Hearing Aid Delivery: Leasing and Subscription Models. TWIH Episode 3

hearing aid subscription leasing
August 3, 2021

In recent years, the popularity of leasing and subscription plans has begun to find its way into hearing healthcare. 

In this week’s segment, Dr. Bob Traynor interviews Jim Kothe, Head of Sales for Whisper Hearing and Dan Quall, Director of Strategic Initiatives for Fuel Medical, on why clinics may consider offering leasing or subscription plans for their patients to acquire hearing aids.

They discuss the benefits to the patients and the practices by offering these types of plans as an alternate to the traditional purchasing model.

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Full Episode Transcript

Bob Traynor 0:10
Welcome to this Week in Hearing, where listeners find the latest information on all things related to hearing care. As you may have seen in some of our other productions, we talk about things from politics, and hearing care legislation to device technology to pharmaceuticals, therapeut.. therapeutics, all the way to the latest trends in practice management. And one of the latest trends that we’ve found these days is in the area of leasing, or I think, as we would probably better talk about that we would call it a subscription to hearing care. I’m your host for this session, Bob Traynor. And my guest today is Jim Kothe, Head of Sales for Whisper hearing aids, from San Francisco, California. Our topic today will be hearing aids subscriptions, but by a manufacturer’s kind of a orientation to the hearing aid subscription process. Welcome to the program. Jim, thanks so much for being with us today. And both of us have been involved in hearing care for probably longer than we ever want to admit. And thanks for being with us today.

Jim Kothe 1:22
Thanks so much, Bob. It’s great being with you. I don’t mind admitting how long it’s been. It’s a great field to be in. So I

love it.

Bob Traynor 1:30
And it’s been great to be because because I know you’re a you’re a master’s degree audiologist as well before you joined up with one of the unnamed large manufacturers out in the world. So with that orientation to the to the products and the use of the products. To me, that was a very refreshing orientation for a colleague that was in the sales area.

Jim Kothe 1:54
Yeah, I mean, I loved you know, my background as an audiologist and I’ve drawn on it, you know, a lot throughout my career. But yeah, most of the time, I’ve been on the manufacturing side of things, which has really been something that I’ve really enjoyed, because then involved in bringing new technologies out to to the profession. So yeah, it was a great background to have to be in this field.

Bob Traynor 2:15
Super. Well, I think before we could really understand leasing or subscription. Remember when now we began looking at leasing a long time ago. Do you remember those days?

Jim Kothe 2:29
Well, I do. But yeah, I know, you’ve written about this in the past, Bob, and I kind of went back and re-read one of the articles he wrote for Hearing Journal just recently, and you reminded me that it was in the 50s, that it actually started. So I’m happy to say I don’t remember that. But yeah, it’s it has been around for quite a while in different forums, it seems to kind of come and go. But right now, it seems like there is a little bit of a resurgence, I think, you know, probably for a number of reasons, consumers are maybe more open to it. There’s been a generational change and the people who were buying hearing aids today, I think there’s some real technology reasons why it makes more sense today, you know, in back in the day, I think it was more of a financial tool. You know, it was used a lot for people if they felt like they couldn’t afford hearing aids. But I think it’s going to change from just a financial tool into maybe a different way of thinking about hearing care and hearing health care.

Bob Traynor 3:28
Well, my guess is that that some products tend to lend themselves a little more toward a subscription model than, say, the traditional products that you and I’ve dealt with for most of our career, maybe you could tell us a little bit about the Whisper device, what makes it lean a little more toward a subscription model than a purchase model.

Jim Kothe 3:51
Yeah, happy to Bob. Thanks. And thanks for that opportunity. So one of the central differences between the Whisper system and other hearing aids that are available today is that our system is a learning hearing system, which means it’s upgraded constantly. So when you think about traditional hearing aids today, you know, people do a fantastic job of building the very best hearing aid that they can at the time that that hearing aid comes out. But then the hearing aid basically stays the same until someone decides to buy a new hearing aid. It’s it’s a very hardware based sort of a system. The main idea behind the whisper system is to move away from just a hardware based system. Of course, we have to use hardware to your pieces. And we use what’s called a whisper brain, we have to use hardware to deliver the sound. But what is very unique is our ability through software to change the performance of the of the hearing aid over and over and over again. And just in the year that whispers been available. We’ve already seen a couple of upgrades to the system and they’ve been fairly major things where we’ve been able to help people improve their ability to understand speech, we’ve changed the way that we deal with some some loud sounds, we’ve added other features like, more connectivity to more devices. So they’re those are just examples of through software, we can make a system that gets better and better and better over time. So that is the part of the system that really lends itself more towards a subscription. Because people are more used to systems now where they don’t just pay for the hardware, they pay for the ability for that hardware to get better. Maybe, you know, one quick example would be your cell phone. That’s one that we talked to a lot of consumers who are considering the Whisper system, we talk to him about the similarity with cell phones where you have hardware, but that phone is actually updated over and over and over again, either by features that you add, like apps, or just the overall performance of the companies. Tonight, there’s a download, do you want to make your phone better? Yes or no. And people’s people usually want to make it better. Okay. So yeah, I think there is a real technology reason that we’ve chosen to go with a subscription system, because the technology changes rapidly, one of the tools that we use to make sure that we can upgrade these systems rapidly is artificial intelligence. So that gives us the ability to make sure that the system keeps getting better and better.

Bob Traynor 6:21
So it’s more than just a little firmware kind of a modification, as we see in the traditional products. It’s more of a overall kind of operating system kind of a modification, such as we see in the cell phones.

Jim Kothe 6:36
Yeah, that’s true. And it’s a good point, Bob, that there have been upgrades to systems in the past and firmware, you know, I would say the more typical example is if Apple makes a change in their operating software, then hearing aid firmware has to be upgraded in order to be able to match. But what we’re talking about here is a fundamental difference where constantly improving the performance of the system. I said, we use artificial intelligence as this engine to improve the fitting algorithms over and over and over again, we think that there’s a new speed to development that’s about to happen with hearing aid technology because of artificial intelligence. And it would just be a shame to be so hardware based that as those improvements are made people, we’re kind of stuck with the same system, when we know that things can be made better and better. We talk a lot with consumers about a performance gap, that from the time they buy their hearing aid, as other hearing aids are developed, the longer they wear their their system, the more of their gap there is between their hearing aid, even though it’s a great hearing, when they bought it and what they could be wearing. That’s what we’re really trying to eliminate here is that gap between what current performance could be and when they when they first bought their system. So we want to be able to do that through software. And we want to be able to do that by person having a subscription, so they have access to this to this technology upgrade.

Bob Traynor 8:03
And the component that’s upgraded is actually the brain part, the kind of piece that fits in your hand kind of rather than in the instrumentation itself, that the person actually is visible behind there ear.

Jim Kothe 8:15
That’s right. So we use receiver in the canal, RIC devices, that’s what delivers the sound to the person and and that those can be used alone, me they have their great devices on their own. They have directionality, they have noise management, they have feedback management. So they’re great high yield high end instruments all by themselves. But you’re right, the ability to get the extra performance that artificial intelligence can give us when people are in really difficult situations and this ability to upgrade the system over time, that takes a far more powerful computer to do. So. You know, usually in a great earpiece, you have maybe two, two and a half billion operations per second. This Whisper Brain gives us 300 billion operations. It’s a magnitude of difference that we that we have some some power to do things better, and continue to make the system

Bob Traynor 9:09
long ways for the first digital hearing aids that we both remember for sure. Let’s see. Are there certain kinds of people though, that will have some issues with “Yes, I really I believe this, I think it’s a really good idea”. The products sound really good and so on. But maybe they’re not going to use a lease or lease option. I mean, it seems to me like there may be some people because of their personal style or the way they’ve done things all their life or whatever. They may not kind of be on board with that subscription system.

Jim Kothe 9:42
That’s a really good question. And it’s one that we didn’t take lightly. We went out and talked to a lot of consumers before heading down this road to be sure that they’d be comfortable with it. It kind of reminds me by above the others was always an age old question of whether certain types of people who will buy high-end hearing aids and is their personality different from somebody who would buy mid-price. And it turns out that that that probably isn’t true. What really determines what someone becomes interested in is the skill of the professional, and explaining what the benefits really are and what this would mean. And that’s what we found, when we discussed leasing or subscription with people, we found that there are certain words that are kind of trigger words that people may say, I would never do that “leasing” tends to be one of those. Another one, what’s that?

Bob Traynor 10:33
Probably “Rent” is another one.

Jim Kothe 10:35
Right? That’s right. But, you know, if you have only one view of what lease means, and for most people, that’s a car, you know, and we’re in, we’re in healthcare, you know, we’re in hearing healthcare. And so we’re trying not to really associate with it was something like, you know, like buying or leasing, leasing a car, we try to associate much more with things that are done in healthcare. And so you know, there are really good examples now of other parts of healthcare that are moving to subscription systems or leasing systems I, you know, I read recently about in diabetes care, you know, you people lease their insulin pumps, partly because it makes it more affordable for people, but partly because then you can make sure that as that lease ends, and you start a new one, you always have upgraded hardware. And that’s one of the ideas, I think, in hearing care, that’s going to become real important. We want to be sure that people turn these leases over these subscriptions over routinely. So they have access, not just to the best software the way I described before, but also to have access to the to the very newest and best hardware at an appropriate time.

Bob Traynor 11:45
Well, you know, you also see that, you know, heart kind of pacemakers and things like that, where the software can be updated, to make it work a little more efficiently and so on. And so I think we’re seeing more and more of that in other health care areas, as you suggest, and why not. And now, one of the things to that I think might be of interest to the viewers, seems to me that a product like this could be highly differentiated from the over the counter products and traditional devices, and so on, to give a practice a significant amount of differentiation from other practices in the community.

Jim Kothe 12:23
That is a really good point, Bob, I think we all know that there’s going to have to be more and more differentiation between practices, just relying on selling hardware, how we sell a hearing aid traditionally, today is going to be more difficult, though, there’s more and more confusion from the consumer on pricing of systems. So yeah, this is a way of really thinking very differently about how you’re providing hearing health care to your patients. Back to the question about are there certain types of people? And how would we explain this to people we do tend to talk more about this is a subscription for your hearing health care that includes the hardware and upgrades and the care that you’re given. So it’s much more secure for the patient, they don’t have to worry about, well, what am I going to be paying, and when should I upgrade, there’s a lot more security built into the system of your being well taken care of by a great professional, we’ve got updated hardware we have, we can improve your system over and over again. So the idea of a subscription, or a lease makes far more sense to the person than just kind of the old way of thinking about as well, it’s just a wave. So you don’t have to pay as much up front

Bob Traynor 13:38
it also, like I don’t want my father’s Oldsmobile, you know, I want to have the upgradable kind of a device. And so that would make a lot of sense, plus the differentiation, if, if I hadn’t sold my clinic, I probably be looking at ways to differentiate in so many different ways. And this could be a could be a nice way to do that. So in that regard, is this a profitable kind of enterprise or the hearing care professional is there’s enough built in there where it makes it valuable to them to not only use this for differentiation purposes, but also to increase their margins and keep themselves in business and things of that nature.

Jim Kothe 14:17
Yeah, I mean, it has to be, you know, without a doubt, and I think there are a few things that go into making sure that it’s profitable for people. Going back to the article that that that you wrote, fairly recently kind of reminded me that there is a tipping point of how long people have their hearing aids to when they might start to wander and look outside of the practice. And that tends to be when the hearing aid is out of warranty, that after that point, you’ll more than half the people start to shop a little bit. So when you have a leasing or subscription system like this, people stay with you, you know, at least in our case, the system is always under warranty. It’s always under loss and damage because it’s a three year program. So people stay with you until it’s time to make another decision. So in that way, you know, you have a much more secure relationship with this patient that is highly profitable. A few other things that at least we try to do, we make sure that the clinics are compensated upfront in a system like this. And we don’t have to rely on Okay, a monthly payment, I have to bill somebody monthly, we don’t want people to have to change their billing systems or things like that. In fact, we do use an existing company called Allegro who’s done this for a long time in hearing care. So they do the billing for folks who take that burden away from the clinics. So yeah, it can be a highly profitable way to think about managing your patients.

Bob Traynor 15:43
Yeah, cuz I, I think some of the some of our colleagues out there, remember the days when we had people trying to sell us on products that were, for example, the Songbird where you, you sell this and then you sell it and you sell it, you and then you do that to 10 people, then you do it to 100 people that you do it on, and you build your your income from that, and where we are with what we have here. It doesn’t isn’t one of those kind of accumulating kind of a thing. It sounds like there’s some business things built into the system as people think about acquiring this particular device.

Jim Kothe 16:19
Yeah, there are. But I think the point that you make about a recurring revenue model is also important. So it’s if it’s a three year system, the first three years, you know, people are, are profitable on those patients. But then when it comes time for year four, you would assume that most people, if they’ve had a great experience, they’ve been well taken care of by their professional, their hearing system has gotten better, that they would want to renew their subscription. So now in year four, you’re actually doubling, you know, then, you know, three or more years go by on now, all of a sudden, you’re tripling so this idea of a recurring revenue model does become a real, real important and very profitable, and something that a clinic can count on, you know, it’s it’s much easier, and both on both the patient and the clinic, when you’ve had a positive relationship to continue it than to go find new customers all the time.

Bob Traynor 17:12
Well, I think that’s, that kind of brings us to to a point where I think what we wanted to do with this session was to at least give colleagues an idea of why manufacture and why might be interested in in monitoring and motivating people to lease their devices, and how that was going to be different than, say, a traditional manufacturer doing it well, for a clinic that is trying to use a leasing system with traditional products. So with that, I think we’ll end our session, part of our model is to keep these timely, keep them short, but give you some of the peak level information in hearing care. So I’d certainly like to thank Jim Kothe, for being with us today and providing us great information on why a manufacturer might be interested in leasing their products, rather than putting them out for bundled sale.

Jim Kothe 18:09
It’s really been great being with you. Yeah, like we started the session. I think the time is right. You know, I think there’s consumers are more open to this. They’re a different generation, they think about young leasing and subscribing to things. It’s very common to most people. And like we talked about, I think the technology lends itself to it, I think people are going to want to be able to keep up with technology, especially if it if I’m right and it moves faster and faster, especially because of the influence of artificial intelligence, people aren’t going to want to buy a hearing aid and be stuck with it for four or 5, 6 years or more. So, you know, for us it you know, it really lends it self because of the nature of our product. I think for a lot of products, it will lend itself and I think it will help consumers see hearing practices in a different light more than just buying a hearing aid. So for a lot of reasons. I think we’re on the right track here. And thanks for the opportunity to put our views out.

Bob Traynor 19:13
You bet. Thank you, Jim. And for those of you who are looking for more information on leasing or subscription as we would probably like to refer to it, we will be doing a second version of this this particular topic at a later time. Again, thanks, Jim. And we will look forward to seeing all of you next time at This Week in Hearing. Thanks, Bob.

I’m Bob Traynor. I’m your host for this particular topic of leasing or subscription as you may choose to talk about this and our orientation for our subscription discussion today is for traditional hearing aid fittings. My guest is Dan Quall, Director of strategic initiatives for Fuel Medical in Portland Oregon. Dan has been at the forefront of leasing for or subscription for traditional hearing aid fittings over the last few years. And he’s here to kind of help us understand that a little more specifically. The first thing I have to ask is, what does a Strategic Initiative Director do?

Dan Quall 20:23
I, I have a great job. And my job here at Fuel is to try to keep my eyes on the horizon and look for solutions, strategies, tactics that can be employed at the clinic level, to address the issues that that are coming at us on a day to day basis. So whether it’s Over The Counter, whether it’s the Medicare Advantage, looking at new programs like this subscription models, these are the things I get to work on and focus on. It’s pretty fun to do.

Bob Traynor 20:56
Cool. Well, you know, I know that many of us have had the opportunity to listen to some of your presentations and webinars and things of that nature. But I’m not so sure that our audience has a good idea how you got into this and where you came from into being the Director of Strategic Initiatives for a major buying group?

Dan Quall 21:17
Yes. So yeah, a little background. So here, if you will, they call me an industry veteran. And that’s because I have a lot of gray hair. But I have been in the profession of Audiology in the industry of hearing aids for more than 40 years now. But actually, it goes beyond that, because my father was a Hearing Instrument Specialist, a dispenser. And so he got into that, that world, in the late 60s, early 70s. And so I kind of grew up around it. And he said, if you are going to even entertain this, this industry and doing this work, you need to get an audiology degree. So that’s that’s the angle I went my first 18 years were in private practice. In fact, I owned as many as five clinics. And one of the things I found during that time was I was relatively entrepreneurial, and I like to grow and expand and do different things. But once I exit there and sold my practices, I got into corporate audiology, and so I’ve held executive positions with Amplifon, mostly with their network and, and working with people in their private practices. And then also, I did some, some work with Starkey for several years ago, really interesting work. And then that led me here to Fuel I always said my career was backwards, because my first 18 years, you know, I hear I was managing clinics, and then the last 20 to 23 have been actually getting into people’s clinics and seeing how they work. And I always say, “Boy, I wish I’d known that”, or “I wish I had done that”, you know, you get so many great ideas from the from the clinicians out there that are, you know, on the front line. And so that’s what I enjoy about network organization.

Bob Traynor 22:47
But it’s refreshing to know that someone with a with a substantial background in orientations or the industry is in certain executive positions to begin to help all of us that are clinicians to facilitate our practice on a much more efficient basis. One of the things that was about leasing, you know, I had a we did an interview here not long ago with Al Turri, who’s the head of the clinics down in The Villages and, and he told me that and all of our audience, that that leasing was the mainstay of his practice these days in all of his seven locations. So how did you kind of look at the the leasing or the subscription model as a possible thing that’s different now than it was maybe in the late 60s, early 70s. Because we all remember what it was here. Were all some of us remember what it was here. Every so much remember what was here before and it just kind of went away? So I guess with that as an orientation, why is it better now than it was before? And and what do you see the the subscription model moving?

Dan Quall 24:03
Yes. So there is a storied history of leasing in in, in the industry. But one of the things that started taking us down this road. And as I say there’s three factors that are really influencing it today, but the probably the key one was technology. So when I was working at at Starkey, I was working with the Dave Fabry and Dennis Van Vilet. And we were trying to look at models that says, you know, how do we keep patients on the top of the way but the leading edge of technology that’s taking place because it’s changing so rapidly? And so we looked at different models of you know, can you can you reduce price a hearing aids, if you if you turn the patient buys every three years or every three and a half years instead of every 4.2 to five to six years. And so, what we found is that, you know, suddenly that the financial model can change the clinic clinic can still make its revenue per hour with less money if it’s on a shorter time period. But how do you then To get them into this technology, you have to ensure that they do it every three years, right. And so that’s where all of a sudden the subscription model comes up. Now, there was a couple other factors that are converging at the same time. One of them was, of course, the comorbidities, we’re starting to see and in associated with hearing loss, and so suddenly, you start, you know, thinking about the medical management of sensory neural hearing loss, you know, this is a chronic issue that is with everybody for a lifetime. And so we have to really start as a profession understanding what does that mean to take the patient on their journey from identification and early intervention, which may mean over the counter products into and through hearing aids accessories, and sometimes into cochlear implants. And so you know, that those comorbidities and the need for us to manage it was another piece. And then the final piece was consumer behavior. So behavioral economics and one of the leading business models today, so the fastest growing business models in the US economy is subscription models. And so we have a segment of consumers moving into our, into our profession, into our industry of hearing aids that are used to buying they like the want the certain they want, what the products provide, they don’t necessarily have to own the products. And so we see that, you know, obviously cell phone is probably our, our biggest model that we can look at, and that that was kind of when we sat down and started talking about that we were really looking at how can we keep people into a single manufacturer, and the manufacturer gets to keep that, you know, once it’s a, you know, XYZ manufacturer, how do they get the next fit, you know, and how do they get the next one they wanted? We were looking at it from that standpoint, when it came to Fuel, we said, well, why couldn’t we just put any product into it? Why can’t it just be a clinical protocol program. And so that’s when we sat down and designed. And that’s what we launched. We’ve launched it now above about the two and a half years ago. So we are at a really interesting time with our model, we go on a three year term rate for the technology aspect. And so what we believe is that we can keep people on that technology wave on a three year cycle. And so we’ll be coming up on that first cycle here in November and December of this year to the patients that first, you know, moved into that that is, in fact, one of the things that we’re really excited about is to watch the percentages of patients that do automatically move into that next set of products.

Bob Traynor 27:23
It’s a very interesting model. So it sounds like it’s semi-fur.. And we would say fur-lined for the dispensers as they begin to move from servicing the leaves to possibly having a release situation by the consumer.

Dan Quall 27:38
So when we look this out, like many people I you know, we don’t like to come I don’t like to compare our profession and the the fitting of hearing aids to the automobile industry, right. And we’re not the same, but we have to recognize we understand at least with a with a car. And so when you look at that model, and you understand when you get to the end of the lease, you have options, that’s what we wanted that same thing to exist for patients. And so when they get to the end of the lease, they really have three options, 1) they can buy out the residual of the product, so that they can continue on with the set of hearing aids, they have 2) they can get the new technology and roll over and move forward with at the same payment rate. Or 3) they can actually hand the hearing aids back in and move on to you know, in a different direction, if that’s what they choose to do. So we really give the patient a lot of flexibility in what they in what they can do. But one of the things that we’re really excited about, and I think you can relate to this, being on the front lines and working with patients is with my patients when I was practicing, obviously, you have to start introducing these new products and start talking to them about what’s new. And you felt like you were constantly in a position. You know, once you’re at the three to four to five year mark, where you’re constantly trying to do the sales, right, you have to understand I’ve got to present the new technology, I have to give an idea what it will do. And so it turns into some lengthy and sometimes uncomfortable conversations with this model. You know, this is like your cell phones, like you get a new hearing aid. So instead of talking about the sales aspect of the hearing aid, it’s like let’s talk about the features you want in your new product. Let’s sit down and have a discussion about what’s changing in your life. And you’re you’ve got a new, a new hearing aid that we can fit you with, let’s get to the latest technology and make sure it’s fitting your lifestyle. So we think it changes the dynamics and the conversation between the professional and the patient. And we’re excited to watch that transition over the next couple of years. So I think I think it really changes the talk track at the clinical level.

Bob Traynor 29:31
It allows people to concentrate more on taking care of their patients rather than trying to offer some sort of a sales orientation to them no matter how they how they like that sales orientation. So would you think that there are some types of patients maybe that worked a little better with the leasing or the subscription model types of patients

Dan Quall 29:54
that has been a really interesting learning curve for us? So I would say the number one thing we found, as we started launching this program we started doing follow up with the clinics that had adopted it is that when it was first being used, they were using it as a finance program. And that is probably the one big red flag and you know, piece of information I would want to share with your listeners is that don’t bring on leasing, or subscription models into your clinic to use it as financing, you really should get to the end of your your hearing aid evaluation, or communication assessment, when you’re going to make your recommendation for a treatment plan, I think you need to let the patient know there’s three ways to enter into that 1), you can purchase a product outright 2), there’s the ability to finance and break it into payments or 3), you can move into a subscription model where you make a monthly payment and you’re in a program that where you’re totally taken care of the hearing aids always under warranty, you’re never gonna have a repair charge you all your services are covered. So it’s really a bundled product, we’re going to follow you and make sure that you know, obviously as your hearing progresses, we’re going to adjust it sure we’re you know, looking at depression issues, any of the factors that are are following it, but it’s a total package, the patient doesn’t make some monthly payment, and then they move forward. And then when three years comes up, the conversation turns to Hey, we’re ready in this program to get the new latest technology. Let’s talk about what we want to do with that. And so it’s not a finance program I and that’s one of the things I think that differentiates our program, maybe from some of the manufacturer programs that have done leasing is they really they have very little residual, so they’re basically financing the product, we do have a residual at the end, you know, depending on we have four levels of technology that people can purchase through it. And so it’s pretty comprehensive and can encompass what we need for everybody. So that’s the number one thing, the number two thing we found is age. And so you know, this is really a program age as a factor for two things. One is, I think some of our elderly patients that are in the 75, 80, 90 year old range, right now, this kind of model is foreign to them. They’re not as savvy as maybe our 65 and 60 year olds, and so they still want to purchase in a more traditional way. So you have to keep that as part of your practice. But when you start looking at the younger people who are coming into our clinics, the people that are in their 50s, 60s, even early 70s, who are going to be repeat users, and they’re going to be buying 2,3,4 sets of hearing aids in their lifetime. This model fits them, you know, absolutely perfectly. You know, the other factor. And what I liked, you know, putting my entrepreneur business hat on is we know from some studies that were done, they came out of the Harvard Business Review is called the value or service profit chain. And you know, these three gentlemen looked at what what is the key drivers for successful service related businesses? Why, Why does you know if you have two Dry Cleaners in a in the same market, why does one do well, and not one does not do well, and they look at it from everything from insurance, to dental to medical, all kinds of things in the in the key drivers are three things we call them the three R’s. And that is, you know, once you capture a patient or a customer, they are going to be repeat. So they’ll buy from you again, if they’re happy and satisfied, you’re going to buy related products. In our case, that’s going to mean anything from cerumen and management to accessories to you know, anything else that’s going to help them here batteries in the old days, that’s that’s coming a little bit obsolete. But the third one was worse was referrals. And so out of this study is that came a lot of what we see today, when we get the questionnaires on our receipts, or through our phone that says how satisfied Were you a lot of those Net Promoter scores came out of this, this study. And so what we want to do is we want to make sure that these patients are coming back and purchasing from us again, and one of the things this program does, because they’re going to get their hearing aid automatically through you, they’re going to come back to you they’re not going to be be shopping around, they’re not going to be looking at the alternatives because they know that they they’re going to be had that new technology coming. So we think it’s a really strong patient loyalty program, it’s a great way to make sure your patients are staying with you, you get to see them on a regular basis. It’s a simple monthly installment. And so it just makes a lot of sense from a patient loyalty standpoint. And I think that’s a key driver in in the world of private practice audiology.

Bob Traynor 34:07
So yeah, and for many years, I’ve advocated the idea of a hybrid kind of a pricing system, where you have a bundled system, you have an unbundled system for patients that purchase products from from others additionally, have a leasing subscription model where whereas people can obtain the benefits. And of course, we all know the difference between features and benefits. We had that MBA lecture one time a long time ago where people don’t buy features they buy what it does, what it does for them, where they can actually obtain those things without wiping out their savings account. They can still use maybe that little bit left over in their Social Security check to facilitate their amplification needs throughout their lifetime. Now, this has been very successful in some practices. And I mean, like, ultimately successful in these these practices, things that save their practice during the pandemic, things that saved their, their capability to take care of their patients, the way they always wanted to my understanding is that in some states, it’s a little harder to do the subscription model than it is in other states. But you might want to least mention a little bit about that, Dan,

Dan Quall 35:27
it’s an important factor in it. Now, it’s a very limited number of states. But what shifts is that when you move out of a dispensing of a product, and we’re where we’re going, when, when we’re talking about here are the tax ramifications for product, you know, most often in most states, hearing aids aren’t taxed, and so but when you move from a actual purchasing of the product into a subscription or leasing model, there are a couple of states that then suddenly the tax apply. And so you know, you have to take into consideration and understand those factors in your state. So in one state in particular, we we see that they, they have to increase the price, the monthly fee a little to compensate for those, those taxes. Now, we work with a company called Allegro. And so Allegro handles all of that, on the back side, it’s not a burden on the clinic. So the payment is increased that that money goes into Allegro. And then Allegro, of course, handles all the taxes and takes care of that when you run through a subscription model with your patient. And once you put them through the Allegro program, and they get signed up and are approved, then the clinic gets a lump sum. So they’re not waiting for a monthly payment from their patients, they get a lump sum of money like you would in a typical transaction, it’s it’s slightly reduced. But you’ll get totally whole at the end, one of the things we ran the models out over several years, and the clinic will actually be revenue ahead if they use this model, just in total cash. So if you took two patients, one who purchased them, and they bought from you three different times buying the hearing aid versus you put somebody on a subscription model and they went through three cycles, you’ll actually make slightly more money for in the office for that you won’t on the first time around is slightly reduced. But because we shorten the term time to three years, you start to see increased revenue long haul with with clinic, so we you know, on our revenue, we like to measure things on on revenue or margin per clinical hour, this, these are real strong models for that. And so for that reason, we’re bullish on that for as a program insight, I think you mentioned something is really important. And that is, you know, you need to have different options. I mean, I’m totally with you. And we could have a great discussion about service plans and adopting patients and, you know, understanding the value we bring to the patients with our professional knowledge and expertise. And so, you know, we can take any product, and we can do analysis on it do really are and really look at an adapted, but you know, we need to really understand that those those kinds of things. And options are things we have to have at the clinical level, particularly moving in today’s business environment,

Bob Traynor 38:05
the type of patients that you and I saw for years, and the type of patients that we’re seeing today are altogether different. As as we all know, they’re a better educated, they know more about what we do. I mean, what I started an audiology, I would say people would say, what do you do? And I said, Well, I’m studying to be an audiologist. And they would say, what kind of stereos Are you going to sell? So we’ve all been there to that one. Now, Here’s a question that we really didn’t feel too much Dan But I’m kind of interested in how the leasing or the subscription model actually would interface into modification of some of the managed care issues that we see in the clinic so much, so much these days.

Dan Quall 38:52
Yeah, so that’s really another issue. We we worked with a Allegro and Allegro was great with working with us on this. So the first one we had, the first hurdle we had to overcome was was patients that come in the clinic with a defined benefit. So that would be I mean, an insurance group that is giving me maybe $1,000 per ear, every three years are giving me you know, $2500 towards whatever. So somebody that wants to do a subscription model there, they can actually subtract that off the total price of the of the of the total model and reduces and reduces the payment. So they stay inside the model, you still capture the patient and they’re they’re getting that same program. It just deducts their benefit, that benefit come straight in into the clinic. And so that’s the way you work with it there as far as when we look at the model with the TPA is where we’re dealing with the Medicare Advantage plans, and oftentimes we’re getting a fitting piece, then it becomes an alternative model for the patient. So one of the things we can we take for granted is that when a person has a benefit that that’s the only thing they want to use, and I think what we have to remember is they are still consumers and and in today’s medical world, you know, consumer reigns. And so when they come in, they want to know the value of the program you’re bringing. And so some of the TPA programs really are focused or product centric, right? They it’s all about getting the product getting it fit and a couple follow ups maybe one year of service. But after that, where’s the where’s the medical management of this patient long hauls, we have to recognize that we we need to introduce our patients to programs, pre premium products, premium service packages that are different and give the patient a choice. And some patients opt to go into programs like this versus the the TPA because once you once you start adding on your services on the back side, you fit the product, and they’re going and adds cost. And so you know, they’re not that far away from what you might offer in a program like subscription or maybe even in your straight direct, you know, your products sold to the patient for ownership by the patient. So, you know, I think we just have to constantly keep that in mind the tpas. Obviously, that’s another topic for another day. Another topic another day. Yeah. So yeah, that but I think it meshes in really well and gives you an alternative that gives you something else to discuss with the patients about a total management plan for them a treatment plan.

Bob Traynor 41:15
So if so, if someone’s interested in hasn’t really done much with the subscription model, and they need to know a little more about it. How would they contact someone to do that, then?

Unknown Speaker 41:28
Yes, so obviously, they can go online and come to Fuel, fuelmedical.com. Or they can you know, contact me [email protected], I love to sit down and talk to business owners and audiologists and non business owners, you know about what it means and how it can be implemented like everything else. And when you’re talking to bringing in something new it you have to develop the materials to educate your patients, you have to develop protocols inside so that you’re showing and telling the the treatment plan program story the right way. And so that’s one of the things that we do is say, here’s how you can implement it, here are the tools you need to have those discussions with patients. And that’s really important to do, you know, without good planning for bringing a program like that, that will struggle getting it getting it off the ground. So really, you really have to sit down and map it out. They just need to call us we can help with that. There are other programs around that they should look into obviously do their do your homework, but you know, reach out to your manufacturer or call us we’re happy to

Bob Traynor 42:29
have and some of the other buying groups also have some programs in this regard these as well. Well, that’s about all the time we have for for this particular session. But I certainly like to thank Dan and Fuel Medical for being with us today and providing some specific insights into the subscription model, which we can’t call leasing anymore, because it’s like leasing. It’s almost like rent so we can’t call it that anymore. So with all this new information on on the subscription model again, hope you’ll be back with us again next week for This Week in Hearing

Transcribed by https://otter.ai


About the Panel

Jim Kothe is a respected veteran of the hearing aid industry, with over 35 years of sales experience. He has worked with a range of technology leaders–from Oticon and Earlens to his current role as the Head of Sales at Whisper.ai, a Silicon Valley-based startup bringing world-class A.I. technologies to the hearing care space. Jim earned his MS in Audiology from the University of Wisconsin, River Falls.

Dan Quall is the Director of Strategic Initiatives for Fuel Medical Group. Dan is an audiologist who began his career in the hearing industry in the 1970s working for his father’s private practice, and has more than 36 years of industry experience. Dan received his M.S. from Western Oregon University, and owned and operated a number of audiology clinics in the Pacific Northwest.

Robert M. Traynor, is a board certified audiologist with 46 years of clinical practice in audiology. He is a hearing industry consultant, trainer, professor, conference speaker, practice manager and author.  He has decades of experience teaching courses and training clinicians within the field of audiology with specific emphasis in hearing and tinnitus rehabilitation. Adjunct Faculty in Audiology at the University of Florida, University of Northern Colorado, University of Colorado and The University of Arkansas for Medical Sciences.  He is a 2017 fellow of the National Academies of Practice, was presented the 2014 Lifetime Achievement Award from the Colorado Academy of Audiology and named a 2018 Distinguished Alumnus of the University of Northern Colorado.  In 2019, he received the Joel Wernick Award for outstanding contributions in audiology and hearing science from the Academy of Doctors of Audiology.

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