Dale Thorstad, Marcon President
Dale Thorstad, today’s guest contributor, offers a brief history and overview of buying groups in the hearing aid industry. It’s hard to remember the names of the groups, much less whom they work with and whom they represent. Buying groups have been around for years, but they are experiencing revived interest, scrutiny, and hype following the Phonak/Costco dust up. New groups and old questions are surfacing: Can buying groups save Audiology? Who owns them? Whom do they benefit? Where does the money go? Who/what the heck is Unity?
Answers, if they exist, depend on the particular buying group. Mr. Thorstad’s natural bias is with the company he represents{{1}}[[1]]Full disclosure: I think I’m a member of AudNet, but I can’t say that with assurance. I own a part-time dispensing Audiology practice through which I inherited a Marcon membership. I’ve never met Dale, other Marcon members, or attended a meeting. I purchase through Marcon because I find it more expedient to pay one supplier than many.[[1]], but he is known throughout the industry for a quiet demeanor and balanced view of the hearing aid world. He also has many years of buying group experience–and a good memory!
What’s Up?
Why buying groups? Why the interest now? They are not new. Recently, there has been much discussion regarding buying groups and many have concluded that they are not looking out for the practitioner’s well being. It’s obviously in the practitioner’s best interests to analyze the DNA of each group and then pick according to mutual goals.
Marcon
The first buying group was Marcon Hearing Instruments, Inc., incorporated in 1977. It was begun by a handful of retail owners who were looking to brand themselves and their products. This worked for a number of years, but as the group changed and grew, there was interest in adding more manufacturers and using their labels. Today, only a few members label their hearing aids Marcon. Marcon is a small buying group of fewer than 100 owners and is always looking to add new members.
Marcon was set up as an ownership group with a limit on how many shares any one member could own. That way no one could control the group. The group has a board of directors that meets regularly and a yearly membership meeting. The membership meeting draws top industry speakers and attendance is free, though members pay for their travel and hotel expenses for the trip.
The mandate of the group is to provide minimal services for the members, thus keeping the cost of hearing aids as low as possible. With their two full-time employees (of which I am one), Marcon provides single-source billing, business autonomy, name and exclusivity, purchasing power, support through member sharing and help with marketing. At the end of the year the profits are divided among all the members instead of being retaining by the company. Since 1977 more than $6 million has been returned to the members. Their reason for existence is summed up this way: “Marcon is a family of entrepreneurs who share our passions.”
Elite, Audigy, and AHAA
Other buying groups have formed over the years and each of their goals is different. Many of the groups provide services that can be utilized if the practitioner needs specific help. The following are the three largest buying groups, with membership exceeding 250 owners, many of whom have multiple offices.
Elite Hearing Network was formed in 1998 and supplies hearing aids from all the “big 6” manufacturers as well as practice management services to its members. Elite , which was formerly the Sonus Network, is owned by Amplifon, the world’s largest retailer of hearing aids.
Audigy Group was formed in 2004. It provides many services for members, including financial services and human relation services. The group brands its hearing aids and buys from Starkey and Oticon. In addition to audiology, Audigy has extended its services to ENT and dental practices.
AHAA (American Hearing Aid Association) was formed in 1994 to provide support and practice management services to hearing professionals at audiology clinics, hospitals and universities in the U.S. AHAA is owned by Oticon, but members can buy hearing aids from Phonak, Rexton, Sonic, Unitron, and Widex, as well as from Oticon.
These three groups host large annual meetings with attendance ranging from 400-1200. It takes many people to provide their services, so they all employ dozens of professionals.
Other Buying Groups
These are also a number of medium sized groups, with memberships from 100 to 250.
AudConnex began recently. It offers members hearing aids from Starkey, Oticon, Phonak, Unitron, Widex, Rexton and Siemens. Also available are discounts on business, printing, website, patient financing and other services. They educate their membership through webinars.
EarQ group brands its hearing aids from Oticon, ReSound, Siemens and Starkey. They promote their EarQ Family Hearing Plan as a value-added program to organizations or employers outside of insurance coverage.
AudNet was formed some years ago by audiologists. It buys from several manufacturers, and is trying to guarantee a large discount to its members. It charges an annual fee to help cover its operating costs and to develop an Audiology Provider Organization (APO) to increase their purchasing power.
Who? How?
We understand some new entity calling itself Unity is trying to organize a “group of volunteers” which will have 1000 members. The claim is that with up to 1000 members they can negotiate with the manufacturers for a price like the VA gets because their members won’t request retail marketing help, cross product marketing, trips, dinners, volume discounts, loans for expansion, loans for equipment, HR help, relocation help, exit strategy help, financial help, etc. They just want a cheap price and will provide all their own services. It sounds good if you are the entrepreneurial type, but there are some things to consider.
For instance, if they don’t provide single-source billing through the entity then the manufacturers have to bill 1000 separate accounts and take on the financial risk of 1000 accounts. That’s not going to persuade them to provide lower pricing. Most manufacturers will consider such a group a national account and will not want to give it the same kind of access to the sales and customer service people that answer all the questions.
Reality Checks
Most buying groups today rely on their members still having direct access to the people at the manufacturers that they’ve come to know. Today the groups and manufacturers get along because there is generally mutual benefit.
Big box stores buy nearly 100% RIC type products and do not need much customer service help. They stock their products and don’t have many questions for the manufacturers. They are a low-maintenance account. And, we may be surprised at what they really pay for product. I believe the reality is they do not get anywhere near VA type pricing, they are actually paying a very fair price for the volume they deliver and they use a very small markup, unlike the average 3X markup most retailers use.
Like it or not, the manufacturers still have the lead position in what goes on in our industry and unless there is a radical disruptive technology that makes us all obsolete, we all need to get along to provide the best care for our patients. And, remember that the manufacturers still have to make a profit to provide the science and research that helps the hard of hearing we serve.
Besides these groups, there are many more throughout the United States. If you decide to look at a buying group, remember to compare what your business goals are and match them as closely as you can to a buying group.
Dale Thorstad has served as President of Marcon Hearing Instruments, Inc. since 2002. He has logged 45 years in the hearing aid business. 33 years were in various positions at Starkey Labs, Inc, including purchase and expansion of many of their foreign and domestic businesses; also manager of its Center of Excellence. He is certified in Minnesota to fit hearing aids and is board certified in hearing instrument sciences.
feature image courtesy of geneticology
Very informative. Thanks for the background!
I have had mixed success with Buying Groups. Dale’s point that the DNA of the organization is important. Some seem most interested in our funding their member meeting at an expensive resort. Others seem focused on value for members and providing additional service. When the the management of a buying group asks us to provide training to them so that they can give guidance to their members I make time for them. I do not expect the Buying Group Managers to recommend Frye just know enough about us and alternative products to help their member decide what is best for them.
Some brief clarifications:
1. EarQ has over 600 members representing close to 1400 locations
2. EarQ is privately held by a collection of practice owners
3. EarQ is one of the only networks to speak out on behalf of the profession
thanks for the input. One of the many joys of blogging is its participatory nature. Readers who provide additional or updated information to improve the quality of posts are an important part of that process. One question to Cliff: does EarQ distinguish between members and active members? This is a challenge in any group or practice (e.g., percentage of patient charts that are “active”). I have not heard any discussion of this metric yet when it comes to buying groups.
That is a good question Holly. We do track the level of engagement and participation of our network affiliates. As you might imagine, this dynamic is fluid and dependent on market conditions (i.e. competitive network activity, new products/promotions from non-EarQ partnered technology manufacturers, etc.) That being said, we have an extensive and diverse portfolio of practices and clinical settings who have access to our innovative, reputable, and complementary value-added services. Many buying groups have a negative reputation as middle-men and perhaps (indeed?) some are; not all groups are created equal. However, EarQ is beholden to, and driven by, the spirit of the entrepreneurial clinician and we understand (and welcome) that we must provide a mutually beneficial value proposition to justify our standing in the marketplace.
What exactly is the value EarQ is providing. My take is that you promise you’re well under 600 active members something new every few months then on to the next thing.
Ron, I’m not sure why you’d guess that or how familiar you are with the history of our company, but I would like to learn more about your claims. In fact, while recently reviewing a presentation I was building, I was struck by how consistent our mission has been over the previous 5 years. Our value, while being delivered in a slightly differing capacity for every one of our clients due to their uniqueness, is derived from our commitment to three principles: 1) we strive to promote global messaging and local access to some of the most skilled professionals in the field in order to reach the millions of Americans with untreated hearing loss, 2) we believe that, as we are owned by independent practice owners, we should provide professional advocacy for our way of doing business and oppose the commoditization of quality hearing healthcare, and perhaps our greatest value 3) we provide the collective influence of a motivated and progressive group. I would warmly invite you to take a closer, more objective, look if our value (or apparent lack) is not already set in your mind. Regards, Cliff
My only familiarity comes from a colleague who was promised the number one website on google and countless AARP and NFL player referrals. None of that came to be and it’s on to the next unfulfilled promise.
AuDNet has over 430 registered member practices, not 200 as mentioned in the post. All members are audiologists.