The CAP had another strong year, balancing headwinds with strong performance to achieve our financial objectives and support members, customers, and the patients we serve.

Total 2022 operating revenues were $262.4 million, less than $0.1 million below the Board-approved target and $10.7 million (4.3%) above fiscal year 2021. While some revenue streams were impacted by the global economic turbulence, others performed better than expected.  

Revenue from Laboratory Quality Solutions (proficiency testing and laboratory accreditation) grew 4.6% over 2021, aided in part by a net increase of nearly 150 labs enrolled in our laboratory accreditation program and continued growth in domestic and international proficiency testing revenue. These programs benefit pathologists, clinicians, and patients and—at 93.8% of total revenues—remained the primary source of funding for other CAP member benefits. 

Secretary-Treasurer
Alfred Wray Campbell, MD, MBA, FCAP

All other revenue declined by 0.1% in 2022. While 2021 was a very strong year for periodical and published materials sales, 2022 saw a decline in this category as economic uncertainty negatively impacted advertising spending. Other programs performed better than expected, including our strongest ever annual meeting, and  growth continued in learning revenue, cancer protocols and data standards subscriptions, as well as Pathologists Quality Registry enrollments.

Our well-diversified portfolio performed better than benchmarks but was negatively impacted by market volatility resulting in net investment loss of $17.0 million in 2022.

Total 2022 expenses net of capitalized amounts were $265.3 million, $0.4 million (0.1%) better than budget and a $26.9 million (11.3%) increase from 2021, with nearly 40.0% of the increase due to the return of most pre-pandemic staff and member travel.

Cost of personnel and benefits (net of capitalized amounts)—our largest expense category—was $107.5 million, or 40.5% of total expenses (vs. 42.8% last year). Like many organizations, the CAP has experienced delays in finding the right talent in a tight labor market. The Compensation Committee continuously monitors personnel and benefits cost against external benchmarks, ensuring our ability to attract and retain talent in a sustainable way. The CAP also selectively engages outside services to augment internal expertise, as reflected in the 2022 outside services cost (net of capitalized amounts) of $30.4 million, or 11.5% of total expenses.

Cost of materials and on-site inspections—our second largest expense category—was $89.9 million, or 33.9% of total expenses, an increase of $9.3 million (11.6%) from 2021. Over half of the increase was due to in-person inspections and reduction of inspection backlog. The remaining increase in cost of proficiency testing materials, packaging, and shipping was driven by program growth, inflation in outside vendor prices for test kits and packaging, and higher fuel costs in shipping kits to nearly 120 countries. We constantly look for ways to mitigate these cost increases through long-term supplier contracts and more efficient packaging solutions.

Rental and maintenance—the fourth largest cost category—was $12.2 million (4.6% of total) and increased $1.6 million (15.5%) over 2021. This expense will grow further over the coming years, as the CAP continues our transition from legacy on-premise systems to modern cloud-based software as a service  solutions. This shift is in line with the long-term technology roadmap monitored by the Information Technology Leadership Committee and the Board, which will allow us to be more flexible and better meet customer and member needs.

Total excess revenue over expenses after investments and adjustments (net income) was negative $19.9 million due to the impact of investment losses noted above and non-operating costs to eliminate inspection backlog. The Board also monitors earnings before interest, depreciation, and amortization (EBIDA), minus capital expenditures (CapEx) to ensure we break even from operations in the long term when adjusted for non-cash and non-operating expenses. In 2022, the CAP again exceeded this target—achieving EBIDA less CapEx of $0.7 million.

Meeting our members’ top needs is always at the forefront of our investment decisions. As the only 501(c)(6) membership organization representing pathologists, the CAP spent $12.1 million in total expenses to advocate on behalf of pathologists and another $1.8 million in net costs to support the only quality data registry that allows pathologists to score highly and maximize payment for their services. We also invested a net of $12.2 million in high-quality practical learning, including a new destination CME conference.

The CAP balance sheet remains strong, with total assets as of December 31, 2022, of $359.3 million, including reserves of $139.1 million. Assets net of liabilities were $110.7 million, a decrease of $19.9 million over the prior year, primarily due to the fluctuation in market value of investments.

As the world continued to recover from the pandemic while facing global economic uncertainty, your CAP persisted in serving patients, pathologists, and the public by offering critical resources and member benefits while also making strategic investments to sustain excellence in the practice of pathology and laboratory medicine worldwide.