February 1998 Bulletin

"No one else will speak for orthopaedic surgery in the public debate."

Setting the course for flexibility, advocacy

The Board of Directors of the American Academy of Orthopaedic Surgeons (AAOS) has created a parallel-member organization, initially to be named the Orthopaedic Surgeons of America (OSA), to carry on the orthopaedic community’s advocacy activities on health care issues on behalf of patients and the profession.

The board also has submitted proposed AAOS Bylaws amendments to the fellowship which, if approved by the fellowship in 1999, would restructure certain aspects of AAOS activities. The changes would make it clear that the AAOS’ primary function continues to be education, while OSA’s primary function would be health policy advocacy.

As the growth in managed care and legislative and regulatory mandates began to change the health care delivery environment in the 1990s, the AAOS responded to threats to patient health care with public advocacy programs. But the AAOS advocacy activities are limited by its tax status as a not-for-profit educational association.

The creation of a 501©(6) organization has been discussed many times in recent years by the Board of Directors and Board of Councilors. In the last three years, motions for the AAOS to create an additional 501©(6) organization reached a board vote on two previous occasions. Both times, the motions failed to pass when board vote was split. At the December 1997 board meeting, the vote to create OSA was unanimous.

The board’s action in creating OSA fulfills a mandate of the AAOS membership, which voted at the 1996 Annual Meeting business meeting to authorize the formation of a 501©(6) organization if and when the board believed it was appropriate.

"The advantage of creating OSA is that it increases our flexibility," said AAOS President Douglas W. Jackson, MD.

"We can maintain our educational function and provide the other services. We can make effective use of our resources to implement our strategic plan. And, we can be certain that if there is a need for a proactive advocacy program it will not be restricted by the same tax code limits that restrict the AAOS activities.

"We will need to be able to continue to take a leadership position in speaking for the musculoskeletal health of our patients and for the profession that provides it. No one else will speak for orthopaedic surgery in the public debate." (For further discussion, see Dr. Jackson’s "Across the President’s Desk"

Proposed amendments to the AAOS Bylaws, which will be read at the Annual Meeting business meeting in New Orleans next month and voted on at the 1999 Annual Meeting in Anaheim, Calif., will create an organizational restructuring of the AAOS. Some of the major changes in proposed Bylaws amendments would:

Section 501©(3) of the Internal Revenue Code (IRC) exempts the AAOS from federal taxation because of its educational functions. One of the requirements of maintaining that tax status is that no "substantial" part of the activities of the AAOS can be devoted to lobbying or other advocacy activities. "The IRS and the courts have adopted certain factors that they will consider in determining whether a 501©(3) organization’s lobbying activities are too high, constituting a 'substantial part' of its overall activities," said Richard Peterson, AAOS general counsel. "The factors include the role of lobbying in the context of the organization’s overall activities, whether the lobbying is active or passive, whether there are advertisements and public solicitation, etc. There is only one sanction for excessive lobbying: revocation of the 501©(3) status."

The tax code and IRS issues were reviewed in detail for the board by the AAOS staff and outside legal counsel at the board meetings in September and December 1997. The board elected to come under the provisions of the 501(h) "safe harbor" provisions of the IRC. The 501(h) provision establishes specific monetary limits on the amount of lobbying a 501©(3) can engage in without running into problems with the IRS.

"Our primary mission is education," said Dr. Jackson. "We cannot lose our educational tax status and jeopardize providing education and other services that the members need and want."

AAOS First Vice President James D. Heckman, MD, agrees, pointing out that "by forming the 501©(6) organization, we can protect our 501©(3) tax status and have the ability to respond to future proposed legislation that we believe is not in the best interests of our patients. It’s a win-win solution to a problem that could have restricted the AAOS in the future.

"The board didn’t create the ©(6) organization because it has a specific plan to increase our lobbying activities. We did it to have the flexibility to continue our mission and strategic plan and to be proactive, as needed, in the future."

Kenneth E. DeHaven, MD, immediate past president of the Academy, emphasized that the IRS has changed the enforcement policy towards 501©(3) organizations. "We can’t even engage in a small increase in the advocacy activities that we have been doing without making a change in our tax status," he explained. "By creating a 501©(6) organization, we gain the flexibility to meet whatever challenges will arise in the future.

"In the past, the idea of creating a 501©(6) organization had mixed reaction from the members. Some were concerned that by forming an organization for lobbying, we would be abandoning our educational mission. Others thought that forming a ©(6) was long overdue.

"Today, everyone will recognize that in a time of fast-moving events, when legislation that is detrimental to our patients can be proposed suddenly, we need to have the ability to act and to act fast. In the past, the consideration was that we would have either a ©(3) tax status or a ©(6) tax status. Now, we realize we can have both. We have the flexibility of a ©(6) without giving up the ©(3) tax status for an educational organization."

Commenting on the proposed AAOS Bylaws amendments, AAOS Executive Vice President William W. Tipton Jr, MD, said, "The restructuring of AAOS’ activities should be invisible to members, involving mainly the distribution of financial expenses and revenues to appropriate organizations. There will be no major changes in the AAOS’ activities. We’re continuing on our mission."

At a Glance

On Dec. 6, 1997, the AAOS Board of Directors approved the creation of the Orthopaedic Surgeons of America (OSA). The board developed and proposed a series of Academy Bylaws amendments that will be read at the 1998 Annual Meeting business meeting in New Orleans in March and voted on at the 1999 Annual Meeting business meeting in Anaheim, Calif. On Jan. 12, 1998, the board approved the OSA Bylaws.


Members All members of the Academy are members of OSA

Governance OSA has an elected Board of Directors, who also will serve as the Board of Directors of the AAOS.

Purpose OSA will conduct health policy and advocacy activities on patient health care issues.

Staff resources The Departments of State Society Relations and Health Policy, and the Washington, D.C. office.

Revenue OSA will be retained by the Academy to manage the Technical Exhibits of the 1998 Annual Meeting. OSA will use the exhibit revenue for its expenses during its initial year.

Expenses Advocacy activities and expenses of the Departments of State Society Relations and Health Policy, and the Washington, D.C. office.


If the proposed AAOS Bylaws amendments, to be read at the 1998 Annual Meeting, are approved at the 1999 Annual Meeting, here’s what will happen.

Purpose The AAOS’ health policy activities will be shifted to the OSA. The AAOS will retain the primary functions of education of orthopaedic surgeons, other health care providers and the public; promotion of research; and communication with other professionals and the public.

Membership, fellowship The AAOS fellowship and membership functions, including the disciplinary process, will be shifted to the OSA. All fellows and members of the OSA will be fellows and members of the AAOS. All classes and requirements of fellowship and membership will remain the same for both organizations.

Revenue The dues statement in 1999 will be invoiced and collected by the OSA. The Board of Directors of OSA, which is composed of the same members on the Board of Directors of the AAOS, will give a share of the dues to the AAOS. Income from the sale of AAOS publications and other educational materials from the Annual Meeting will go directly to the AAOS.

Tax implication Currently, AAOS dues are fully deductible from a member’s federal income tax as an educational expense, although many AAOS fellows deduct their dues as business expenses. If the Bylaws amendments are approved, the percentage of dues paid to OSA and used for public advocacy activities, i.e., lobbying, will not be tax deductible. The OSA board of directors will determine on a yearly basis the percentage that is used for advocacy activities.

Assets The AAOS will retain ownership of the AAOS’ investment fund and the appreciation of value as it accrues, and the AAOS’ buildings in Rosemont, Ill. and Washington, D.C.

Resolutions and Bylaws process Resolutions and amendments to the OSA Bylaws will follow the same process as in the AAOS.

Officers’ functions The descriptions of the duties of the Academy officer positionsópresident, first vice president, second vice president, treasurer and secretaryówill be revised to more accurately reflect their actual functions.

Councilors/COMSS Members of the OSA’s Board of Councilors and COMSS also will be members of the AAOS’ Board of Councilors and COMSS. The chairmen, chairmen-elect and secretary of the Board of Councilors and of COMSS will serve on the board of OSA and on the board of the AAOS.

Name change The proposed AAOS Bylaws amendments contain a temporary "placeholder name" for the AAOSóAmerican Orthopaedic Surgeons Academy. At the 1999 Annual Meeting, the fellowship will be given the opportunity to change the name of the AAOS. Members could potentially elect to switch the names of the AAOS and the OSA; the 501©(6) organization (now known as OSA) could be named American Academy of Orthopaedic Surgeons, and the 501©(3) organization (the current AAOS) could be named Orthopaedic Surgeons of America. Other names are possible.

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