Executive Compensation 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.

There are 21 independent voting members (trustees) on the governing board (Board of Trustees), although 24 are listed on the Form 990, which appears to be due to timing differences.  All board members received compensation although the amounts vary from $34,000 to nearly $300,000.  18 of the 24 (75%) trustees are male wile 6 of the 24 (25%) are female.

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) with the largest expense reported to be compensation.  1,115 employees received $169 million in compensation which equates to an average compensation of nearly $152,000.  However, only 449 employees received more than $100,000 with the 17 most highly compensated reported to be:

• $2,536,019:  James L Madara, EVP and CEO
• $1,345,517:  Bernard L Hengesbaugh, COO
• $1,130,659:  Kenneth Sharigian, Chief Strategic Officer
• $1,057,572:  Howard C Bauchen, SVP, Editor in Chief
• $1,054,269:  Laurie A S McGraw, SVP, Health Solutions
• $  900,763:  Thomas J Easley, SVP, Publisher
• $  890,498:  Richard A Deem, SVP, Advocacy
• $  879,299:  Modena H Wilson, SVP, Chief Health/Science
• $  730,874:  Denise M Hagerty, CFO
• $  291,980:  David O Barbe, President/Past President
• $  286,652:  Barbara I McAneny, President Elect/President
• $  244,980:  Jack Resneck, Chair-Elect, Chair
• $  228,649:  Andrew W Gurman, Past President (thru June, 2018)
• $  222,080:  Patrice A Harris, Trustee, President-Elect
• $  194,421:  Carl A Sirio, Trustee (thru June/2018)
• $  188,922:  Gerald E Harmon, Chair/Trustee
• $  165,115:  Jesse M Ehrenfeld, Trustee/Chair Elect

The 17 most highly compensated employees received more than $12 million, which equates to an average compensation of $724,000.  However, it is interesting to note the gaps in compensation. The 9 most highly compensated employees received $730,874 – $2,539,019.  The next 8 most highly compensated employees received $165,115-$291,980.

12 of the 17 (71%) most highly compensated employees are male while 5 of the 17 (29%) are female.

The AMA paid for first class or charter travel and health or social club dues or initiation fees.  In addition, the AMA has various deferred compensation plans. Please refer to the Form 990, Schedule J, Part III, Supplemental information for more information on first class travel, health or social club dues and the retirement plans.

104 independent contractors received more than $100,000 in compensation with the 5 most highly compensated reported to be:

• $3,043,275:  Silverchair, of Charlottesville, VA for IT services
• $1,673,291:  Humach, f Dubuque, IA for consulting services
• $1,383,996:  IQVIA, Inc., of Philadelphia, PA for consulting services
• $1,202,490:  PBD, Inc. of Alpharetta, GA for fulfillment services
• $  901,515:   Premier Healthcare Solutions, of Charlotte, NC for consulting services

In summary, the AMA’s golden goose is its medical classification coding system – the CPT Coding System, which is the primary source of the organization’s revenue, followed by subscriptions, reprints and credentialing. 1,115 employees worked for the AMA in 2018; their compensation ($169 million) accounted for the largest expense.   The top executives are compensated millions and the organization paid for first class travel and paid for health or social club club dues or initiation fees.

To read the IRS Form 990 (2018), click here.