The American Medical Association plans to spend at least $1.5 million on a new membership study after paying a consulting firm more than $1 million over the past year for a wide-ranging examination of its membership strategies, organizational structure and business operations.
In an internal memo obtained by Modern Healthcare, the AMA's eight-member finance committee recommended that the board of trustees pay consulting giant McKinsey & Co. anywhere from $1.4 million to $1.54 million for the membership study. The estimated fee for the "unbudgeted expenditure" does not include any additional charges for market research, which could add considerable cost to the project.
The finance committee's memo also recommends that the AMA pay McKinsey another $1.6 million to review the organization's "purchasing and business operations." The total cost of the dual-track consulting contract is expected to be $3 million to $3.5 million, according to the June 12 memo.
"This is just throwing good money after bad," said Michael Fleming, president-elect of the American Academy of Family Physicians and a vocal member of the AMA's governing House of Delegates. "In the last 10 years, the AMA has spent about $15 million trying to do something about membership and they still haven't come up with the answer."
The AMA struggled financially through the late 1990s before turning a profit in 2000 after laying off about 7% of its workforce, or approximately 80 employees, and abolishing or reducing some programs as part of a $20 million cost-cutting effort. It has turned an operating profit in each of the past three years, including $11.7 million in 2002.
William Plested, a Los Angeles heart surgeon who is chairman of the AMA's board of trustees, confirmed that the board has "pretty much made the decision to hire" McKinsey, pending negotiations about a ceiling on costs and certain performance guarantees.
Last year, the AMA paid McKinsey about $1 million for a review of its business operations and an analysis of membership strategies and initiatives. Plested said McKinsey now would provide a far more comprehensive business analysis that is expected to save the organization as much as $7 million per year.
"One reason we spent the money on McKinsey in the first place is so we could have some data to look at," Plested said.
He praised McKinsey's work, saying the consultancy provided valuable help when the Chicago-based AMA was considering drastic changes in its organization, including scrapping its individual-membership model and transforming itself into an "umbrella" group for specialty societies and state medical associations. Plested also said McKinsey's bid on the first job was "certainly not among the highest."
McKinsey's consulting contract over the past year has involved reviewing a variety of membership models, including surveying scores of specialty societies and affiliated doctors' groups to gauge support for potential changes in the way the AMA does business. McKinsey did not endorse any particular strategy. And the costly review itself did not lead to any change at the AMA, whose 531-member House of Delegates voted last month, after the memo was sent to board members, to retain its existing membership model. That decision triggered angry reaction from some members who believe significant changes are needed to reverse the steady drop in membership.
"The House of Delegates is an organization that, in my opinion, is still living in the 1970s," said Fleming, a family practitioner in Shreveport, La. "They have not caught up to what's happening in medicine."
McKinsey, which does not comment on its business contracts, has about 1,700 clients, including 85 of the top 100 companies in the world, according to its Web site, mckinsey.com.
Another member of the AMA's House of Delegates, Michael Miller, a physician from Madison, Wis., questioned the decision to continue to rely so heavily on the consulting firm. "We just had a study from McKinsey," he said. "I don't know if they have any expertise to deal with membership issues."
He said it's time for the AMA, which has long been dominated by older, conservative males, to completely revamp the way it looks at issues such as membership, particularly in terms of attracting younger physicians.
"You cannot solve new problems with old ideas," said Miller, an AMA member for about two decades. "I don't know how well older, white male joiners can transpose themselves into the minds and spirits of a different demographic group. I'm just wondering if it's going to be necessary to turn this whole thing over to young physicians and say, `You solve it.' "
Fleming criticized the AMA's decision to abandon the plan to modify its membership model or seriously consider any of the potential changes reviewed during McKinsey's consulting work. The AMA, which once represented the vast majority of America's doctors, now has only about 260,000 members, a drop of almost 30,000, or about 10%, since the end of 2000. The AMA represents just 27% of the nation's doctors.
"Basically, the AMA (House of Delegates) did not address the membership issue at all at the annual meeting," Fleming said.
Acknowledging the continuing concern over membership issues, top AMA officials announced in June that they would con- vene a "membership summit," scheduled for July 19-20 in Chicago, as a way to brainstorm about ways to build interest among doctors. Plested has vowed to come up with "answers" to the AMA's problems.
However, the AMA's press department last week said that the summit, designed to highlight ways the organization could stimulate interest among nonmembers, would be closed to the public. The only nonphysician member of the AMA's 21-person board of trustees, Robert McMillan, a New York lawyer, declined to comment about the meeting when reached by telephone. "I think I'd be wasting your time to talk further-I have nothing to say," he said.
"There's a lot of stuff they don't want people to know," Fleming said. "They're very secretive. It's a sign of a very dysfunctional organization."