How Revenue is Spent at the American Medical Association (AMA) 2018
The American Medical Association (AMA) is a non-profit 501 (c) (6) – a professional association and the largest association of physicians – whose primary purpose is to:
- publish the Journal of the American Medical Association (JAMA) – a peer reviewed medical journal that includes original research, reviews, and editorials of medicine;
- maintain a code of medical ethics,
- create and maintain physician data which is sometimes referred to as master files; and
- update and maintain medical classification codes (referred to as CPT codes) used by the government, medical practices, hospitals, and insurance companies in return for royalty fees.
Although the AMA is a professional association, membership dues are surprisingly not a large source of revenue for the organization. There are about 1.1 million physicians in the US, but only about 130,000 practicing physicians belong to the AMA (according to MedPage Today). Membership rates vary with most paying about $400 annually although medical students and residents do not pay the annual fee. As such, dues account for a very small portion (about $37 million or 11%) of the revenue stream for the AMA.
The AMA reported total revenue of $332 million in 2018 (compared to $317 million the prior year) of which only $37 million (11%) came from membership dues. By far, the biggest source of revenue was from “royalties” which totaled $159 million (48% of revenue) followed by subscriptions, reprints, and credentialing ($61 millions or 18% of revenue), inventory sales ($25 million or 8%), investment income and gain on the sale of assets ($26 million or 8%), and advertising ($16 million or 5%). In essence, nearly 80% of revenue comes from 3 sources: royalties, subscriptions, reprints, and credentialing, and membership dues.
Royalties is a general term for the fees paid by any doctor, group, practice, hospital, or payers (i.e. insurance companies, Medicare, Medicaid, etc) who uses the CPT (Current Procedural Terminology) Codes/Booklets/Etc (a medical code set established and maintained by the AMA) that the AMA established to classify medical, surgical, and diagnostic services. This is by far the largest source of income to the AMA who holds the copyright for the CPT Coding system. Therefore, any person or organization that uses the codes must pay license fees (royalties) for the use of the codes.
Expenses totaled $288 million (not including $11 million in depreciation) and can be categorized as follows:
- $169 million (51% of revenue): Compensation
- $ 34 million (10% of revenue): Office-related Expenses
- $ 21 million (6% of revenue): Fees for Services (consult, acct, invest, etc)
- $ 16 million (5% of revenue): Publications
- $ 14 million (4% of revenue): Travel and Conferences
- $ 12 million (4% of revenue): Other Expenses (no detail provided)
- $ 9 million (3% of revenue): Membership Solicitation/Telemarketing
- $ 8 million (2% of revenue): Advertising/Market Research
- $ 5 million (1% of revenue): Grants
As illustrated above, compensation expenses for the 1,115 employees (average compensation of $152,000) used up half of the revenue collected in 2018, followed by office related expenses which used up 10% of total revenue. Fees for services are fees paid to non-employees, most of which ($21 million) are not detailed on the 990 because the AMA is not required to if the fees are less than 10% of total expenses.
Grants totaled $5 million and were primarily to medical schools, foundations, and other non-profits for a variety of reasons including general support. However, there was 1 large grant:
- $1.8 million to PCPI Foundation, which operates out of the same office address as the AMA in Chicago. The purpose of the grant was for general support. PCPI stands for Physician Consortium for Performance Improvement and was established by the AMA to develop measurements in the medical field; and
The AMA reported $56 million in net unrealizable losses on investments and a $12 million adjustment for post retirement benefits but also only spent $288 million out of the $322 million raised in 2018, which resulted in a decrease in net fund assets from $560 million at the beginning of the year to $549 million at year-end.
Using the above information, every $100 in revenue was spent as follows:
-$ 51: Compensation
-$ 10: Office-related Expenses
-$ 6: Fees for Services
-$ 5: Publications
-$ 4: Travel and Conferences
-$ 4: Other Expenses
-$ 3: Membership Solicitation and Telemarketing
-$ 3: Grants
-$ 2: Advertising/Market Research
-$ 88: Total Expenses
$ 12: Excess Revenue: To Fund Balance
As illustrated above, the AMA spent revenue primarily on staff compensation, office-related expenses, fees to non-employees and publications.
The Bottom Line:
The AMA raises about $300 million annually, primarily through royalties, subscriptions, reprints, credentialing, and membership dues. By far, the largest source of income is from royalties which are primarily the fees paid by doctors, groups, hospitals, insurance companies, and the government to use the CPT Coding System, a classification system established by the AMA for classifying medical, surgical, and diagnostic services.
Half of all revenue is spent on staff compensation for the 1,115 employees followed by office-related expenses, fees paid to non-employees, and publications.
The AMA has $549 million in net fund assets which is a significant sum.
To read the IRS Form 990 (2018), click here.