“The Company’s strategy includes immediate public differentiation from all existing hearing centers.”{{1}}[[1]]HEARx Marketing Plan, internal document, about 1986.[[1]]
Thus began one man’s corporate vision to revolutionize hearing care in the US and Canada, and also make a bunch of money. Based on current headlines, it seems the vision has been achieved. The corporation–currently known as HearUSA for a few more months at least–has very publicly differentiated itself from anything else ever seen in the field of hearing healthcare. If one ascribes to the adage that there is no such thing as bad publicity, then HearUSA has hit it out of the park. Adding to the lustre, the corporation in its various guises has managed to make tons of money every year of its existence while never showing a positive profit.{{2}}[[2]]Yes, there is such a thing as negative profit and it seems likely that HearUSA posted negative profits on an annual basis.[[2]]
And so begins this post, the first in a series that may drag on for some time as we muddle through the beginnings, middle, and possible end of the HearUSA vision. Had the corporation failed to distinguish itself so thoroughly, there would be minimal interest in its decline, restructuring, or likely demise. Instead, the story of HearUSAis a fascinating cautionary tale of money, intrigue, backroom dealing, international finance, cronyism, bad marriages, divorces, sugar daddies, contested settlements, and yeah, there’s probably sex too (but we’re not covering that angle unless we get a really interesting comment that’s printable).
Traditionally, the business of hearing healthcare has conducted itself in a fairly courtly and discrete manner. It’s been a gentleman’s game for players who hold their cards close. Not so these past months with HearUSA and Siemens. You can almost see HearUSA swaggering into the saloon, throwing money around, raising a ruckus, and ending up in a mainstreet shootout with its main supplier and banker. As one blogger commented:
The hardball tactics are unusual in the hearing-aid industry where conflicts are more often resolved out of the public eye.{{3}}[[3]]https://hearingmojo.com/hearusa-lashes-back-at-siemens-with-a-lawsuit.[[3]]
In a nutshell, HearUSA couldn’t meet its debt payment to Siemens last December. Siemens called the loan, which prompted a slew of legal petitions and counter-petitions between the companies throughout the spring. HearUSA found a temporary safe haven in backrupcy, negotiated a big loan from a rival suitor (William Demant Holding), and sent out scarey notices to its employees and network affiliates. At the moment, HearUSA is spending the summer grooming itself to be auctioned off to the highest bidder, an effort that includes talking about its rosey future with AARP in “45 states and counting” {{4}}[[4]]https://journals.lww.com/thehearingjournal/Fulltext/2011/07000/HearUSA_rolls_out_AARP_Hearing_Care_Program_to_45.7.aspx[[4]].
As previous writings in this section indicate, I am not a fan of poorly managed companies that fail in their fiduciary duty to their stockholders, or in their societal duty to other stakeholders, such as employees and customers {{5}}[[5]]https://hearinghealthmatters.org/hearingeconomics/2011/who-ya-gonna-serve-shareholders-or-stakeholders/[[5]]. Having got that off my chest, I will make an effort to report in an unbiased manner on all that I’ve been able to unearth on the times and travails of Hear USA. Most of it is in the public record, some is from inside sources that prefer anonymity. This post wraps up the first in a series by introducing the future bride and groom in the doomed marriage that produced HearUSA:
1. HEARx was founded by Paul Brown, MD in 1986 in Florida. Dr Brown’s vision was to improve the hearing profession by achieving “professional” branding via hospital accreditation, with the financial goal of capturing large insurers to cover hearing services and products. The model called for starting offices from scratch and using a central office to ensure quality control.
2. Helix Hearing Care was founded in 1996 in Canada and quickly became the chief competitor to Sonus. The MO for both was to acquire existing offices via a “sales liquidating debt” approach in which office acquisitions were assigned sales thresholds to recapture expenditures for the office purchases. The business model was to carry a lot of debt but offset it by showing a lot of equity on the books.
If opposites attract, Helix and HEARx appeared to be made for each other. Stay tuned for future posts that go into these companies in more detail, then look at the HearUSA merger and bring us up to modern times.
Bankrupcy photo from soxfirst
