Although dues revenues at the American Hospital Association dropped for the fourth straight year last year, a big score in the financial markets made 1998 one of the most profitable years ever for the Chicago-based trade group.
And the association shared the wealth with its senior executive staff, most of whom enjoyed big raises.
The nation's largest hospital trade group detailed how it generated and spent its money on its Form 990, an annual tax filing with the Internal Revenue Service.
The AHA filed its 1998 form on Aug. 16, and MODERN HEALTHCARE reviewed it last week.
Last year, and for the fourth straight year, dues revenues dropped, this time to $53.5 million, 5% below the 1997 figure of $56.3 million. Dues revenues peaked in 1994 at $61.3 million (See chart).
But nearly $8 million in investment income boosted the association's net income to $3.8 million on total revenues of almost $77.1 million. That was the highest profit since $5.8 million in 1988, and a big jump from 1997's $531,839 profit on total revenues of $75.4 million.
The investment income included $4.8 million from the sale of securities and another $3 million in dividends and interest on securities.
Also pushing profits higher was the AHA's ability to cut its annual expenses by 2% in 1998 to $73.3 million from $74.8 million in 1997.
"I think from my perspective and from the board's perspective we have great confidence in the position of the organization," said Gary Mecklenburg, chairman of the association's operations committee and a member of its board.
Mecklenburg, who is president and chief executive officer of Chicago's 492-bed Northwestern Memorial Hospital, also is running for AHA board chairman.
The AHA board voted last year to raise the organization's dues 2.5% beginning in 1999, but that's not expected to stop the dues revenues slide (Nov. 23, 1998, p. 42).
"It was not intended to give us an increase as much as it was to help us mitigate the impact we saw," said Dallas Carroll, the AHA's senior vice president for corporate services.
The effect of the dues increase will be reflected on the AHA's 1999 filing next year.
The AHA blames its sinking dues revenues on consolidations in the industry and the financial impact on its members of the Medicare cuts mandated by the Balanced Budget Act of 1997.
The AHA has 4,883 institutional members, down from as many as 5,900 it represented when Richard Davidson took over as AHA president in 1991.
Meanwhile, the amount of money that the AHA spends on executive compensation continued to climb last year, up 14% to $4.1 million.
Among those with bigger paydays last year was Jonathan Lord, M.D., the group's chief operating officer. His annual compensation shot up almost 16% to $436,960 from $377,155 in 1997 (See chart). Lord is in charge of the association's day-to-day operations.
The association's IRS filing shows a 4.7% drop in Davidson's compensation to $620,909 in 1998 from $651,466 in 1997.
However, Carroll said the 1998 filing doesn't include Davidson's 1998 bonus, which wasn't paid to him until 1999. The AHA declined to release the amount of Davidson's bonus.
The executive compensation section of the filing also showed that $331,383 was paid to Christine McEntee, a former AHA executive vice president, who left the association in February 1998. She had been in charge of the AHA's Chicago office since 1994.
Mecklenburg said "severance was part" of the package paid to McEntee.
McEntee, now executive vice president of the American College of Cardiology in Bethesda, Md., said when she decided to leave the AHA she talked to officials about honoring her employment contract, which had provisions in it for her departure.
"(The AHA) honored my contract," McEntee said.
Compensation paid to nonexecutives employees of the AHA dropped 4.7% last year to $22.8 million from $23.9 million in 1997.
The number of full-time-equivalent employees also dropped 10.7% to 433 last year from 485 in 1997.