Investment losses dog AHA
AHA’s income sees big drop in 2009
The American Hospital Association ramped up a few discrete spending items in 2009 because of the pitched battle over healthcare reform, but officials with the Chicago-based trade group say much of the extra oomph will not be found on their latest federal tax disclosure forms.
That’s because the IRS doesn’t care much about cold dinners, or weekend hours for salaried workers, or the stepped-up effort by a workforce hit by layoffs even as it sought to influence the historic healthcare reform laws passed last March.
Rather, the picture that emerges on the AHA’s public Form 990 is of an organization that saw far lower revenue than the year before—a dip almost exclusively attributable to investment losses—and some growth in salaries, which combined for an 88% decline in the bottom line at the tax-exempt organization.
The AHA posted $2.7 million net income on $98.7 million in revenue in 2009, compared with $22.3 million in net income on $120.6 million in revenue in 2008. Those figures equate to net profit margins of 2.7% in 2009, compared with 18.5% the year before.
Operating revenue was relatively flat, and operating expenses increased only modestly, leaving the movement in the AHA’s investment portfolio as the driving factor in the organization’s one-year difference in performance.
The AHA recorded a net loss on its portfolio activity in 2009, earning just $58 million man- aging securities that were originally purchased for $62 million, creating a $4 million loss, net of fees. That loss was partially offset by $1.6 million in income from dividends and interest, leaving the AHA to record a $2.4 million net loss on its investment activity for 2009.
The year before, the AHA posted a $15 million profit on its sales of securities, earning $69 million from investments that were purchased for a total of $54 million. That $15 mil- lion profit, combined with $4 million in dividend and interest income, created a $19.4 million investment windfall in 2008.
The difference between the $19.4 million investment profit in 2008 and the $2.4 million loss in 2009 tracked closely with the changes in the AHA’s bottom-line results, where the group’s net income dropped by $19.6 million between the years.
AHA Senior Vice President and Chief Financial Officer John Evans said that despite the realized losses on investments in 2009, the AHA’s investment portfolio actually gained in value during the year. “Our total return was good, but the IRS only wants you to show your realized gains,” he said. “2009 was a very good year for us in terms of our investment returns.”
Factoring in all of the trading activity and the fluctuations in the values of securities, the AHA’s investment portfolio was valued at $128 million at the beginning of 2009 and $138 million by the close of the year, according to the balance sheet in the AHA’s tax forms. At the beginning of 2008, however, the total portfolio was valued at $182 million.
Looking at operating revenue, the 6% growth in membership dues revenue to $74 million was offset by lower income from special projects on behalf of AHA members, conferences and publications, the tax forms say. Although AHA membership dues are based on hospitals’ operating expenses, the organization capped singleyear increases at 2.75% in 2009.
Officials didn’t offer a working estimate for how much extra the reform battle cost them in 2009, aside from several donations to reform-related groups.
“We didn’t have a specific budget set aside for it. There is some direct cost we could add up, but it’s impossible to count the number of hours that our staff spent,” said John Finan, chairman of the AHA board of trustees’ operations committee, and president and CEO of Franciscan Missionaries of Our Lady Health System, Baton Rouge, La.
Much of the AHA’s purely political operations don’t appear on the tax forms because they’re handled by the American Hospital Association Political Action Committee in Washington, which placed 31st in the nation in PACs that donated the most to political candidates in 2009, according to the Federal Election Commission.
In 2009, federal filings say, AHAPAC distributed $852,491 in individual contributions to candidates, two-thirds of whom were Democrats. The largest single donation of the year, for $15,000, went to the Democratic Congressional Campaign Committee.
Meanwhile, personnel costs grew at a healthy clip during the year, expanding by 9% to $48.3 million in 2009, from $44.2 million in the prior year. Evans said increases in employee medical benefit costs accounted for $1.6 million of the increases in personnel costs, while salary increases and pension plan payments encompassed $1.3 million each.
The AHA paid 138 employees more than $100,000 in 2009, the tax forms say, compared with 144 in the prior year. Those executives included President and CEO Richard Umbdenstock, whose total compensation was $1.7 million in 2009 and $2.1 million in 2008.
Future tax forms won’t include Senior Vice President James Bentley and Vice President of Strategic Communications Richard Wade— paid $634,209 and $583,150, respectively, in 2009—because they were laid off in October 2009 along with two assistants. The AHA also laid off workers in 11 positions at its publishing arm, Health Forum, in 2009. The AHA paid about $4.6 million for employee travel in 2009, about $1 million less than the year before, and overall functional expenses declined to $96 million from $98 million the year before.