by Brian Taylor

“Signal & Noise” is a bimonthly column by Brian Taylor, AuD

 

“The handshake of the host affects the taste of the roast”

–Benjamin Franklin

 

Brian Taylor, AuD

Query any hearing healthcare provider and she is likely to say she practices patient centered care1. The concept of patient centered care is a broad one, but one basic tenet of it is the patient sets the agenda for what’s covered during the appointment with guidance from the provider. For example, there is evidence suggesting patients have a greater acceptance of an intervention when they are offered an opportunity to choose from a range of options (La Plante-Levesque, et al 2012).2

Many providers believe they are practicing patient centered care, but research tells a different story.  There are several studies indicating audiologists are perceived by patients as overly focused on technology and even emotionally distant. If these studies reflect reality, one could say most providers are practicing what is best termed “product centered care.”

In a series of published reports, Grenness and her colleagues at the University of Melbourne and University of Queensland analyzed dozens of appointments between adult patients and an audiologist. Their analysis suggests audiologists tend to control their interactions with patients. They found many patients raised concerns about the emotional and social consequences of their hearing loss only to be rebuffed by the audiologist who wanted to steer the conversation back to hearing aid technology and test results.

 

In one study they found that less than 5% of utterances of the audiologist addressed an emotionally-related topic initiated by the patient. Given the social and emotional consequences associated with hearing loss, such as frustration, annoyance and embarrassment, this is a missed opportunity to engage with patients on a deeper, more meaningful level.

 

The inability of many audiologists to emotionally connect with their patients is even more problematic when you consider the imminent deregulation of the dispensing process3. Soon it will be possible for a substantial number of individuals to purchase self-fitting hearing aids, and only find their way to an audiology clinic when they have a problem that cannot be adequately addressed through a smartphone app with an algorithm that uses artificial intelligence (AI) to solve it. As a profession we must plan for a day when a patient’s hearing aid problem can be solved with AI and machine learning, and we are left to address the social and emotional complexities of hearing loss that remain.  If the work of Grenness and colleagues is a guidepost, most audiologists are ill-equipped to address the challenges associated with the psychosocial aspects of hearing loss.  

The 2018 series of Signal & Noise posts hope to serve as a reminder that no matter how vital hearing aid technology is to patient outcomes, adults with hearing loss expect improved social and emotional well-being from their intervention from audiologists. More than simply learning how to use hearing aids, they want reduced annoyance, frustration and anxiety during communicative interactions; they desire to be more socially engaged and active; they want less stress associated with communication. For many individuals coping with hearing loss, these outcomes cannot be achieved unless they gain a trusting relationship with a licensed professional.  Signal & Noise will tackle these issues and discuss how audiology needs to adapt if the profession wants to thrive in the era of self-fitting OTC devices, managed care and big-box retail.

A secondary goal of the upcoming Signal & Noise columns is to show examples of innovation in a more broadly defined way. Even though we have come to expect incremental progress with respect to hearing aid innovations, innovations can and do occur around the service experience. Innovations are not confined to microchips and software.

 

Audiology Best Practices and Best Principles are Needed

 

Let’s examine a concept that’s been around for more than 25 years, but worthy of a revisit4. It is the Progression of Economic Value. It is a good example of how hearing healthcare professionals need to look beyond clinical best practices and apply best principles that come from other professions. In the case of the Progression of Economic Value, it has been successfully applied in retail, education and other healthcare businesses.

Notice in Figure 1 (below) there are five distinct levels of value. Starting at the bottom left of the Figure, there are commodities, which are often literally extracted from the ground. Commodities are usually the raw materials used to make a product or good. In hearing care, commodities are the fungible components inside the hearing aids. Components from various manufacturers could be substituted for one another, and as long as they are working within a pre-determined specification, no one is likely to notice the difference.

 

hearing healthcare best practices value

Figure 1. The Progression of Economic Value, Pine and Gilmore, 1993.4

 

The next level of value is goods. Take the hearing aid out of its packaging, place it on the ear, program and adjust it. Although software allows for customization of the hearing aid to the individual’s hearing loss, you can buy a high-quality device from many places: It can be purchased on-line, through the mail or in a clinic, often with minimal involvement from a provider.

Next, provide a service that helps people learn how to use their hearing aid and acclimate to their hearing aids, and you have reached the next level of value: An intangible service. A bit harder to measure and define, compared to a commodity or good, audiologists deliver services when they patiently teach patients how to insert and remove their instruments or counsel the patient of learning how to listen with hearing aids.

As we move up the ladder of value, customizing a service by designing or staging a series of memorable events moves us into the experience bucket. If services are delivered, experiences are staged4. For the audiology practice this means creating a series of memorable touch-points that engage the patient emotionally5. Provide those hearing aid counseling sessions in a memorable way using colorful brochures and effective communication skills, and you have likely created an experience.

 

*Stay tuned for Part 2 of this series next week!

 

 

References:

  1. In 2015 the Institute of Medicine defined patient-centered care as: “Providing care that is respectful of, and responsive to, individual patient preferences, needs and values, and ensuring that patient values guide all clinical decisions.”
  2. Laplante-Levesque, A, et al (2012) “What makes adults with hearing impairment take up hearing aids or communication programs and achieve successful outcomes?” Ear and Hearing. 33, 79-93..
  3. According to the January 2018 Bernstein Report, the FDA looming OTC regulations are likely to deregulate the hearing aid sales & distribution process. This means that rather than buy hearing aids from a licensed professional, a growing number of individuals will buy hearing aids direct from the manufacturer (or from an on-line distributor) and visit an audiologist for follow-up service. One possible by-product of a deregulated sales & distribution is the unbundling of service provisions from the sale of the product.
  4. The first edition of the Experience Economy by James Gilmore and Joe Pine was published in 1993. Their book introduced the concept of the Progression of Economic Value using birthday cakes and coffee.
  5. The book Quality in Audiology has a chapter describes how a practice to can stage memorable patient experiences and how these experiences might contribute to superior patient outcomes with hearing aids.  

 

 

Brian Taylor, AuD, Brian Taylor is the director of clinical audiology for the Fuel Medical Group. He also serves as the editor of Audiology Practices, the quarterly journal of the Academy of Doctors of Audiology, and editor-in-chief of Hearing News Watch for HHTM. Brian has held a variety of positions within the industry, including stints with Amplifon (1999-2008)  and Unitron (2008-2015). Dr. Taylor has more than 25 years of clinical, teaching and practice management experience. He has written and edited  six textbooks, including the third edition of Audiology Practice Management (Thieme Press) which will be published in 2018. He lives in Minneapolis, MN and can be reached at brian.taylor.aud@gmail.com

 

*feature image courtesy of Cambridge in Color

Editor’s Note: Hearing Health & Technology Matters (HHTM) is pleased to post the first column from the new Section Editor of Hearing Economics, Amyn Amlani. If you are a frequent reader of HHTM, it’s likely you have read several guest columns from Amyn, and if you’re an occasional reader who may have missed his previous postings, you’re sure to be impressed with the unique perspective he brings to the table. Combining his background in research, clinical audiology and economics, Dr. Amlani, who is Professor and Chair in the Department of Audiology and Speech Pathology at the University of Arkansas for Medical Sciences, has made several important contributions that cut across these three disciplines.

We look forward to Amyn’s monthly contributions at Hearing Economics. Further, I am pleased that he has assembled several notable guest contributors you can look forward to reading throughout the year. As his first column posted below demonstrates, HHTM readers are sure to continue to learn a lot from his data-driven insights.

–Brian Taylor, AuD, HHTM Editor-In-Chief

__________________________________________________________

 

Amyn Amlani, Editor Hearing EconomicsIt is an honor and pleasure to serve as the incoming Section Editor of Hearing Economics. I have the formidable task of proverbially filling the large shoes of my predecessor, Holly Hosford-Dunn. Holly was a visionary in creating this section, having the forethought to share timely information with peers about how the profession and industry produced, distributed, and consumed goods and services. This section will continue with its intended mission, serving as the online source for economic news and information related to hearing health care.

–Amyn Amlani, PhD

 

 

Improving Hearing Aid Market Penetration through Forward Integration

 

Hearing aid market penetration is a term used to quantify the percentage of individuals within a market that consume a product or service. According to Staab,1 “In about 1975, the hearing aid industry was considered to have reached a market penetration of about 27%. Today, it is closer to 17%, even though more hearing aids are sold.” To reverse this negative trend, several hearing manufacturers have resorted to a vertical integration model.

 

Vertical Integration

 

Vertical integration is the merger of two or more businesses, with each business representing a different process in the supply chain. One example is a parent company that produces hearing aids while also owning a retail distribution chain. This type of merger is known as forward (or downstream) integration, where the manufacturer component has direct contact with the end user at the retail level (Figure 1).

 

Figure 1. An illustration of forward (downstream) integration.

 

Forward integration is effective when:

 

  • A small number of distributors are available in the industry;
  • Distributors and retailers have high profit margins;
  • Distributors are expensive, unreliable, or unable to meet company’s distribution needs;
  • The industry is expected to grow significantly;
  • The market allows for stable production and distribution.; and,
  • The company has enough resources and capabilities to manage the new business.

 

The primary goal of the forward integration strategy is to achieve higher economies of scale and increase market share by providing a lower retail price to the end user (Figure 2).

 

Figure 2. An illustration of supply-side demand, denoted as S, in a market where the manufacturer has direct contact to the end user through a retail distribution chain. D represents the demand function

 

The decreased retail price stems from the yellow triangle positioned between the initial supply—labeled as S1—and supply stemming from the forward integration, denoted as S2, for a demand curve (i.e., D). The reduction in S2, compared to S1, occurs because (1) costs reductions are improved through coordination of production and inventory scheduling between stages in the supply-chain process, and (2) marginal cost (i.e., total cost to produce and sell one additional item) is decreased. Together, these variables decrease the need by the parent company to increase the wholesale markup on their product(s).2

 

Forward Integration and Hearing Aid Price

 

Given that several hearing aid manufacturers employ a forward integration model, we attempted a cursory analysis on how much in retail savings is being provided to the end user. The data for the analysis was adopted from retail3 and wholesale4 price figures between 2012 and 2015.

While we do not have access to correlational data between retail and wholesale pricing, we make the assumption that reductions in pricing will be highlighted in a trend analysis based on the fact that roughly 21% (i.e., 17% manufacturer-owned divided by 80% total devices dispensed in the private domain) of all privately dispensed hearing aids stem from manufacturer-owned retail outlets.

 

premium hearing aid pricing trends

Figure 3. Trend analysis differences between retail and wholesale hearing aid prices for premium-priced devices dispensed between 2012 and 2015.

 

The trend analysis for premium-priced devices is shown in Figure 3 (above). The analysis suggests:

 

  • The wholesale costs of premium-priced hearing aids remain essentially flat over this period.
  • The retail costs of premium-priced hearing aids increase slightly over this period.
  • The difference (i.e., retail – wholesale), or gross profit, increases, suggesting any potential savings in price are not being passed on to the end user.

 

pricing trends economy hearing aids

Figure 4. Trend analysis differences between retail and wholesale hearing aid prices for economy-priced devices dispensed between 2012 and 2015.

 

The trend analysis for economy-priced devices is shown in Figure 4 (above). The analysis suggests:

 

  • The wholesale costs of economy-priced hearing aids increase slightly over this period.
  • The retail costs of economy-priced hearing aids remain essentially flat over this period.
  • The difference (i.e., retail – wholesale), or gross profit, slightly decreases, suggesting that a small savings in price at the retail level is being passed onto the end user.

 

Summary

 

At face value, manufacturers operate retail outlets to improve market penetration growth through forward integration. Forward integration is premised on lowering supply-side expenses that can be used, then, to reduce retail costs. A trend analysis, however, indicates that savings in expenses, which result in increased gross profit, are being passed onto the end user for economy-priced devices, but not for premium-priced products.

If this trend analysis is correct, the findings posits that manufacturers are not fully contributing to reversing the eroding market penetration rate.

 

References

 

  1. Staab W. (2017, July 25). OTC hearing aid standard.
  2. Abiru M. (1988). Vertical integration, variable proportions, and successive oligopolies. Journal of Industrial Economics, 36, 315-325.
  3. Hosford-Dunn H, Amlani AM. (2016). Price functions in the US retail hearing aid market, Part 2.
  4. Hosford-Dunn H, Amlani AM. (2016). Price functions in the US wholesale hearing aid market.

 

*featured image courtesy Field Technology Online