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A Balanced Budget

IN 2013, the Chicago Medical Society (CMS) Board of Trustees set three distinct and somewhat contradictory administrative goals: increase membership, lower dues, and maintain a balanced budget. Prior reports have focused on membership and dues, and this report will explore the budget.

The Great Recession wreaked havoc on CMS finances. From 2005-2009, CMS experienced a deficit for five consecutive years, amounting to a cumulative loss of $1.49 million. Since then, CMS has reversed this trend and made $264,000 between 2010—2012.

To erase the budget deficit, there has been a significant decrease in expenses. The Society cut back on non-essential spending, including the Holiday Reception and the Annual Dinner. Several contracts, including building maintenance, were renegotiated on more favorable terms. Electronic communication with members and on-line meetings generated significant savings.

Since 1995 the number of CMS employees slowly decreased from 45 to 15. This net decrease was entirely through attrition and not layoffs. A wage freeze, which has been in place since 2008, is to be lifted in 2014.

When one examines the Society’s economic turn-around, it is interesting to note that the improved financial performance is almost entirely on the expense side. Dues revenue has not increased during this period. However, CMS has profited from non-dues  revenue sources. Non-dues revenue has had a tarnished reputation since the AMA/Sunbeam debacle in 1998. Any non-dues revenue source for CMS is carefully evaluated to assure the endeavor is consistent with the core values of the Society.

The CMS building has provided an excellent source of non-dues revenue for the organization. Purchased in 1979 for $1.8 million, the Grand Avenue property was appraised last spring for over $6 million. The building’s 47,000 rentable square feet, which includes a portion of the basement, are fully rented. The free cash generated to the Society totaled about $133,350 for 2012, and the profitability is expected to increase as leases mature.

The CMS Insurance Agency is also a significant source of non-dues revenue for the Society. Specifically, 2012 showed profitability of $53,934. This continued performance is particularly impressive given the increased competitiveness of the insurance industry. As the core business of small physician groups contracted, the Insurance Agency has come up with creative ways to market to larger groups, such as the Risk Purchasing Group for Children’s Memorial Hospital physicians.

Despite the financial improvements, there are also continuing challenges. The move to electronic communication has generated significant financial savings. However, the one remaining print communication, Chicago Medicine, which was redesigned two years ago, remains quite expensive. CMS continues to sell advertising to help defray the cost, and will now contract that work out in the hope of obtaining additional advertising revenue.

The past few years have seen a welcome paradigm shift, a shift in the way CMS leadership views the budget. There is no longer the hope for, but the expectation of, a balanced budget, and that expectation continues to be realized.

Robert W. Panton, MD
President, Chicago Medical Society

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