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

Total 2023 operating revenues were $278.3 million, $2.3 million better than the Board-approved target and $15.9 million (6.0%) above fiscal year 2022. While some revenue streams were impacted by the global economic turbulence, others performed better than expected.

Revenue from Laboratory Quality Solutions grew $14.1 million (5.7%) over 2022, driven by continued proficiency testing growth both domestically and internationally and higher than budgeted growth in the Laboratory Accreditation Program from new laboratories that joined in late 2022. These programs benefit pathologists, clinicians, and patients and—at 93.5% of total revenues—remained the primary source of funding for other CAP member benefits.

All other revenue grew by $1.8 million (11.1%) in 2023. Periodical and published materials sales continued to decline as economic uncertainty continues to negatively impact advertising spending. Other programs performed better than expected, with notable growth in Pathologists Quality Registry enrollments and cancer protocols and data standards subscriptions, as well as the FDA/BAA project SHIELD—an initiative aimed at enhancing patient-centered outcomes research and value-based care—entering its second year.

The CAP’s diversified portfolio performed well, resulting in a net investment gain of $18.5 million in 2023, erasing the previous year’s loss due to market volatility.

Total 2023 expenses net of capitalized amounts were $285.5 million, $3.8 million (1.3%) worse than budget and a $20.2 million (7.6%) increase from 2022, driven primarily by proficiency testing materials, personnel expenses, and investments in new technology.

Cost of personnel and benefits (net of capitalized amounts)—our largest expense category—was $112.5 million, or 39.4% of total expenses (vs. 40.5% last year). Like many organizations, the CAP continues to experience 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 2023 outside services cost (net of capitalized amounts) of $33.4 million, or 11.7% of total expenses. Outside services spend increased $3.0 million (9.8%) over 2022, net of reductions in other areas, due to incremental investment to modernize our systems and support the SHIELD project.

Cost of materials and onsite inspections—our second largest expense category—was $96.5 million, or 33.8% of total expenses, an increase of $6.6 million (7.3%) from 2022. Higher costs in proficiency testing materials, packaging, and shipping were 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. We also incurred $2.5 million in 2023 to eliminate the COVID inspection backlog—a major accomplishment by member and staff inspectors.

Rental and maintenance—the fourth largest cost category—was $15.5 million (5.4% of total). This expense increased $3.2 million (26.6%) over 2022 as the CAP continues our transition from legacy on-premise systems to modern cloud-based software as a service solution. This shift is in line with the long-term technology roadmap monitored by the Information Technology Leadership Committee and the Board and 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 $11.4 million due to the impact of investment gains noted above. The Board also monitors earnings before interest, depreciation, and amortization (EBIDA), minus capital expenditures (CapEx). In the long term, the objective is to break even from operations when adjusted for non-cash and non-operating expenses. In the short term, the Board has approved a negative EBIDA less CapEx to support multi-year investments in technology modernization and other critical initiatives. The 2023 EBIDA less CapEx was negative $8.7 million, $1.5 million better than the Board-approved budget.

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 $13.0 million in total expenses to advocate on behalf of pathologists and another $1.9 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 $13.6 million in high-quality practical learning and a new destination CME conference.

The CAP balance sheet remains strong, with total assets as of December 31, 2023, of $377.7 million, including reserves of $149.3 million. Assets net of liabilities were $122.1 million, an increase of $11.4 million (10.3%) over the prior year, primarily due to the increase in market value of investments.

As the world continues to face economic uncertainty, your CAP continues to adapt, innovate, and make strategic investments to sustain excellence in the practice of pathology and laboratory medicine worldwide for the long term.

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