Perfect Storm: The Unraveling of Hearing Healthcare Delivery: Part II

Dr. Jerry Northern returns as guest contributor this week to review a number of converging factors that threaten the viability of Audiology as a profession. The factors emanate from the rapid transition of hearing aid distribution from a medical model toward the electronic commodity market, as he discussed last week. Specific solutions are in short supply, but he gives us some direction along with some pointers on directions to avoid.

Readers will note an inordinate number of links in today’s post. That’s because Dr. Northern marches through many “unforeseeable” topics chronicled by HearingHealthMatters in recent years as we tugged at unraveling threads.

 Unforeseeable, Uncontrollable, Unstoppable

 “…we didn’t see, or understand, the rampant growth of the converging forces chipping away at our position as the self-stated ‘owners of hearing healthcare.’”

jerry northern phd
Jerry Northern, PhD

Take a look at the tsunami of converging forces that have combined in exponential factors to affect our independent practices:

  • The manufacturer’s quest for profits.   There can be little doubt that even with the meager growth in hearing aid sales over the past decade, the profit margins for the “Big Six” major companies are nothing short of amazing.  Their route to growth is to sell more units….period. Mergers have brought them bigger, stronger and better distribution systems.  Every manufacturer is now a full-service vendor willing to provide every service one might need.  The mergers have provided the surviving companies with reduced expenses, shared research and development costs, pooled administrative resources, and an improved ability to ride out market cycles – all leading to increased manufacturing revenues – and profits.
  • Retail network expansion. The reality of retail networks now involves the majority of independent audiology practitioners seeking management support and guidance as well as lower unit costs for their products.  The price a private practice pays to belong to a network  is a reduction in freedom in operations and a likely diminution of overall profits.  Manufacturers have been quick to cement special relations with the retail networks to protect their own product distribution while racing to exclude their competitors from gaining market share.
  • Co-op buying programs.  Starting quietly when a group of audiologists in Philadelphia banded together to buy in larger volumes for reduced unit costs, the number of partnership co-op organizations has increased over the years to provide all the remaining non-network audiologists an opportunity to share in reduced costs for hearing aids.  In the apparent belief that lower cost-per-unit can be the salvation of the independent practitioner, co-op programs survive and proliferate; witness the recent advent of the mysterious Unity co-op program.
  •  The Internet explosion.   In spite of audiologists screaming about the “unethical” sales of hearing aids through the Internet, this distribution system has taken hold sufficiently that private-practice audiologists have had to accept and develop protocols and pricing structures to manage patients who show up at their offices with hearing aids purchased online.  Unable to win this war, many audiologists now view these patients, albeit reluctantly, as “value added” with the hope that they can turn them to be loyal clients.
  •  PSAPs.  As if the private practitioner didn’t have enough to worry about, suddenly and without warning, the FDA recognized (and authorized) the sale of personal sound amplification products (PSAPs).  Confusing the distribution system with blurred lines of public information, literally hundreds (if not thousands?) of less expensive sound-amplifying devices are now available.Marketed with persuasive and innovative appeals, PSAPs can be found online, in big box stores, gun shops, drug stores, and ubiquitous kiosks.  Aimed ostensibly at recreational users and not the hearing-impaired public, PSAPs sell for as little as $9.99 and as much as $479.  Although most of the PSAP devices are not really hearing aids, per sethe better PSAP systems offer multi-channel amplification, advanced signal processing, noise-reduction circuits, and impressive gain and output performance.
  • The warehouse invasion.  The advent of warehouse sales of hearing aids is, no doubt, the biggest disrupter of our traditional audiologist-empowered dispensing system.  Costco is clearly the major force, but Wal-Mart, Sam’s Club, and Best Buy are testing the waters and watching closely (along with Walgreens and CVS) the amazing growth in sales shown by Costco. The warehouse model is very successful and not likely to go away.  With its high sales volumes, narrow profit margins, and strong professional delivery model,  Costco may have found the way to capture the majority of the new hearing aid buyers we have all been anxiously awaiting.  With nearly 70 million members walking past their warehouse sound booths each year and a recognized legitimate cost-saving reputation, Costco is the most actively growing marketplace to attract potential hearing aid buyers and may soon outdo the Veteran’s Administration as the biggest buyer of hearing aids.

Survival Strategies

 Does anyone really believe the manufacturers are going to bend and reduce costs significantly to audiologists?

So how does audiology survive in this uncertain and constantly challenging hearing aid marketplace? I certainly don’t have any concrete solutions. However, it seems to me that the answers are in innovation, increased efficiencies, and overwhelming personal customer service.

The solution is NOT a new buying co-op, as suggested by the Unity group.  Does anyone really believe the manufacturers are going to bend and reduce costs significantly to audiologists?

I believe we need to break away from our focus on the hearing aid device itself; then we must unbundle prices so consumers can directly compare our product prices with the prices of Internet and warehouse sellers.  It is far too easy for consumers to buy hearing aids at the sales outlets where prices look cheapest. Audiologists need to sell products competitively, and market the services we can provide from our extensive training and understanding of persons with hearing loss.

Only though new and innovative patient-oriented services will we survive in today’s tsunami and the shifting sands of hearing healthcare.

* feature image courtesy of Oregon State

Jerry L. Northern, PhD, is Professor Emeritus at the University of Colorado School of Medicine where he served as head of the Audiology Department for more than 26 years. Dr. Northern, a native of Denver, is a prolific writer and editor of several professional journals; he has authored a dozen textbooks in the areas of hearing and hearing disorders, including six editions of Hearing in Children and three editions of Hearing Disorders. Internationally known for his expertise in pediatric audiology, his professional background includes clinical practice, teaching, medical-legal industry experience, clinical and basic research, as well as consulting in nearly 30 countries. Dr. Northern is a founding member of the American Academy of Audiology and was the organization’s third president. He has been honored by numerous organizations for his contributions to the field of audiology and can be reached at jnorth1111@aol.com.


About HHTM

HHTM's mission is to bridge the knowledge gaps in treating hearing loss by providing timely information and lively insights to anyone who cares about hearing loss. Our contributors and readers are drawn from many sectors of the hearing field, including practitioners, researchers, manufacturers, educators, and, importantly, hearing-impaired consumers and those who love them.

5 Comments

  1. Dr. Northern,

    Thanks again for bringing to light these critical topics.

    I agree with you that the concept of highlighting our services, skill, and expertise by unbundling is a sound idea.

    However, unbundling is NOT a viable solution when Private Practice Audiology pays 200% to 300% more than Big Box for hearing aids (after the “management” Buying Groups extract their considerable profits from the transaction).

    First, Audiology must demonstrate to manufacturers that we are a strong, reliable business partner by collectively speaking through the AudNet inspired APO that Audiologists from across the nation are forming. THEN when pricing parity is achieved, we unbundle and display the value of our professional services.

    Please consider attending an APO Webinar. We need input from leaders like yourself as we act on behalf of Audiology and the Hearing Impaired.

    Regards,
    Scott Sims, AuD.
    Private Practice Audiologist

  2. Dr. Northern, you are right and wrong when you say, “The solution is NOT a new buying co-op.” You are right that Audiologists don’t need another buying co-op owned by manufacturers and business people (middle men), where the Audiologist members get small discounts and the middle men make all of the profit. Audiologists do need an Audiology Group Purchasing Organization (APO) where the Audiologist members get 100% of the manufacturer negotiated discount, allowing the Audiologist Members who do all of the work to make the profit. Dr. Northern also asks, “Does anyone really believe the manufacturers are going to bend and reduce costs significantly to Audiologists?” If you want the answer, ask the VA who gets an 85% discount. Ask Costco who gets almost the same discount. Thus, the answer is , “YES, ABSOLUTELY YES!”. However, Audiologists would need to band together in one large APO to buy as many hearing aids as the VA and Costco. That would only take 1000 Audiologists each buying 285 hearing aids a year. Thus, this is very doable. The APO exists. If Audiologists would join the APO, they could get prices as low as the VA and Costco. If the consumer could get his hearing aids from a salesperson at Costco who used to stock shelves before he sold hearing aids, for the same price as he could from a Doctor of Audiology, who do you think the consumer would choose? I can tell you from personal experience, that they choose the Doctor of Audiology. Also, if Audiologists could get VA/Costco pricing from manufacturers (A Win for Audiologists), the consumer could get hearing aids at a lower price from a Doctor of Audiology (A Win for consumers). Manufacturers could sell more hearing aids (A Win for manufacturers), and more hearing impaired people could receive treatment, which is A Win for Consumers, Audiologists and Manufacturers. The only question that remains is whether Dr. Northern will help Audiologists to achieve our goal of helping the consumer and saving the Audiology profession, or not.

    1. While it’s true that people go to Costco because of price, there are other reasons people go to a Big Box store that an APO still does not address.

      You will still lose many people that find their hours of operation more convenient and likely audiology offices could not run on the razor thin margins these types of stores operate under. While I applaud the effort and hope it is successful, we ultimately need to be thinking beyond simply price. Reducing unit cost alone is not going to save the profession from itself, the problems are much more systemic than that.

      1. Dear Anonymous, most audiology practices are open 8am-5pm Monday-Friday. Many of us come in early and stay late if patients require it. Also, many of us are open Saturdays and do house calls, hospital calls, nursing home calls, etc.. The Costco Hearing Aid section is not open Saturdays, the salesperson will not come in earlier than Costco opens, and will not stay later than Costco closes. Costco does not give customers their cell number to call 24/7 if there is a problem, and doesn’t give them their email to contact them 24/7. Audiologists who get the same pricing as the VA and Costco could not only survive on the same pricing as the VA and Costco, but could thrive as well. In addition, Audiologists could actually lower their prices to the public. If you believe that a person with no University training in Audiology and Hearing Aids can provide the same level of service as an AuD, you are sadly mistaken. I am currently on the faculty of three University AuD programs and taught for 10 years for two AuD programs. I have worked with hearing aid dispensers for over 35 years now. When I go for Healthcare, I go to the best. I don’t want to be second guessing that I could be hearing better, walking better, having my heart working better, having all of the cancer removed, etc. If you go to the best, the chances of a superior outcome is increased.

        You say that there are other reasons people go to a Big Box store that an APO still does not address. What specifically are they? What do we need to be thinking about beyond price? What systemic problems are you talking about?

        I have been in private practice for 32 years now. The main problem with audiologists is that they won’t take action to help themselves or their profession because it takes “Change”. The only people who can save the profession are audiologists themselves, and they are their own worst enemy. As Pogo said, “We have met the enemy, and the enemy is us.”.

      2. “Reducing unit cost alone is not going to save the profession from itself, the problems are much more systemic than that.” Dear Anonymous, However, it would be a great start to share lower prices. Take the first step and join a National Network where every member has an NPI number and is a licensed audiologist… oh, wait. There’s only one. AuDNet.

        AuDNet will be your voice. So you think we can’t be the ones the public chooses? The public would run from Costco if the choice were a National LLP Network of NPI registered Licensed Audiologists who bring true Audiology Care and serve the Medicare system. Support 18 X 18. Bring true Audiology Care. Join AuDNet and market ‘Audiology Care” to the public and we will be the right choice and the known choice.

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