The President’s Council of Advisors on Science and Technology (PCAST) issued a report in late 2015 suggesting that the market for hearing-impaired consumers was characterized by high cost and low innovation, and suggested that current distribution channels created a barrier to access for older Americans in need of hearing care (HLAA, 2016). The Council further declared that hearing health care was too expensive for the majority of Americans. They identified a few recommendations for change, including the need to reduce the cost of hearing aids and the possibility of creating a category for over-the-counter (OTC) hearing aids (PCAST, 2016).
Just a few days prior to the writing of this article, U.S. Senators, Elizabeth Warren and Chuck Grassley, announced plans to introduce the Over-the-Counter Hearing Aid Act of 2016. Citing recommendations from the recent investigation into the cost of hearing health care (PCAST, 2016) and the resultant report on hearing aid accessibility and affordability, the bipartisan legislation would make certain types of hearing aids available OTC and, “would remove unnecessary and burdensome requirements that currently create barriers for consumers who could benefit from hearing aids.”
According to the press release, the Over-the-Counter Hearing Aid Act of 2016 (Hearing Review, 2016) would allow hearing aids that are, “intended to be used by adults to compensate for mild-to-moderate hearing impairment” to be sold over the counter. Furthermore, it would also remove the requirement that people get a medical evaluation or sign a waiver in order to obtain hearing aids. In essence, the proposed legislation would eliminate the need for audiologists to be involved in fitting hearing aids for individuals with mild or moderate hearing loss.
Why This Matters
So how could this impending legislation affect audiologists and what can we expect in the coming year? While some industry insiders may project impending doom, my overly optimistic personality believes that while our industry will face and is, in fact, in need of change, there will always be a place for quality hearing health care. Audiologists will continue to be the most qualified professionals to provide that care.
I asked some colleagues to share their concerns for 2017 and, as expected, the situation causing the most anxiety is the unavoidable change in the dispensing model created by competition from big-box stores, manufacturer-owned practices, the internet, and the pending new legislation that will allow and encourage over-the-counter sales of hearing aids.
Hearing aid sales by big-box retailers are the fastest growing segment of the hearing aid market. The Hearing Review estimates Costco’s U.S. market share to be around 11 percent of total sales, with the retailer’s year-on-year unit growth increasing at an estimated 20–25 percent pace during the past five to six years, while the average audiology practice only grew two to three percent (Pessis, 2016). At Costco, the largest wholesaler of hearing aids, devices often sell for less than audiologists pay for similar products despite the fact that the aids are produced by the same manufacturing companies. So, can audiologists win the price war?
Economics would suggest that to compete on price alone, an average practice would need to see three times as many patients as they currently see to make up for the reduced margins created by the dramatically discounted prices offered by big-box retailers and the internet. Where will those additional patients come from? The cost of attracting a new patient through traditional marketing efforts are already substantial and a typical practice has a limited marketing budget.
What practice can afford to spend three times as much on marketing efforts with the hopes of gaining more patients? I can only imagine that manufacturer-owned practices have access to much lower priced devices and almost unlimited corpuses of cash for marketing. How does a typical audiology practice compete against these giants? Perhaps the answer is not in waging a price war, but in creating a practice that focuses on the best in hearing health care. While most audiology practices can’t compete on price alone, we certainly can provide our expertise, an amazing experience, over the top service, and a commitment to 100 percent patient satisfaction, qualities that will be attractive to consumers who want the best.
How to Compete
There is a strong relationship among excellence in hearing health care, benefit, and improvement in quality of life derived from better hearing. Benefits always outweigh price in this industry, so instead of lowering prices, perhaps the focus should be on adhering to a protocol consisting of a comprehensive test battery including measures of loudness discomfort and speech-in-noise testing, as well as in depth real-ear measurements to ensure that patients are deriving optimal benefit from their hearing aids.
When problems occur, there is value in evaluating outcomes of performance by using real-ear and aided discrimination testing to make certain a patient is understanding in complex listening environments. It’s important to measure outcomes instead of just making minor changes and suggesting a patient, “Try this setting and let me know if you continue to have problems.”
While a patient’s subjective impression should always be considered, objective measurements can provide valuable information and may reduce the number of follow-up appointments when a patient is experiencing problems. If a patient has poor speech-in-noise ability, a rehab program may be necessary to improve their ability to understand in noise. Patients should always be assured that you are there to help them every step of the way on their journey towards better hearing. Make certain your actions back up that assurance.
If you want to survive in an increasingly competitive marketplace, measuring and monitoring predictors of profitability become the key to success. Some business owners rely on their accountants to keep the business on track financially. No one outside of the business is as readily equipped to assess the health of a practice as the owner. In most practices, it is the practice owner or manager’s job to monitor financial stability.
The key indicators of profitability should be monitored at least quarterly. When profitability is down or not as expected, it is time to reassess profit and loss to develop a plan to put the business back on the right track. Over the years, my business has experienced many slowdowns. After digging into the numbers, the slowdown has always been the result of the same problem: taking my eye off of the ball. I got busy working in the business, seeing patients, and forgot to work on the business.
In an established practice, a reduction in profitability is usually a result of a change inside the business. For instance, pricing from suppliers may have increased slightly, patients may be getting out of the door without a future appointment, incoming calls are not being converted to appointments, or perhaps marketing that was producing new patients is no longer effective.
Operating a small business is a constant balancing act—spending too much time on marketing or managing employees detracts from the necessity of generating revenue and yet, if the majority of the owner’s time is consumed with patient care and there is no time to monitor the health of the business, the bottom line will suffer.
Having a handle on the financial metrics of a practice is critical for making quick decisions and maintaining profitability. The routine review of key performance indicators of the business will reveal what is resulting in a profit and should also uncover other areas that are not generating a profit.
Key to Success
Another concern shared by many colleagues as they face a new year in business is reduced, or lack of, reimbursement for diagnostics and hearing aids. The reimbursement landscape is undergoing significant changes. According to reimbursement expert Paul Pessis, AuD, “Practice management, which encompasses reimbursement, is becoming increasingly more important in securing business success. Each practitioner within a facility is responsible for fortifying the practice through thoughtful business protocols. In the end, it is the patients seeking the services of the audiologist who benefit most when a practice has the financial stability to be the best in its class” (2016).
Much of the success of an audiology practice depends upon the owner or manager’s awareness and understanding of coding and reimbursement. There is a difference between coverage and reimbursement.
Coverage, in health care, is when a third party is responsible for reimbursing the professional for all or part of the services rendered. In other cases, payment comes directly from the patient themselves. Reimbursement, regardless of whether it comes from third-party payers or from patients directly, is key to maintaining good cash flow in a business. Practices that focus heavily on reimbursement from third-party payers must monitor accounts receivable carefully to make certain that payment is coming in a timely manner. Third-party payers are notorious for finding all kinds of crazy reasons to delay payment. It is prudent for practices to decide what portion of total revenue in the business should come from third-party payers. Diversity is important for maintaining profitability so that if one payer decides to quit reimbursing, the business can continue to survive.
While change is not easy for any business, audiologists have the choice to find new solutions to maintain a successful practice or fight change and possibly become stagnant and cause the business to suffer. As Socrates suggested many, many years ago, “The secret of change is to focus all of your energy not on fighting the old, but on building the new.” Audiologists will be wise to follow this salient advice in 2017.