Hearing Aid Dispensing Part III

History of Dispensing Systems – Part IIIThe Wave

 

The “winds of change” apply well to the practice of hearing aid dispensing.  It is almost as if Yogi Berra was able to predict that the options offered were like “deja-vu, all over again”.

Audiologists were increasingly employed by clinics or by otolaryngologists, primarily to evaluate hearing.  Because many of the patients had hearing losses not correctable by medical and/or surgical intervention, they became candidates for hearing aids.  Audiologists were prohibited by their professional trade organization (ASHA) from selling hearing aids, and sought to establish their significance/importance via the process of making the recommendation of the hearing aid to be fitted by the dispenser.  The audiologist would recommend that the patient consider hearing aids, and as a result, working relationships were developed between the audiologist and the hearing aid dispenser, generally with one they felt comfortable with, or with an office in the area where the patient lived.

Initially, such recommendations were made to the dealer, who selected and fit the actual hearing aid using input from the patient.  Larger practices recommended greater numbers of hearing aids and, as a result, a number of audiologists at those facilities were empowered with an aura of prominence by those receiving referrals, with the prominence level generally directly related to the number of hearing aids that were being recommended by their facility.  This period of “hearing aid recommendations” by audiologists to hearing aid dealers resulted from desires on the part of all involved: the audiologist, the dealer, and the manufacturer, to strengthen their positions.  In truth, each was seeking additional business, even if audiologists failed to recognize that they were in a business, foremost.

As audiology programs began to expand and more courses were added (some of which actually related specifically to hearing aids), audiologists began to believe that their textbook exposure trumped actual fitting experience (fitting experience identified as being responsible for the final fit and patient satisfaction – meaning willing payment).  This referral system often led to an uncomfortable situation – a fitting that was destined to fail, yet with the dispenser being expected to follow the recommendation, especially if he/she wanted to receive future referrals.

In the early days of this relationship between the audiologist and dealer, there is no doubt that essentially all hearing aid referrals from audiologists resulted in over-fitting (too much gain and too much output).  Remember, this was a time in the training of audiologists when a 50 dB pure-tone average hearing loss was being recommended a hearing aid with 50 dB average gain, plus an extra 10 dB for “reserve!{{1}}[[1]] Staab, W. Hearing aid selection, in Sandlin (Ed.) Hearing Aid Amplification: technical and clinical considerations, Singular, 2000, p. 70[[1]]”  This approach today would most likely result in a malpractice suit.

To provide the audiologist with “options,” dealers placed into audiology facilities “loaner” hearing aids that could be evaluated during the hearing aid evaluation.  The audiologist would test from this stock of hearing aids and then recommend that make and model to the dispenser, who made the ear impression for an earmold and then fitted the hearing aid.  Note that up to this time referrals were primarily only for monaural fitting.  Essentially the entire audiological community considered binaural hearing aid fitting unethical.

Clinic Loaner Hearing Aid Program

During this time, audiologists were provided with hearing aids from dealers to evaluate on their patients.  Under this arrangement, the hearing aids that were recommended came from those evaluated on the patient by the audiologist.  This fostered a movement in which dealers tried to get as many hearing aids as they could into a clinic in hopes that what they had provided would be used in an evaluation, and then recommended.

The fact that the recommendation had been made by an audiologist, considered as impartial, resulted in less “selling” being required of the dealer.  It also resulted in what some dealers considered “easy money” in that these were not clients that had to be harvested.  Interestingly, these referrals to the dealer led to and expanded the “in office” practice of selling hearing aids – whereby the client came to the dealer, rather than vice versa.

There was a downside, however.  In time, dealers in cities with many audiological referral options found that placing hearing aids in a clinic to be used for evaluation/referral purposes was a costly proposition.  In time, when the dealer was large enough, and had a good relationship with the audiologists (meaning that he was receiving a decent number of referrals), he found that he could put pressure on the manufacturers he was working with to place hearing aids in the clinic at the manufacturer’s expense.

The placement of loaner instruments in audiological referral centers spread rapidly throughout the industry.  Larger manufacturers tended to place more instruments in clinics, but even a small manufacturer could do well in selected markets with the right audiologist/dealer relationship.  Dealers, manufacturers, and their field representatives spent considerable time visiting clinics to sell the benefits of their particular model(s) for different losses, with hopes that it would be accepted for possible evaluation comparisons.  Making such contacts with audiologists and facilitating this practice was the primary job of most of the audiology-trained individuals working for hearing aid manufacturers in the late 1970s and 1980s.

Problems gradually occurred with the clinic loaner program because some clinics ended up having many more hearing aids than could possibly receive a fair shake in the evaluation process, especially those that were intended for limited use.  Some manufacturers’ representatives were good about rotating product, but many hearing aids languished in their original boxes, with never a battery inserted into them or a trim pot adjusted, even after a couple of years.  This would not seem to be a good investment for a manufacturer, and it wasn’t.  Reports at the manufacturing level suggested that some companies had as much as a million dollars in loaner hearing aids placed in audiology clinics.  The clinic loaner program may have actually led to the demise of some hearing aid manufacturers at the time.

The loaner hearing aid program led to still another change in the hearing aid distribution system – that of taking hearing aid dealers from primarily selling a single company’s line (contractual arrangement), to becoming multi-line dealers.

Single Line to Multi-line Dealer Distribution

It was reasonable that a dispenser looking for an increased number of referrals would attempt to be associated with those audiologists seeing the greatest number of hearing-impaired patients.  It was this relationship that produced a major change in the hearing aid distribution system – that of taking hearing aid dispensers from representing essentially a single company line of hearing aids, to multi-line representation.  For the dispenser, referrals were desirable.  The dispenser did not have to spend considerable time and expense to find hearing aid “prospects,” and in many cases, just by showing up at the dispenser’s office the patient had already been “pre-sold” on hearing aids.

Audiologists, for the most part, were likely to refer patients to those dealers that they felt most comfortable with, and who would follow their hearing aid recommendations.  This ignored the fact that in the early days in the referral arrangement, the patient often would have been better fit if the recommendation had considered the dealer’s experience

Going into the 1970s, most hearing aid dealers represented a single hearing aid manufacturer.  They had signed contracts for a specific territory, and required a unit volume purchase in order to maintain that association and use of the brand name.  These were not franchises in the true use of the term, but were signed agreements to sell the company’s products, use its signage, advertising materials, etc., and were exclusive, providing that the dealer purchased an agreed-upon number of units on a monthly basis.

The number of units was quite variable and reflected the market.  For example, when I joined Telex in 1972, the Telex dealer in Chicago had a quota of 1000 hearing aids per month, which he met, and usually exceeded.  On the other hand, the dealer in Storm Lake, IA was scheduled for 5 units per month.  Failing to meet these “quotas” could result in a dealer being in violation of the agreement.  However, not much ever happened during my early experiences when a dealer failed to meet quota, unless a better dealer was interested in the same market area, in which case the original dealer was replaced and prohibited from purchasing product, using the name, etc.  In other words, you were a Telex Dealer, a Maico Dealer, a Radioear Dealer, a Sonotone Dealer, a Zenith Dealer, etc.  You did not handle multiple lines of hearing aids.

The audiology clinical referral system helped foster this change in the single-line dealer arrangement.  Dealers having good relations with an audiology facility were interested in fitting some of the other recommended hearing aids, as long as they did not lose their primary manufacturer identity.  In reality, the clinical referral system “forced” manufacturers and dealers away from single line representation, and not necessarily to either party’s dismay.  Both the manufacturer and dealer sought additional sales; the manufacturer by offering a number of locations and dealerships where their product could be purchased (often including better dealers than they had), and the dealer, by being able to accept recommendations for hearing aids not previously accessible to him.

Difficulties arose for hearing aid manufacturers wanting to enjoy clinical referrals, but who had no dealer in a desired market.  The options were to approach a dealer in that market who already had a good relationship with the audiology facility, and who was receiving referrals.  But, what was the incentive for the dealer to take on a new hearing aid line?  Certainly, a superior and/or unique product that offered the possibility of significant sales might be welcome, but most hearing aids were not all that different from what was already on the market.  Taking on another line might diminish the volume of hearing aids purchased from a particular manufacturer, with the dealer paying a higher price for those units as a result.  Also, taking on an additional line of hearing aids could easily lower the level of manufacturer support – advertising or other.

An approach used by manufacturers in this situation was to have their representative contact the audiology facility under consideration and request a meeting.  During the meeting, the goal was to show the product line, and focus especially on a product that might not be in the clinic’s offerings.  If the audiologist was interested, the logical question was to ask to whom they referred.  Because the manufacturer had no dealer in the area, the request was generally followed up with some kind of statement to the effect that if the person they referred to would accept recommendations for this/these aid(s), would the audiologist accept it in the clinic for hearing aid evaluation purposes?  If the answer was “yes,” the next step was to visit the dealer, mentioning that the audiology facility would have your product for evaluation purposes, and if the clinic referred the aid to them, would they fit it?  If the dealer’s answer was “yes,” a new outlet in a previously unmet market had been established.  The hope of the manufacturer was that their product would be of such interest to the clinic that sales for hearing aids other than the product mentioned would take place.

Of course, the scenario in the previous paragraph could work the other way as well.  The manufacturer’s representative could approach the dealer first and ask if he would accept referrals for the hearing aid in question if the audiology clinic would refer it to him.  If the answer was “yes,” the next step was to visit the clinic and mention that the identified dealer would accept referrals for the instrument(s) discussed.  In either case, what occurred is what I have referred to as “forced distribution.”  Regardless, the dealer now had a multi-line offering, and the manufacturer could have more than a single dealer in a marketing area.  In a way, it was a win-win for both parties.  And, the clinical audiologist had even more offerings from which to perform the hearing aid evaluation.

Professional Referral Programs

Favored hearing aid dealerships (e.g. Master Plan Service) as mentioned on the last blog, were of concern to hearing aid dealers because this movement could start something that might get out of hand and destroy their established business of hearing aid sales.  Many dealers had already made price concessions to third party purchasers such as Welfare and Vocational Rehabilitation.  Unanimity in accepting programs that could reduce the dollar flow and price level of hearing aids that were then being sold without too much difficulty, did not exist.

Some dispensers sought a program that could assist them in obtaining referrals; others were comfortable in following leads generated or calling on old users, or holding periodic Open Houses; and others still maintained some degree of manpower organization and had to be concerned with commissions.  The bottom line was important, and not all dealers had the same expenses.  Much depended on the type of sales organization they had and any movement to set a low price was not consistent with many operations’ ability to survive.  In reality, something of this nature could drive them out of business.

To counter favored hearing aid dealerships, most manufacturers provided, at least in part, some kind of optional program in response to distribution systems that sought to control hearing aid costs, such as Master Plan Service and others mentioned in the previous blog.  In general, these programs attempted to establish a relationship between audiologists and hearing aid dealers, or even as triads between audiologists, dealers, and manufacturers.  These plans tended to be somewhat vague, but at the same time offered something to the referring parties that provided accommodations for continued and/or new cooperation.  A sample letter follows:

Dear Doctor:

This announces to you that our authorized dealer, ______________has agreed to participate in the ________ Professional Referral Program to determine the feasibility of a continuing cooperation with the audiologists and medical specialists who examine, evaluate, and recommend _________hearing aid corrections for the benefit of hearing impaired individuals.

This program allows the patient or agency to purchase most ______ hearing aids at a reduced price which allows deduction of the fees already paid for professional evaluation and consultation – when presenting audiological work-up or ________model recommendations to such authorized and participating _________dispensers.  (The plan offers 10-day refund of purchase price of aid if not satisfactory.  Extended trial rental programs 30 days – 60 days may also be arranged.)

Your inquiry as to details and technical data on _______fittings is here invited.  We hope that your interest will lead to favorable consideration of this offer of cooperation.  Hearing aids for your use may be arranged as appears necessary and desirable.

Signatures

(Next blog: “When it Rains, it Pours”)

About Wayne Staab

Dr. Wayne Staab is an internationally recognized authority on hearing aids. As President of Dr. Wayne J. Staab and Associates, he is engaged in consulting, research, development, manufacturing, education, and marketing projects related to hearing. Interests away from business include fishing, hunting, hiking, mountain biking, golf, travel, tennis, softball, lecturing, sporting clays, 4-wheeling, archery, swimming, guitar, computers, and photography. Among other pursuits.

2 Comments

  1. Wayne,

    Thanks for a trip down memory lane. I enjoyed this post! I lived much of this and I hope others get some perspective on this! Good Work!

  2. Wayne,

    Such interesting background that so few people are aware of. It reminds me of what a colleague once told me about his experience with ASHA prohibition on hearing aid sales while he was practicing in the 1970’s. He said he was frustrated and barely scraping by financially… yet the local hearing aid dealer who worked for a well-known franchise was driving around town in a Cadillac and routinely making a six-figure salary (and this was over 30 years ago now).

    Of course, you can’t blame someone for being frustrated by such a scenario…especially after six years or more on an education. Considering most dispensers until recently have often had limited formal education beyond a high school diploma, making 3-4 times what the average audiologist makes is a pretty shocking figure indeed….especially when that income comes from your own patients that you were required (by ASHA) to refer elsewhere.

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