5% to $25.8 million last year.
The drop in nonexecutive wages reflects the ongoing downsizing at the nation's largest hospital trade group.
The AHA has 257 full-time-equivalent employees in its Chicago headquarters and 72 FTEs in its Washington office. The total of 329 FTEs is less than half what it was when Davidson took over. In 1991, there were 628 FTEs in Chicago and 50 in Washington, for a total of 678.
In addition, hospital industry consolidation has shrunk the pool of available AHA hospital members.
Individual hospital membership in the AHA had dropped by 150 facilities to 4,433 as of July 31, 1996, compared with a year earlier. Hospital system membership also dropped by four to 157 (Oct. 7, 1996, p. 50).
That pushed the AHA's dues revenues down by nearly 3% last year to about $56.4 million. It was the second consecutive year the association's dues revenues declined. The AHA's annual dues revenues peaked in 1994 at about $61.3 million.
As of July 1 of this year, the AHA had 4,403 individual hospital members and 160 system members.
AHA executives declined to release financial projections for this year.
Despite the declining dues revenues, the AHA under Davidson has been able to thrive by controlling its expenses. Money from dues revenues represented more than 71% of the group's1996 total revenues.
Total expenses at the AHA last year dipped to $78.4 million from $80.1 million in 1995.
In addition, AHA Services turned a nearly $5.9 million profit last year, the AHA's tax filing disclosed.
Detailed financial information about the AHA's for-profit subsidiary is unavailable. The AHA stopped releasing its audited financial statements to the public in 1995 and to its own House of Delegates members last year. The 218-member House is the AHA's top policymaking body.