The American Hospital Association finished 2006 with an $11.1 million profit, despite a drop in revenue and income from a year ago thanks to tumbling investment returns.
Richard Davidson ended his 15-year tenure as the American Hospital Associations president with a $1.5 million payout. Davidson, who stepped down Jan. 1, was succeeded by Richard Umbdenstock, a former Providence Health & Services executive who joined the AHA in June 2006 as president-elect and chief operations officer. For his six months as COO, Umbdenstock took home total compensation of $761,944.
The Chicago-based trade groups year-end profit is down roughly 40% from $18.4 million in 2005 caused by an even sharper drop in revenue from investments, which plummeted 46%. However, the steep drop-off is misleading.
Investments still added $7.6 million to the associations bottom line in 2006, unlike poor returns in 2003 and 2002, when the AHA lost money on investments and finished both years in the red. Instead, a one-time $7 million windfall from the sale of a single stock catapulted the associations 2005 investment revenue to $14.2 million, said John Evans, the AHAs chief financial officer.
The association shed half its stake in Health Dialog Services Corp., Boston, a patient education and disease-management company, during a December 2005 recapitalization after initially investing $2.5 million in the company in 1997 (Jan. 30, 2006, p. 8).
Last year marked the AHAs third consecutive year of profits. The AHA posted 2006 revenue of $100.7 million, including investment income, down about 1.5% from $102.3 million a year earlier. Meanwhile, dues revenue rose 5% for the third consecutive year to $65.7 million. Expenses climbed about 7% to $89.6 million.
William Petasnick, president and chief executive officer of Froedtert & Community Health, Milwaukee, and AHA chairman-elect, called the associations performance solid, and cited individual membership growth and strong investment performance overall. The association reported a $10.6 million unrealized gain on investments among its 2006 assets.
The associations 15 personal membership groups, such as the American Society for Healthcare Engineering, counted roughly 30,400 members in 2006, a 15% increase from five years ago, the AHA said. The associations overall membership includes 4,927 organizations, including 4,121 hospitals.
Evans said rising membership and climbing dues payments contributed to the AHAs rising membership revenue. Dues are calculated based on a percentage of members expenses. As organizations grow, their dues increase.
Spending on compensation for officers, directors and key employees rose 28% last year to total $3.1 million. The associations consulting expenses increased 27% to $11.5 million.
Petasnick, who will succeed Catholic Health Initiatives President and CEO Kevin Lofton as chairman Jan. 1, said the associations finances position the AHA to be active in the national healthcare reform debate. He dubbed the profits a reserve for the unknown.
Internal Revenue Service filings show the AHA spent roughly $15 million on lobbying or related consulting in 2006, which doesnt include political action committee contributions, a spokeswoman said. For the first six months of 07, it reported lobbying expenses of $7.3 million, according to a midyear disclosure.