• Wayne’s World examines the unwritten history - people, events, and products - that shaped the hearing aid industry.

Hearing Aid Distribution – III

By On · Add Comment

Distribution channelsThis week is a continuation of the topic for the past two weeks – hearing aid distribution systems.  Last week’s distribution   systems related to contract services, purchasing groups, big box retailers, pharmacies, and health care companies.  This week additional distribution systems that have been tried are discussed.   

 

 

SAME SESSION FIT  Lens Crafters Logo

Lens Crafters (1987)

Hearing Care 2000 was a Division of Precision Lens Crafters.  For the first time, a patient could have their hearing evaluated, and then the hearing aid fabricated and fitted in one place, during one visit.  An on-site laboratory made possible the fabrication of the hearing aid during the first visit, and primarily referred to custom-molded products.  Just as Lens Crafters advertised one-hour eyeglass fitting, the intent was to allow the patient to leave the same evaluation session with a custom-molded hearing aid.  Their promise was to “…custom fit you with the best possible hearing aid….and we will do it in one visit.”  The hearing aid would be made while the patient watched.  This was during the time when custom-molded hearing aids dominated hearing aid sales.  PAC

SeboTek (2003)

The SeboTek PAC™ (Post-Auricular-Canal) hearing aid was presented at the AAA (American Academy of Audiology) meeting in 2003, and the hearing aid industry was forever changed – changed with an impact that rivaled that of digital hearing aids.  It was the first successful same-session fit hearing aid.  This development sparked a monumental reversal in hearing aid design, sales, and use – from custom-molded in-ear/canal variations, to essentially invisible BTE (behind-the-ear) configurations.  And even more significant, it helped bring an untold number of new hearing aid users into the market.  The invention was responsible also for improving patient satisfaction of existing hearing aid wearers, bringing many back to hearing aid offices for this “new and better” design.  But, while it changed the hearing aid industry relative to fittings, it did not change the traditional distribution systems already in place, even though it could have done this easily.  Mail Order

 

MAIL ORDER HEARING AID SALES

Lloyds of Rockford, Illinois has been selling hearing aids via mail order for 45 years, and now sells them via Lloydsthe web as well.  Also, Hearing Help Express of DeKalb, IL started selling hearing aids via mail order 31 years ago.  Currently, mail-order hearing aids are synonymous with Internet hearing aid sales, because those former mail-order companies have followed marketing trends and now offer the option of on-line purchasing.  Surfing the web will identify many similar hearing aid sales operations today.

Attempts have been made to ban mail order hearing aid sales.  Some states passed laws prohibiting OTC (over-the-counter) and mail order sales without a dispensing license, indicating that it is within the power of the state to pass such rules as a public safety and welfare issue [1].

However, such state laws were contested in a 2006 case involving the Missouri Board of Examiners for Hearing Instruments Specialists v. Hearing Help Express, an out-of-state mail order/Internet hearing aid seller.  Hearing Help Express asked the 8th Circuit Court of Appeals to review a lower federal district court decision that had stopped Hearing Help Express from selling hearing aids to the residents of Missouri without prior audiologic testing or fitting as required by state law [2].  On review of the lower court’s decision, the US Court of Appeals for the 8th Circuit reversed the district court’s ruling.  According to Liang et al [3], the 8th Circuit Court of Appeals held that the Missouri state law was invalid because it was preempted by the federal Medical Devices Amendment (MDA) to the Food, Drug, & Cosmetics Act, 21 U.S.C.  The MDA states that No State… may establish…any requirement (1) which is different from, or in addition to, any requirement applicable under this chapter to the device, and (2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under this chapter.  Under federal law, an adult patient that wishes to purchase a hearing aid must either undergo an auditory evaluation or execute a signed waiver prior to being allowed to purchase a hearing aid.  This can be interpreted that under federal law, an auditory examination is optional prior to hearing aid purchase.  Overall, the Missouri law was considered to be in direct conflict with the federal regulations, and hence, unenforceable.

Essentially, the Court held that adult patients may purchase hearing aids OTC (over-the-counter) in retail stores, online or through mail order with a signed waiver and without an audiologic fitting or testing.  (The latter requirements are not necessary for the sale of PSAPs).

 

STARTER HEARING AIDS

Low-cost “starter” hearing aids have been introduced through traditional hearing aid distribution channels to compete with OTC, mail order, and Internet sales of hearing products that are sold directly to the consumer.  Dispensers somewhat grudgingly accept the fact that not everyone is willing to make a hearing aid purchase with a capital “C” (commitment of dollars), especially when they are hesitant to accept that they have a hearing loss that is severe enough to require amplification.  The more marginal the hearing loss, the less likely is the willingness to make a hearing aid “Commitment,” especially when substantial dollars are involved.  This issue is as old as hearing aids – it is not something new.  For the most part, all major hearing aid manufacturers have had something in their product line that has been offered as an “introductory” product to help address this issue, but the price has not been as low as what some non-traditional and traditional distribution channels of hearing products have offered.

Songbird (2000)

The first systematic approach to quality, low-cost hearing aids was addressed by Songbird in 2000, with a disposable hearing aid.  However, the original Songbird failed due to dispenser non-interest.  Some dispensers have opined that it failed because it was an inferior product, a common argument against most low-cost hearing aids.  However, when the Songbird was compared with the Songbird Photoleading programmable digital hearing aids at the time, the Songbird performed technically as well, or better than the premium-priced hearing aids – and even more so in its ability to reduce circuit noise [3], [4].

Two reasons that the product was not the success hoped for were: 1) dispensers were unwilling to sell a product that cost the consumer $39.00, substantially depressing gross profit margins, and 2) the instrument did not fit as many ears cosmetically as had been projected due to its fixed design.  With today’s sized components, the latter would have been essentially eliminated.  What the Songbird showed, however, was that a quality hearing aid could be produced consistently for a low cost.

Does this mean that all low-cost hearing aids (or devices that appear to be hearing aids) are high quality?  The answer is no.  Some have limited adjustability, marginal circuitry, and some utilize cast-off components and dies of older hearing aids.  The primary consideration related to quality of these units would seem to be related to the manufacturer making the product.

For the most part, “starter” hearing aids have not introduced new distribution channels.  Traditional sellers of hearing aids offer these as affordable hearing aids to compete with OTC, mail order, and Internet sale of products that are sold direct to the consumer.  Prices to the consumer range from about $500 to $900.

Confusing the issue of “starter” hearing aids is that many share the same performance characteristics with some of the better PSAPs (personal sound amplification products – to be discussed in a later presentation, and which have introduced new channels of distribution of products designed to assist hearing).

Next week the topic of hearing aid distribution systems will feature Internet sales, consumer hearing aid purchase based on audiogram/self test, and over-the-counter (OTC) sales.

 

 

 

Footnotes    (↵ returns to text)
  1. Goldsmith, M., Another voice…to hear: why it is OK to try retail or mail order hearing aids, June, 2011, ICOT Hearing Systems↵
  2. Missouri Board of Examiners for Hearing Instrument Specialists v. Hearing Help Express, Inc. 447 F.3d 21 C.F.R. §801.421(a) (2006)↵
  3. Liang, B., Law, financial arrangements, and implications for audiology↵
  4. Moore, B.C.J., Stone, M.A., and Alcántara, J.I.  Technical review of the Songbird™ Disposable Hearing Aid, Department of Experimental Psychology, University of Cambridge, Commissioned by Defeating Deafness, 2001↵
  5. Brooks, D., Moore, B.C.J., and Taylor, R.  Songbird disposable hearing aid – Panel Report commissioned by Boots Opticians, Ltd. 2001↵

Hearing Aid Distribution – II

By On · Add Comment

HEARING AID DISTRIBUTION SYSTEMS  0 Distribution 3

Last week’s topic initiated the conversation on hearing aid distribution systems, explaining that many have been tried over the years.  This topic was brought on because of current discussions concerning hearing aid sales and how these instruments are/should be dispensed.  Hearing Aid Distribution – I produced commentary on manufacturer trends, franchises, insurance carriers, and low cost sales to consumers without direct audiologist dispensing (selling of the product).  This week is a continuation of the trends that the hearing aid industry has been exposed to.  Keep in mind that not all of these approaches were successful, not all that have been proposed will be discussed, and the “test of time” was fairly short for many.  The purpose of this series is to serve as a “refresher” to assist in conversations relating to the best approach to hearing aid distribution as we move forward, providing there is a “best” solution.  Contract

 

CONTRACT SERVICES

National Rehabilitation Services (1985)

National Rehabilitation Services (NRS) of Bala Cynwyd, PA, sought contracts for a variety of rehabilitative services, of which audiology was one.  The objective was to obtain audiological services administered by qualified professionals for patients who could benefit from the services (primarily audiological evaluations and hearing aids), when directed by a physician.

The contractor duties were defined as:

  • Provide licensed/certified personnel to perform audiological services.
  • Provide audiograms, written evaluation, and other reports as required by NRS.
  • Submit invoices to NRS on a bi-monthly basis.
  • Obtain physician’s orders and recertifications on all audiology services.
  • Copies of all transaction and visits with patients should be sent to NRS and kept in a patient file at NRS.
  • All hearing aids were to be bought from NRS at the single unit price.  NRS would consult in the selection of the appropriate aid.
  • There would be a 30-day return privilege on all hearing aids.

NRS would:

  • Provide sufficient blank NCR forms to Contractors.
  • Process and pay invoices submitted by contractor within 45 days from submission of bills.
  • If NRS does not receive payment for services, then Contractor will not receive payment for services.
  • A 5% retainer against possible denials will be withheld and placed in an interest-bearing account.  This will be reviewed every 6 months and monies dispersed upon results.
  • Pay $40 per audiological evaluation.
  • Pay Contractor on a 60/40 arrangement based on the amount received by NRS for Medicaid patients.

A separate program was involved with audiology programs in nursing homes they were involved with.  The irony of this program was that the speech pathologist or physician on notice at the nursing home would be the point of entry for patients in the audiology program.   2 Buying Group

 

PURCHASING GROUPS    

Marcon (1977), Hopkins, MN    

Marcon initiated shareholder members, and the company provided a private-labeled product and exclusive territories.  A company brochure identified the goal as: “to increase their group but limit the number of shareholders to maximize the financial, as well as the non-tangible benefits, of the venture.”  The company continues today.  Marcon  3 Marcon provides marketing support in the form of private labeling of marketing materials, ads and patient newsletters, and provides financial reporting directly to its members monthly.  The company has provided dividends to its members every year.  Because its members own the company, Marcon controls operating costs very tightly by keeping administration costs to a bare-bones minimum [1].  Most of the initial Marcon members were previous Maico dealers.

Audiology Coop (1980)

In 1980, a group of dispensing audiologists (Leo Doerfler, Paul Plucker, Michael Pollack, and John Balko) formed a buying CO-OP in the form of a partnership so that they could avail themselves of the various discounts that hearing aid manufacturers offered to groups that purchase a large number of hearing aids.  In November 1983, these dispensing audiologists founded Audiology CO-OP, Inc. to make these benefits available to a wider group of dispensing audiologists so that both the founders and newer members could purchase hearing aids at even lower prices.  Audiology CO-OP would pass 4 Audiology Co-Opon to its member-stockholder the benefits that accrue when large numbers of hearing aids were purchased.  These benefits included quantity discounts, cash discounts, and business development grants.

Membership in the CO-OP Corporation required a purchase of one share of stock (a security) for $10.00.

That single share had no other value, and could only be resold back to the corporation for the same amount.  The CO-OP was initially set up to have as many as 250 common stockholders.  As a stockholder, the member was allowed to vote on CO-OP business and to get the benefits of the CO-OP purchasing power.  And although audiologists founded the Co-OP, any person who purchased hearing aids to sell at retail was eligible, with final membership allowed to those who received unanimous approval of the management board.

No exclusive member-stockholder territory was allowed.  A $20 nonrefundable fee for applicants was used to pay for credit checks.  An annual fee of $50 reimbursed the management group for their time and money invested in managing the CO-OP.  An administrative group (Lesowitz & Baskin CPA) received a fee for administration of CO-OP affairs.  Members purchased hearing aids at the negotiated price with the manufacturers plus a 10% markup, about half of which was used to operate the CO-OP.  The remainder of the money was to remain in the CO-OP until the member qualified to draw it out.

Hearing aids were allowed to be purchased outside the CO-OP.  But, if no purchases of hearing aids occurred in a given month, a $5 account-maintenance service fee was billed to the account for that month.  Hearing aids were not to be purchased from the CO-OP, but directly from the manufacturer, thereby maintaining those important contacts.  Members would receive a security code to use as a purchase order number.  The CO-OP would bill the member monthly, based on that security code number purchases, with payment expected within five (5) days of receipt, and if not, a penalty of 2% per month on the unpaid balance.  Additionally, separate, single-unit price invoices would be supplied by the CO-OP then requested.  Members would also pay for the cost of Security Registration in their state at a rate of $1.00 per hearing aid purchased, which would be deducted from the member’s profit account until such time that the cost of compliance was recovered.  This was to be paid on a pro-rata basis, depending on the number of members in the state, until the registration fee was recovered.

Other Collective/Management/Professional Assistance Models

Other collective groups have emerged since then, including, but not limited to; some as part of a franchise (Sonus), some as5 Logos part of a group benefits package that includes discounts for hearing aids (EarQ), others as a part of a purchasing network and marketing assistance group (Oracle Hearing Group, American Hearing Aid Associates – AHAA), some to provide for quality hearing care (Avada, AuDConnex), some to ensure the role of independent audiologists (AuDNet), and some to provide practice management systems (Sycle.net).

 

BIG BOX RETAIL STORES

Big Box stores such as Sears, Walmart, Sam’s Clubs, and Costco have been selling hearing aids for quite a number of years.  These followed the traditional hearing aid sales practices, with the exception that they were located in box stores and were owned by either the Big Box company itself, or by an independent company operating in the Big Box facility as a concession.

Miracle-Ear (1984)

Miracle-Ear LogoDahlberg, under its subsidiary brand name of Miracle-Ear®, began opening centers in Sears stores in 1984.  In the late 1980s, the name of the dispensing operation for Dahlberg in Sears stores was changed to “Retail Stores Division,” from the “Sears Division,” and the hearing aid operations within Sears stores became “concessions,” space leased and operated by Dahlberg, parent of Miracle Ear, as opposed to being owned and operated by Sears.

Walmart (1985)

An initial attempt to place hearing aids in Walmart stores on a limited scale took place in 1985, when Charles Bavuso of WalmartPittsburgh, KS sought private label hearing aids for Walmart stores in a four-state area (Kansas, Missouri, Arkansas, and Oklahoma).  He had permission to work out of the Pharmacy Departments of Walmart stores, but could have no permanent installation within the stores.  The program was short-lived, but it kept resurrecting itself at different times with different players, until now, when Amplifon, which now owns Miracle-Ear, has in excess of 150 outlets in Walmart stores, most of them called Amplifon Hearing Aid Centers.

HearAtLast

HearAtLast Holdings, Inc., a publicly traded Nevada corporation headquarted in Mississauga, Canada, franchises hearing aid clinics under the name HearAtLast in selected Walmart, Sam’s Club, or independent location stores, primarily in Canada.  Their stated purpose is a commitment to providing their customers with straight-forward and affordable solutions for hearing protection, preservation, and enhancement, enhanced by an alliance with VitaSound.  Stores are staffed  HearAtLast primarily by hearing instrument specialists who are required by their Province to hold a college degree in their profession.  HearAtLast franchises are owned and operated by Pharmacy Hearing Centers (PHC).  Their mission is to expand and co-develop and/or license its HearAtLast brand throughout North America, within Walmart stores as well as in independent locations, using Walmart’s model as a template for expansion.

Costco (1989)

Costco LogoCostco opened its first location in 1976 under the Price Club name, but the warehouse concept that is now recognized was founded in 1983.  Costco started selling hearing aids in 1989, and now has hundreds of hearing aid centers in many of its warehouses across the nation.  Costco’s operating philosophy is simple: keep costs down and pass the savings on to their members.  Their large membership base and tremendous buying power, combined with their never-ending quest for efficiency, results in the best possible prices for their members.  Costco owns the hearing aid dispensing operations in its warehouses, and are staffed by audiologists and traditional dispensers employed by Costco.     Pharmacy

 

PHARMACIES

In the second half of 2008, a pilot program was launched in which Beltone began dispensing hearing aids and providing other services in about 30 CVS pharmacies, many of them in the Northeast and Florida.  The centers were to be staffed by Beltone dispensers, who in many cases also worked at regular Beltone offices in the area.  Because professional staff members were dividing their time between locations, some of the CVS centers’ stores were open only a few days a week.

 

HEALTH CARE COMPANIES

It should come as no surprise that Health Care Companies sought to find ways to capture part of the hearing aid market.

Travenol Laboratories, Inc.  Travenol Logo

In 1985-86, when I was with Audiotone, we had extensive communications with Travenol Laboratories, Inc. (Baxter Travenol), expressing their interest in entering the hearing health care market.  They had recently formed an otologic products board, and Travenol sought to set up hearing and speech services in mall locations.  Four options for this arrangement included: (1) a straight contract for Audiotone to develop specific hearing aids, (2) Travenol investment, (3) Joint venture, and (4) Acquisition of Audiotone by Travenol.  Travenol’s intent was to develop a 1-stop location where all hearing and speech needs could be met, with the exception of cochlear implants.  This was to include: testing, fluid solutions, alternative devices, assistive devices, rehabilitation, hearing conservation, medical services, commercial products, all of the speech services, and hearing aids.  Two test facilities were to be set up in the Kansas City area.

Other Health Care Companies

Johnson and Johnson, Proctor and Gamble, and Philips Medical Division all have investigated placing hearing aids into wellness centers in pharmacies (and I suspect they still are).  However, complications when considering these as over-the-counter products and resolving this issue with state and federal regulations controlling the sales of hearing aids, has hindered progress.

Next week:  Hearing Aid Distribution – III, Network concept of hearing service centers, same session fit, Internet sales, do-it-yourself pathways, and PSAPs.

Footnotes    (↵ returns to text)
  1. Bonta, R. Buying groups and networks…who’s out there, Advance for Hearing, Vol. 7, #6, p 47, 2005↵