October 2002 Bulletin

Ensuring a sound financial future

By Vernon T. Tolo, MD, and Andrew J. Weiland, MD

Over the past year, the AAOS has been affected by events that were largely beyond our control. Among these was the almost $1 million shortfall in revenues from the Annual Meeting and the decline in the AAOS investment portfolio as a result of the overall decline in the market. While we exercise fiscally prudent management by keeping our investment returns apart from operations there has nonetheless been a negative impact on the AAOS. Consequently, the Board of Directors has taken a hard, in-depth look at all aspects of AAOS finances and has concluded that the organization must act now to position itself for a sound financial future.

As part of an overall strategy to ensure our Academy’s financial stability over the next several years, the Board made some tough calls at its September 2002 meeting. We took into account the observations and recommendations from the organizational review conducted by R.S. McGladrey and directions and vision developed by the "AAOS in 2005" planning initiative. Today, we are communicating those decisions, and the rationale behind them, directly to you, the members.

Background

Earlier this year, the Board appointed a project team chaired by Dr. Weiland to study a number of fiscal matters. The group was instructed to define revenue requirements for the next several years, identify areas for cost cutting and seek out potential new sources of revenue. The team reported back to the Board with a wide-ranging series of recommendations. In September, the Board approved several proposals, including cost cutting initiatives, new sources for revenue, policy changes and increases in various fees and dues.

Board controls, reduces expenses

The Board has moved to control expenses in the following areas:

New revenue sources

The Board is actively seeking to develop new sources of revenue for the future. To that end, the following policy changes were approved:

In addition, the Finance Committee has been charged with seeking new and innovative sources of revenue to offset several existing subsidized AAOS activities. The Finance Committee also has been charged with recommending other identified cost reductions that will be designed to lower expenses.

Also, a project team–headed by Robert W. Bucholz, MD, AAOS second vice president–is developing plans to seek additional sources of revenue from corporate and foundation funding beyond that of the orthopaedic industry’s generous contributions in support of various programs in medical education and public education.

We have also introduced a system that is linked to the AAOS’ Annual Program of Work (APW) that will enable the Board to evaluate the performance and success of all programs and projects that are part of the APW. The application, known as the Program Assessment System (PAS), will be used on a regular basis throughout the year.

Dues and fee increases

Following are some of the approved expense items that will most directly impact Academy members:

Increase in member benefits

Of course, along with the dues increase is a corresponding increase in benefits to you, the member. An array of exciting new projects and initiatives has recently been established. Following are just a few of these new member benefits:

Dues comparison

It’s essential to note that even with the increase, the AAOS dues level remains relatively low in comparison to other major medical specialty societies.

In a comparative analysis of 17 major medical specialty organizations, each organization’s dues were added to their fee for members’ annual meeting registration. (Most medical specialty societies charge their members a registration fee for attendance at their annual meeting; the Academy does not.) In this comparison, the AAOS total dues level ranks relatively low–the Academy’s dues ranks tenth out of 17 organizations participating in the survey.

For Board Certified members, the highest dues level was $1,835 for the American Society of Plastic Surgeons, and the low was $350 for the American Urological Association. Even with the 2003 increase to $750, the Academy’s total dues level still remains in the low-to-mid range of the major medical specialty organizations.

Dues increase history

The last dues increase was approved by the membership in 1999 to cover the cost of the public education program. The AAOS dues increase prior to 1999 was in 1994. This means that the Academy hasn’t taken into account the general increase in costs to operate the AAOS in nearly 10 years. Using the Consumer Price Index (CPI) as an inflation indicator, costs in 2002 are projected to be 21.6 percent higher than in 1994. That means one dollar in 1994 is worth just $0.82 today.

Thus, it is because of some adverse financial impacts beyond our control, the addition of new program initiatives desired by the membership and the fact that almost 10 years have passed since we have taken into account general increased costs to the AAOS that the Board was forced to take this action. We hope you will agree that your Board of Directors has acted with a sense of fiscal responsibility in its efforts to ensure that the AAOS can continue to serve its members well in the future.


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