The American Medical Association suffered its largest operating deficit of the decade in 1998, stoked by rising expenses and a dip in membership.
Total membership fell by 2,669 to 290,958, down nearly 1%. The drop came despite pilot programs to offer reduced dues in cooperation with state medical societies and increased recruitment of students and residents.
Executive Vice President E. Ratcliffe Anderson Jr., M.D., pledged in June 1998 to improve member services and increase the rolls.
The AMA's $5.4 million after-tax loss exceeded a $1.7 million operating shortfall in 1997, according to an auditor's report released in advance of the AMA's annual House of Delegates meeting, which begins June 20 in Chicago. The negative margins followed two years of gains (See chart).
The membership drop came in the wake of the organization's controversial endorsement pact with Sunbeam Corp. in 1997. The aborted deal embarrassed the physician lobby and led to a payout last year to settle litigation with the appliance-maker.
Officials denied the decline was related to Sunbeam, instead citing weakening participation in medical societies. "I'm very optimistic we'll see a reversal in the trend, so the numbers will begin to go up in the next year," said Edward Hill, M.D., chairman of the AMA board of trustees' membership committee.
Total dues revenues fell 3.8%, continuing to erode as a funding source. Dues represented 27.8% of operating revenues, compared with 35% in 1993. Advertising revenues were also down, attributed partly to a shift in drug advertising to consumers.
Operating revenues were nearly $240 million, up 1.7%, while operating expenses rose by 4.5%, with the biggest increases for salaries and employee benefits, professional services and computer costs (See chart).
AMA Treasurer and Secretary Timothy Flaherty blamed much of the operating loss on the year-2000 computer bug, which he says cost at least $4 million to fix. Salaries and benefits rose as the Anderson administration filled empty positions, he said.
Development of the American Medical Accreditation Program increased spending by $4.5 million. The AMA has spent $11.8 million to create its seal of approval for physicians, Flaherty said.
For nonoperating items, the $9.9 million paid to Sunbeam was offset by $18.4 million in gains on the sale of real estate in Chicago and Washington. Total AMA equity at the end of 1998 stood at $130.1 million, up nearly 8% from $120.8 million.
According to a separate report, total trustee compensation was $2.3 million, little changed from 1997. Top earners were President Nancy Dickey, M.D.; President-elect Thomas Reardon, M.D.; and immediate past President Percy Wootton, M.D., who took home $221,980 each. Chairman Randolph Smoak Jr., M.D., earned $201,120. Anderson earned a base salary of $259,621 and benefits worth $18,290. His annualized total compensation was $496,269.