“Signal & Noise” is a bimonthly column by Brian Taylor, AuD.
A few weeks ago the National Academy of Sciences (NAS) issued their report on the status of hearing health care for adults and their 12 recommendations for improving it.
This report was billed as landmark, groundbreaking and a major milestone, and, if it is received by key stakeholders like previous NAS (then known as the Institute of Medicine) reports, such as 1999’s To Err is Human: Building a Safer Health System, and the series of similar reports, entitled Crossing the Chasm, over the next decade we can expect some significant changes in the delivery of hearing health care in America.
On the other hand, if you peruse the NAS website reviewing other reports, some issued more than a decade ago, you’ll quickly realize some reports simply don’t get much traction. The main question remains, will the June 2nd NAS report be a harbinger for change?
Harbinger of Change or Status Quo
Before jumping to the conclusion that the NAS report is marshaling in a new era of hearing health care, it’s noteworthy that financial experts, who carefully study the hearing aid industry, don’t predict much change over the next several years. For example, last June, the Bernstein report, an oft cited and trustworthy source of industry information wrote the following:
“We have explored several emerging alternative distribution channels in order to gauge the risk of any new, disruptive business models coming to the fore. Other than the potential for additional store-within-store players (e.g. Walgreens, etc.), we do not believe the hearing aid retail landscape is likely to face any major new entrants in the next 5-10 years. In particular, we do not expect the internet to prove the disruptive force it has been in some other retail markets. The fitting and adjustment of hearing aids remains critical to good functionality, which means a visit to a qualified audiologist. As such, we do not expect direct online retail (i.e. a Warby Parker for hearing aids) to gain much traction. Instead, we expect the internet to improve price clarity for consumers and increase their ability to research their options. This will likely lead to faster growth of channels that can offer notable discounts (e.g. store-within-store formats, and in particular Costco). For retailers, the internet will likely provide a means to improve after sales service.”
As previously stated, this quote comes from a Bernstein report now more than one year old, well before the PCAST and NAS recommendations that a new category of direct-to-consumer products be created. So, back to the question of change within the industry: Will the recent NAS report hasten changes to the entrenched manufacturer-clinician establishment?
Bottom Up Pushes for Access and Affordability
First, we should agree hearing health care system needs changing. (Granted, not everyone agrees change is needed). However, based on recent statements from some key stakeholders, there appears to be consensus that hearing loss of adult onset needs to become more of a national priority.
After all, any mindful professional cannot be satisfied with the exorbitant number of adults with hearing loss and self-reported communication difficulties, essentially shut out of the current system. The broader issues of how to address the complex issues of affordability and access are likely to remain sources of contentious debate for years to come.
Most would agree enduring change comes from the bottom up. That is, when there is a groundswell of activity from clinicians, engineers and business people collectively tackling a systemic problem, change becomes a mission or cause.
Think about, for example, the wave of support in the 1990s to make universal infant hearing screening a reality. It’s the innate drive of many audiologists to help people. And, it’s that innate drive that could spearhead improvements in universal access and affordability for adults with hearing loss.
Top Down Pushes for Status Quo
The challenge, however, is overcoming forces within our industry which sustain the status quo. These forces – the entrenched manufacturer-clinician establishment – tend to stymie the innate drive of the skillful and conscientious professional, and countervail any movement toward innovative approaches to improving care.
A closer examination of how hearing health care providers are incentivized may help us better understand why our current hearing health care delivery model is unlikely to “face any major new entrants in the next 5-10 years” as stated in the June 2015 Bernstein report. For the following highly rational reasons, the manufacturer-clinician establishment is the imperious defender of the status quo, staving off any potential disruptive technological or service delivery innovations that could reduce their sizable market:
- The continued rise of big-box retail. Currently, industry experts suggest 17% of the current American private hearing aid market is comprised of Costco (11%) and Amplifon’s Miracle Ear franchise system (6%). Given their economies of scale and brand recognition, if you’re employed by either of them, it is unlikely you would want to see big changes to the status quo. Experts project this channel to grow another 3 to 6% over the next five years, further broadening its reach.
- Vertical integration is still going strong. Around the world, hearing aid manufacturers continue to buy practices. Currently in the US, Starkey-owned Audibel is at 8% of the market, GN-owned Beltone at 10%, Sonova’s Connect Hearing at 3%. Combined, Sivantos/Signia, William Demant and Widex make up around another 5% of the total US private market. In addition, the recent announcement of GN’s purchase of Audigy, comprising more than 300 independent owners – estimated to be 3% of the total U.S. private market, can be lumped into this category. Like clinicians in a big-box chain, you probably do not have a lot of incentive to embrace innovative service delivery models or disruptive technology from companies outside the establishment, if you work in a vertically integrated, manufacturer-owned location.
- Loan obligations. The Bernstein report estimates that just over 50% of the current private US hearing aid market is composed of independent practices. In theory, an independent practice is free to choose the products they dispense and the manner in which they conduct business.However, a closer examination of independent practices estimates, according to two unnamed industry experts, between 50 to 75% of independent practices have a loan with a manufacturer or buying group. These loans almost always involve some type of unit commitment with the originator of the loan. If you are a clinician in a practice with a loan obligation to a buying group or manufacturer, what incentive to do have to dabble with outside players?
- Continuing Education. It’s not too big a stretch to say that the majority of continuing education credits obtained by licensed hearing health care professionals are through the attendance of manufacturer-sponsored junkets, or events in which manufacturers provide much of the content. (Attempts to reach professional organizations for data on this question went unanswered, but a random web search of upcoming state professional meetings suggest the majority of content comes from representatives of device manufacturers.) In an age when consumers are expecting their health care providers to be using evidence to make better decisions, in the worst case scenarios these manufacturer-sponsored courses are no more than a commercial for their product. In the best cases, these courses provide recycled ideas about marketing or business. Too often manufacturer-sponsored events reinforce antiquated processes and don’t spur critical thinking or creative problem solving. If you rely on maintaining your license by attending these types of events, are you being exposed to innovations that will address any one of the 12 NAS recommendations?
Rational Reasons Don’t Align With Access and Affordability
Those four drivers of the status quo are completely rationale. They are reasonable strategic business decisions that attempt to maximize profit and efficiency – profits that provide income for thousands of dedicated employees. I am not suggesting the CEO of each hearing aid manufacturer or buying group has a diabolical plot to hijack the industry. On the contrary, you are unlikely to meet a nicer group of smart and highly competitive people – their incentives are just not in alignment with most of the issues related to access and affordability of hearing health care.
There are many potential game changing innovations out there, some ready to be embraced now and others in an embryonic stage. Self-fitting hearing aids, amplification apps, automated diagnostic testing, community-based hearing health care delivery initiatives, telehealth, COM-B behavior model theory, pharmaceutical therapy…the list goes on.
Social Policy as Change Maker
The bottom line – it will probably require top-down change, likely in the form of updates to the 1977 FDA hearing aid regulations to address many of the 12 NAS recommendations. Maybe I’m wrong, but the incentives required for bottom-up improvements to access and affordability to occur simply are not there.
Brian Taylor, AuD, is Senior Director, Clinical Affairs, for Turtle Beach/Hypersound. He continues to serve as Editor of Audiology Practices, the quarterly publication of the Academy of Doctors of Audiology. During the first fifteen years of his career, he practiced clinical audiology in both medical and retail settings. Since 2005, Dr. Taylor has held a variety of leadership & management positions within the hearing aid industry in both the United States and Europe. He has published over 50 articles and book chapters on topics related to hearing aids, diagnostic audiology and business management. Brian has authored three text books: Fitting and Dispensing Hearing Aids(co-authored with Gus Mueller), Consultative Selling Skills for Audiologists, and Quality in Audiology: Design & Implementation of the Patient Experience. His latest book, Marketing in an Audiology Practice, was published in March, 2015. Brian lives in Golden Valley, MN with his wife and three sons. He can be reached at email@example.com or firstname.lastname@example.org.