The American Medical Association continued its four-year financial slide in 1999, losing $2.7 million more than expected.
The Chicago-based AMA recorded a net loss of $9.2 million for the year, far more than the $6.5 million loss it had projected at its December 1999 interim meeting in San Diego.
For the second year, operating expenses outpaced operating revenue gains. AMA officials attributed the gap primarily to higher employee compensation and technology-related spending that royalty and subscription increases couldn't make up for.
According to an auditor's report released in advance of the meeting of the AMA's House of Delegates, which begins June 11 in Chicago, total operating revenue for 1999 was $242.8 million, compared with $240 million in 1998. Operating expenses were $252.7 million in 1999, $12.6 million more than in 1998.
The report also said American Medical News, the AMA's weekly news publication, saw downturns in advertising, and other publication and product sales also took a hit. The association plans to increase equity in 2000 through anticipated real estate sales, such as the confirmed $20 million sale of a Chicago property, formerly the site of its headquarters. The property is contracted to be sold to a group that includes local developers William Marovitz and Bud Cataldo, Magellan Development Group and U.S. Equities Realty.
The AMA's 1999 after-tax operating loss of $15 million was nearly triple the $5.4 million loss of the previous year. It was offset in part by an insurance recovery of $5.2 million for unspecified litigation settled for $9.9 million in 1998. That's the same settlement amount made in the breach-of-contract lawsuit filed by Sunbeam Corp. against the AMA, but association officials wouldn't confirm that that was the same settlement.
AMA membership is at its highest level in five years, with 293,695 members. But despite the increase, membership revenue declined by $4.8 million, or 7.2%, from 1998. Many new members, especially students and residents, were offered discounted dues through pilot programs intended to boost the membership ranks, not necessarily revenue.
To help plug its budget drain, the AMA in February began implementing budget cuts, ranging from 7% to 15%, in all of its operating units (Feb. 21, p. 8). Some 80 employees, or almost 7% of the AMA staff, were laid off as part of the effort to save $20 million in 2000 and 2001 (March 20, p. 4). The group also decided to drop its American Medical Accreditation Program this year to stem the budget shortfall (March 27, p. 12).
Even the 14-member board of trustees, through a reduced number of per diem days and subsequent compensation reductions, trimmed its budget by 12%, according to a separate report included in the delegates' handbook.
In a break with tradition, details of the trustees' compensation, as well as those of the AMA's top executives, were not included in this year's annual meeting materials. The House of Delegates committee on trustee compensation decided at last December's interim meeting that those figures would be submitted to the delegates during each year's interim meeting instead.
However, base compensation rates adopted at the board's April meeting will be effective at the end of the annual delegates meeting. Board officers' salaries would be set at $225,000 per year. In 1998, the president, president-elect and immediate past president each earned $221,980.
The delegates will address numerous issues at their five-day annual meeting, including continued antitrust relief efforts, the formal dismantling of AMAP, hospital-based physician contracting, appeal mechanisms for managed-care coverage denials, the addition of a nonphysician to the AMA board and several technology initiatives.
Internet security policies, encompassing electronic medical records and digital physician certification, likely will be made in anticipation of compliance with regulations of the Health Insurance Portability and Accountability Act of 1996.