Drilling into the DNA of Buying Groups, Part 3

David J. Smriga, President, AudNe……

John Zeigler, Au.D.
AuDNet Board and Director of Marketing

Continuing the “DNA” series, today’s post is the second half of the AudNet view of buying groups for Audiologists.  Last week, David Smriga explored “Can buying groups save Audiology?”  He’s joined today by fellow guest contributor and AudNet owner John Zeigler (see bios at end of post).  They take on three questions that define, and sometimes distinguish, different buying groups.  

Finally, because they’re good sports, Dave and John agreed somewhat reluctantly to step up to the plate and take a swipe at a final, unanswerable question of highly questionable merit that I posed last month (as did any number of others in the field).  Their clever answer is one of omission:  Will everyone who is NOT Unity please stand up?  

Who Owns the Buying Groups?

Itemizing the ownership of the groups listed in the prior posting:

• Two groups are owned by management and members (Audigy, EarQ, Marcon).
• One is owned by a hearing aid manufacturer (AHAA).
• One is owned by a public corporation (Elite).
• One is owned by audiologists and business people (AuDConnex).
• One is owned by audiologists (AuDNet).

Who Do the Buying Groups Benefit?

Keeping independent audiology practices competitive by lowering hearing aid costs benefits both the profession and the patients it cares for.  This is an important role group purchasing can play.  When a group purchasing enterprise focuses on promoting the value and importance of audiology care over product to the American consumer, the profession benefits even more.

Some might suggest that certain buying group perks are benefits that the member(s) can enjoy as a reward for business activity they direct to these buying groups.  This is true.  Examples of perks include: ownership, dividends, profit-sharing rebates, marketing co-ops, loans, retirement savings plans, etc.

But, if you are an audiologist, the perks are often problematic.  Most of the examples listed above are specifically identified by our professional associations  as professionally unethical for association members.  Some of the perks run the risk of violating federal and likely state anti-kickback statutes.

Federal regulations regarding group purchasing organizations require such things as no more than 40% of that group’s business can come from owners, and no more than 40% of that group’s owners can be customers.{{1}}[[1]] Small Entity Investment Safe Harbor as specified in OIG Regulation 42 U.S. C. 1320a-7b(b).[[1]] These federal regulations apply whenever federal dollars are involved in the compensation members of the group receive, including such third party payments as Medicare, Medicaid, state assistance, and Medicare Advantage programs.{{2}}[[2]]Federal law applies whenever a transaction (in this case a transaction between an audiologist and their patient) is paid for in part or in full by a third party who receives federal dollars.  The clearest example would be if the patient has a policy that includes a benefit that pays for the hearing aid(s), and that insurance company is a Medicare Advantage company, who receives money from the federal government to cover the costs of taking over that medicare receipient. A sharp lawyer could easily argue that the “perks” the audiologist receives were paid for within the hearing aid price on the invoice the insurance company (and by association the federal government) paid for.  And, the receiver of the “perk” as well as the provider of the “perk” can be culpable.  This is why manufacturers have their disclaimer on the bottom of their invoices.  To put the onus on their customer to report it.  Where it becomes more grey is when there is no direct payment for the hearing aid, or only an allowance toward it.  The law may still apply, depending on the case by case interpretation of the courts.[[2]]

Where Does the Money Go?

Historically, a group purchasing organization’s gross revenue is used to cover operating expenses.  These include infrastructure costs that any business has, sales and marketing to members, potential members, and potential member customers, business support services, and if offered – such things as rebates, dividends or other sales incentives, and profit.

Where should the profit go?  In the opinion of AudNet, 100% should go to every audiology practice that is a member, so that it can benefit every patient in need of audiology care.

 Who/What the Heck is Unity?

Here at Audnet, we have no idea who or what Unity is.  For the record, it is not our company.  And, we can’t help but cast a distrustful eye toward any organization, volunteer or otherwise, that goes to such lengths NOT to disclose who they are, regardless of their message or stated intent.

A Final Thought

In this author’s opinion, the choice of joining or not joining a group purchasing effort should be based not just on the opportunity that organization represents in lowering costs and neutralizing the cost advantages currently enjoyed by large scale purchasers.  It should also be based on whether or not joining that group challenges ethical and legal standards observable by interested third parties.

As the audiology community pursues changes in federal regulations that would grant direct access and limited license physician status to our profession, business practices that are contrary to our own internal ethical practice guidelines or inconsistent with current state or federal regulations only serve to undermine these efforts.  This is an important consideration when evaluating the prudence of aligning with and joining a group purchasing organization.

David J. Smriga is both the president of David J. Smriga Consulting Services, as well as president of AuDNet, Inc.  Mr. Smriga received his master’s degree in audiology from Northern Illinois University in 1976.  He has held positions in both clinical and research audiology at the University of Manitoba Medical School in Winnipeg, as well as senior management positions in sales, marketing, product management and public relations for some of the industry’s leading hearing aid manufacturing firms.  Mr. Smriga has conducted over 500 lectures in North America and in Europe, and has authored over fifty publications ranging in topic from inter-operative brainstem monitoring to counselor selling.  In addition to directing AuDNet, Mr. Smriga is also the senior audiology consultant for Audioscan, and their chief lecturer on the use of real-ear measurement technology and audibility-based fitting strategies. 

John Zeigler, AuD, has served on the AuDNet Board of Directors and is its Vice President of Marketing.He founded Lake Hearing Clinics in Florida in 1996 and owned it for 30 years before sellin the practice in 2006.  Presently, he works on a part-time basis as a fee basis audiologist at the Orlando, Fl, VA. He has services on several AAA committees and boards, most recently the Ethical Practices Board.  He is a long-time advocate of ethical audiology practices and quality care for those with hearing loss.

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