The American Hospital Association's board chairman has a vivid memory of sitting down with HHS Secretary Alex Azar fresh off his January 2018 confirmation.
"One of the things they asked us—like they were asking other sectors of the economy: 'What can we do as an administration to get the burden of regulation away from things that just make sense? How do we really attack this?'" recalled Brian Gragnolati, the AHA's board chairman.
Luckily, the AHA gang assembled, including CEO Rick Pollack, had a list of ideas ready. They handed those over and Gragnolati said the Trump administration has since made progress on the suggestions.
The powerful Chicago-based hospital lobbying organization spent $22.5 million on lobbying last year, or 16% of its expenses, according to its recently-released 2018 tax form 990. But don't expect that ratio to jump significantly in response to next year's presidential election. The AHA's finance chief said the organization aims for a roughly 16% ratio, even when politics is in hyper-mode.
"We are able to hover at the same amount because we do take direction from our membership and the board in terms of what our priorities should be," said Christina Fisher, the AHA's chief financial officer. "As opposed to have substantive swings year-over-year, we're able to prioritize what's most important to members."
The AHA's finances took a beating last year that leaders said was mostly from one-time expenses such as a retirement plan change and investment losses. The organization recorded a $6.4 million loss in 2018, a noteworthy swing from its $11.2 million surplus the year before. Expenses grew 11.4% year-over-year in 2018, even as revenue declined 2.3%.
"I think the way the financial picture played out, we had a strong year with just a couple of one-time events," Gragnolati said. "Hopefully the investment loss will be a one-time event."
The AHA transitioned its retirement plan from a defined benefit structure to a defined contribution structure last year, a move that entailed funding the remaining 10% of the plan that wasn't already funded, Fisher said.
"We were fortunate that our retirement plan was over 90% funded," she said. "That's pretty impressive for any industry, including healthcare."
Fisher wouldn't say how much that change cost, but the tax form shows the AHA's pension-related expenses more than quadrupled to $10.7 million in 2018, compared with $2.6 million in 2017.
AHA also paid $1.3 million in severance to five former executives last year, a line-item that didn't exist in 2017.
The organization named Navy veteran and consultant Ryan Frazier its senior vice president of member relations in June 2017. In 2018, the AHA paid Frazier $339,464 in severance. He is now running for mayor of Aurora, Colo.
Dr. John Combes, former chief medical officer, took home $357,169, John Evans, the former CFO, received $350,055 and Eileen O'Keefe, the former vice president of member relations, received $100,633. An AHA spokeswoman declined to share their departure dates.
The AHA spent $50.6 million on salaries and wages, including about $10 million for its highest-paid executives, officers, directors and trustees in 2018, compared with $46.4 million in 2017.
Pollack, the CEO, made $2.8 million last year, up from $2.5 million in 2017. Tom Nickels, the AHA's executive vice president of government relations and public policy, is the organization's second-highest paid executive. He made $1.5 million last year, and $1.3 million in 2017.
Some of that increase stems from merit pay increases, promotions, retirement pay and severance payouts, said Susan Gergely, the AHA's chief people officer.
"We had some of those key retirements in 2018," said Gergely, who assumed her role in 2019 amid a cultural transformation at the AHA.
About 60% of AHA's employees made over $100,000 in reportable compensation last year, or 238 out of 398 employees. That's compared with 36% in 2017, when 152 out of 417 employees made over $100,000. Employee benefits spending increased 20% to $8.4 million in 2018.
Revenue from membership dues totaled at $82.5 million last year, compared with $81.3 million in 2017.
The AHA's investment income fell 87% to $841,223 in 2018, compared with $6.7 million in 2017. Fisher said the AHA isn't changing its asset allocation strategy in response, especially because the organization's loss was only about one-third of the overall market loss.
"That speaks to a strong asset allocation because we were able to shelter it pretty well," she said.