Investmentsa headache and a drag on finances for many this yearhelped to sharply boost the American Hospital Associations income in 2007.
The trade group finished last year with a profit of $16.5 million on revenue of
$109.6 milliona nearly 50% increase from a year agoas investment returns rebounded and the gap between rising costs and revenue widened. Interest, dividends and the sale of investments generated $12.6 million for the association, up from $7.6 million the prior year. Returns accounted for 11% of the years revenue, up from 8% the prior year. The associations profit margin for 2007 climbed to 15.1% from 11.1% the prior year.
The gains contributed to the Chicago associations 9% boost in revenues, while expenses rose 4%. Membership dues accounted for roughly 62% of the AHA revenue, down slightly from 65% the prior year. After growing 5% each of the previous two years, membership revenue increased at a slightly slower rate of 4% to $68.1 million last year.
Richard Umbdenstock, who succeeded Richard Davidson as president on Jan. 1, 2007, earned a salary of $799,139; his total compensation, which includes benefits and expenses, was $1.3 million in his first year on the job. The prior year, his total compensation for six months as the associations chief operating officer was $761,944.
Davidson, who retired Jan. 1, 2007, received total compensation of $2.9 million. Of that, $2.7 million for supplemental executive retirement benefits was reported in prior years, but paid out in 2007, the tax filing notes.
Not counted toward the associations profits was the January sale of its remaining stake in Health Dialog Services Corp., a disease management company, in which the AHA was an early investor. The AHA, which invested $2.5 million in Health Dialog in 1997, sold half its stock in December 2005 for $7 million.
Last December, Health Dialog announced its largest shareholder, British not-for-profit Bupa, was buying out other shareholders, including the AHA, to take full control of the company (Dec. 24/31, 2007, p. 17). Umbdenstock said at the time that the AHA was unlikely to get involved in such a startup venture again. John Evans, the trade groups chief financial officer, said the sale of the remaining Health Dialog stock for $5.7 million came a month too late to be counted toward 2007 revenue, so it was reported on the balance sheet among its assets.
Last year, the association reported unrealized investment gains of $11.4 million. Market volatility has eroded the value of the trade groups portfolio, which was down 4% for the year, as of June, Evans said. But oversight by the AHA board and treasurer has limited damage.
William Petasnick, AHA chairman and president and chief executive officer of the Froedtert & Community Health system, Milwaukee, said the association needs fiscal strength to support its agenda for healthcare reform and its members interests. We are also realists, he added. After Novembers election, the president and Congress will grapple with a mandate for overhauling healthcare and cutting the nations deficit. The association will seek to prevent congressional budget-balancing measures from coming at hospitals expense, he said.