Perfect Storm: The Unraveling of Hearing Healthcare Delivery: Part II

Dr. Jerry Northern returns as guest contributor this week to review a number of converging factors that threaten the viability of Audiology as a profession. The factors emanate from the rapid transition of hearing aid distribution from a medical model toward the electronic commodity market, as he discussed last week. Specific solutions are in short supply, but he gives us some direction along with some pointers on directions to avoid.

Readers will note an inordinate number of links in today’s post. That’s because Dr. Northern marches through many “unforeseeable” topics chronicled by HearingHealthMatters in recent years as we tugged at unraveling threads.

 Unforeseeable, Uncontrollable, Unstoppable

 “…we didn’t see, or understand, the rampant growth of the converging forces chipping away at our position as the self-stated ‘owners of hearing healthcare.’”

Jerry Northern, PhD

Take a look at the tsunami of converging forces that have combined in exponential factors to affect our independent practices:

• The manufacturer’s quest for profits.   There can be little doubt that even with the meager growth in hearing aid sales over the past decade, the profit margins for the “Big Six” major companies are nothing short of amazing.  Their route to growth is to sell more units….period. Mergers have brought them bigger, stronger and better distribution systems.  Every manufacturer is now a full-service vendor willing to provide every service one might need.  The mergers have provided the surviving companies with reduced expenses, shared research and development costs, pooled administrative resources, and an improved ability to ride out market cycles – all leading to increased manufacturing revenues – and profits.

• Retail network expansion. The reality of retail networks now involves the majority of independent audiology practitioners seeking management support and guidance as well as lower unit costs for their products.  The price a private practice pays to belong to a network  is a reduction in freedom in operations and a likely diminution of overall profits.  Manufacturers have been quick to cement special relations with the retail networks to protect their own product distribution while racing to exclude their competitors from gaining market share.

• Co-op buying programs.  Starting quietly when a group of audiologists in Philadelphia banded together to buy in larger volumes for reduced unit costs, the number of partnership co-op organizations has increased over the years to provide all the remaining non-network audiologists an opportunity to share in reduced costs for hearing aids.  In the apparent belief that lower cost-per-unit can be the salvation of the independent practitioner, co-op programs survive and proliferate; witness the recent advent of the mysterious Unity co-op program.

•  The Internet explosion.   In spite of audiologists screaming about the “unethical” sales of hearing aids through the Internet, this distribution system has taken hold sufficiently that private-practice audiologists have had to accept and develop protocols and pricing structures to manage patients who show up at their offices with hearing aids purchased online.  Unable to win this war, many audiologists now view these patients, albeit reluctantly, as “value added” with the hope that they can turn them to be loyal clients.

•  PSAPs.  As if the private practitioner didn’t have enough to worry about, suddenly and without warning, the FDA recognized (and authorized) the sale of personal sound amplification products (PSAPs).  Confusing the distribution system with blurred lines of public information, literally hundreds (if not thousands?) of less expensive sound-amplifying devices are now available.Marketed with persuasive and innovative appeals, PSAPs can be found online, in big box stores, gun shops, drug stores, and ubiquitous kiosks.  Aimed ostensibly at recreational users and not the hearing-impaired public, PSAPs sell for as little as $9.99 and as much as $479.  Although most of the PSAP devices are not really hearing aids, per se, the better PSAP systems offer multi-channel amplification, advanced signal processing, noise-reduction circuits, and impressive gain and output performance.

• The warehouse invasion.  The advent of warehouse sales of hearing aids is, no doubt, the biggest disrupter of our traditional audiologist-empowered dispensing system.  Costco is clearly the major force, but Wal-Mart, Sam’s Club, and Best Buy are testing the waters and watching closely (along with Walgreens and CVS) the amazing growth in sales shown by Costco. The warehouse model is very successful and not likely to go away.  With its high sales volumes, narrow profit margins, and strong professional delivery model,  Costco may have found the way to capture the majority of the new hearing aid buyers we have all been anxiously awaiting.  With nearly 70 million members walking past their warehouse sound booths each year and a recognized legitimate cost-saving reputation, Costco is the most actively growing marketplace to attract potential hearing aid buyers and may soon outdo the Veteran’s Administration as the biggest buyer of hearing aids.

Survival Strategies

 Does anyone really believe the manufacturers are going to bend and reduce costs significantly to audiologists?

So how does audiology survive in this uncertain and constantly challenging hearing aid marketplace? I certainly don’t have any concrete solutions. However, it seems to me that the answers are in innovation, increased efficiencies, and overwhelming personal customer service.

The solution is NOT a new buying co-op, as suggested by the Unity group.  Does anyone really believe the manufacturers are going to bend and reduce costs significantly to audiologists?

I believe we need to break away from our focus on the hearing aid device itself; then we must unbundle prices so consumers can directly compare our product prices with the prices of Internet and warehouse sellers.  It is far too easy for consumers to buy hearing aids at the sales outlets where prices look cheapest. Audiologists need to sell products competitively, and market the services we can provide from our extensive training and understanding of persons with hearing loss.

Only though new and innovative patient-oriented services will we survive in today’s tsunami and the shifting sands of hearing healthcare.

* feature image courtesy of Oregon State

Jerry L. Northern, PhD, is Professor Emeritus at the University of Colorado School of Medicine where he served as head of the Audiology Department for more than 26 years. Dr. Northern, a native of Denver, is a prolific writer and editor of several professional journals; he has authored a dozen textbooks in the areas of hearing and hearing disorders, including six editions of Hearing in Children and three editions of Hearing Disorders. Internationally known for his expertise in pediatric audiology, his professional background includes clinical practice, teaching, medical-legal industry experience, clinical and basic research, as well as consulting in nearly 30 countries. Dr. Northern is a founding member of the American Academy of Audiology and was the organization’s third president. He has been honored by numerous organizations for his contributions to the field of audiology and can be reached at [email protected].