How Revenue is Spent at the American Medical Association (AMA) 2019
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 ($20-$420). As such, dues account for a very small portion (about $35 million or 10%) of the revenue stream for the AMA.
The AMA reported total revenue of $364 million in 2019 (compared to $332 million in 2018 and $317 million in 2017), of which only $35 million (11%) came from membership dues. By far, the biggest source of revenue was from “royalties” which totaled $194 million (53% of revenue) followed by subscriptions, reprints, credentialing, and education programs ($69 millions or 19% of revenue), inventory sales ($22 million or 6%), investment income and gain on the sale of assets ($29 million or 8%), and advertising ($13 million or 3%). In essence, 72% of revenue comes from 2 sources: royalties, and subscriptions, reprints, credentialing, and education programs.
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 $349 million (not including $12 million in depreciation) and can be categorized as follows:
- $185 million (51% of revenue): Compensation
- $ 38 million (10% of revenue): Office-related Expenses
- $ 35 million (10% of revenue): Pension Termination
- $ 20 million (5% of revenue): Fees for Services (consult, acct, invest, etc)
- $ 17 million (5% of revenue): Travel and Conferences
- $ 16 million (4% of revenue): Publications
- $ 11 million (3% of revenue): Other Expenses (no detail provided)
- $ 10 million (3% of revenue): Membership Solicitation/Telemarketing
- $ 9 million (3% of revenue): Advertising/Market Research
- $ 7 million (2% of revenue): Grants
As illustrated above, compensation expenses for the 1,179 employees (average compensation of $157,000) used up half of the revenue collected in 2019, followed by office related expenses which used up 10% of total revenue. A pension terminations resulted in a $35 million expense. Fees for services are fees paid to non-employees, most of which ($19 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 75 million and were primarily to medical schools, foundations, and other non-profits for a variety of reasons including general support. However, there was one large grant:
- $1.1 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.
The AMA reported $57 million in net unrealizable gains on investments and a $15 million adjustment for post retirement benefits resulting in an increase in net fund assets from $549 million at the beginning of the year to $624 million at year-end.
Using the above information, every $100 in revenue was spent as follows:
-$ 51: Compensation
-$ 10: Office-related Expenses
-$ 10: Pension Termination
-$ 5: Fees for Services
-$ 4: Publications
-$ 5: Travel and Conferences
-$ 3: Other Expenses
-$ 3: Membership Solicitation and Telemarketing
-$ 2: Grants
-$ 3: Advertising/Market Research
-$ 96: Total Expenses
$ 4: Excess Revenue: To Fund Balance
As illustrated above, the AMA spent revenue primarily on staff compensation, office-related expenses, pension termination fees to non-employees and travel and conferences,
The Bottom Line:
The AMA raises about $350 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 1,179 employees followed by office-related expenses, fees paid to non-employees, travel and conferences, and publications.
The AMA has $624 million in net fund assets which is a significant sum.
To read the IRS Form 990 (2019), click here.