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Hearing Journal:
doi: 10.1097/01.HJ.0000293291.79379.8f
HJ Cover Story

Want to join a dispensing network? Groups offer many options to persuade prospects

Florian, John

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John Florian is a freelance writer and president of John Florian Media, a communications firm based in Huntington, CT.

If you're like many hearing care professionals, you enjoy getting together with colleagues now and then to trade ideas and information that can help make your practices more successful. This is called networking, of course, and many practitioners find it essential for staying up to date professionally.

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But do you want to network your practice? A growing number of companies in the hearing industry hope so. It is estimated that from 20% to 40% of today's private hearing care practices belong to a network of some kind, and the number is growing. Says one network member: “It's pretty lonely out there when you're not with a group.”

The publicly owned networks apparently agree, and are networking themselves—that is, consolidating:

❖ Amplifon USA, owner of Miracle-Ear, has agreed to purchase Sonus Corp., including its networks of corporately owned and independent practices, for $38 million, pending approval from Sonus stockholders. According to Dan Quall, president of the Sonus Network, the Sonus Network will retain its name, and “program-wise, it will all be the same.”

❖ Stockholders of HEARx Ltd. and Helix Hearing Care of America Corp. in late June approved the long-expected merger of the two firms, forming a new entity called Hear USA, Inc. The combined company will own or manage some 200 hearing healthcare clinics in the U.S. and Canada, and, through Helix's Hear USA Advantage Network and the recently acquired National Ear Car Plan (NECP), will have access to some 2000 affiliated provider members.

Networks are hardly new in the hearing care field. Beltone and Miracle-Ear have been in business for decades. However, in recent years, networks have proliferated and evolved in diverse directions. They now offer many options to independent practitioners, including help with practice management and marketing. Also, groups provide buying power, which brings members product discounts.

On the other hand, critics warn that networks may exert pressures on their members, even those who own their practices, that limit their autonomy in making professional decisions. For example, many respondents to the latest Hearing Journal dispenser survey (see March 2002 cover story) said that networks with ties to specific hearing aid manufacturers may restrict members' choices of hearing aids so that they dispense only specified brands to patients who might be better served by another company's product.

So far, joining a network has been “just the opposite” experience for John Zeigler, AuD, owner of Three Lake County Hearing Clinics based in Tavares, FL. In practice for 25 years, Zeigler wants to remain independent, calling his own shots, selling multiple brands of hearing aids. “I don't want somebody controlling me, and I want to own a practice that some day, someone will buy from me,” Zeigler says.

But 3 years ago he saw a need for audiologists to band together for marketing and other support. He joined the Sonus Network.

“I have the same fears as anyone else,” says Zeigler. “I don't want strings attached.” His Sonus agreement allows the purchase of multiple product brands and lets him quit the network with 30 days' notice. That avoids the pressure to purchase greater quantities of fewer brands, which is Zeigler's hot button. “You want to do what's best for the patient,” he stresses.

For those considering a network, Zeigler advises, “Learn about them all and try to join one that gives you choices and supports you.”

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WHAT NETWORKS OFFER

Not surprisingly, the networks scoff at criticism that they breed assembly-line hearing health care. To the contrary, they contend that the array of training and audiologic services they offer actually improves patient care. And, they say, helping with business functions frees practitioners to spend more time with patients. Don't forget those purchasing discounts and marketing support, they add.

Typically, networks of independently owned practices make their money through the members' product purchases and, to a lesser extent, from fees for certain services.

Networks are structured in a variety of ways. These include ones whose clinics and dispensing offices are:

❖ owned, franchised by, or affiliated with a single hearing aid manufacturer;

❖ owned by a network;

❖ independently owned; or

❖ either independently or network-owned—in other words, a blend of both.

Maybe belonging to a network is right for you, or maybe not. But, to know for sure, maybe it's worth a fresh look at what's out there.

Following is information about the major networks, how they function, and what they offer members (see also Table 1).

Table 1
Table 1
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AHAA (www.ahaabizlink.com)

American Hearing Aid Associates (AHAA) is a network of approximately 1700 independent hearing healthcare professionals in 2400 locations throughout the U.S.

“Our basic product is to provide independent hearing healthcare professionals with all the practice-management tools they need for increasing their profitability and efficiency,” states Vince Russomagno, CEO of the organization he founded in 1995.

“We're a completely independent organization that provides our members total freedom of choice with their product offerings, and we deal only with independent audiologists, ENT doctors, and traditional dispensers,” he adds.

But what about the major investment in AHAA by William Demant, owner of Oticon, Maico, and other companies? Russomagno says that Demant's 49% stake in AHAA is for return-on-investment purposes only. “It is not unit-driven and has no supply agreement attached to it,” he says, adding that AHAA offers purchasing discounts from 20 vendors.

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Empowering the independent

“Our sole purpose is to empower the independent with sound practice-management implementation,” says Bill Conners, senior vice-president of worldwide sales and marketing at AHAA. “We foster the members' reputation and community image with an umbrella approach. They can choose AHAA business services a la carte.”

There are two types of membership: (1) co-op associates, who receive pricing discounts and consolidated billing, and (2) preferred associates, who qualify for all services and receive an exclusive territory and the guidance of AHAA's 30 regional sales managers.

AHAA emphasizes training, offering courses in marketing, counselor dispensing, human resources, office productivity, and selling a practice. Its marketing kit provides help with advertising in all media. It also has alliances with national managed care organizations and a physician partnership program.

Associates pay an annual fee of $150, plus additional fees for services they choose to take advantage of.

By 2003, AHAA envisions a membership of 2500 professionals. “Although we're based in the Northeast, we're fairly well distributed and will continue that way,” says Conners.

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AUDIBEL USA (www.audibelusa.com)

Audibel USA is operated by Starkey Laboratories, Inc., and the network promotes the fact that its hearing healthcare centers dispense hearing aids made in the U.S. by “the largest American-owned hearing instrument company”—Starkey. However, a company spokesman emphasizes, “All Audibel locations are independently owned and operated. Starkey does not own any retail locations.”

Audibel practices provide patients with “the most advanced diagnostic and fitting tools,” according to the company web site. The site invites consumers to call a toll-free number to schedule a “free, no obligation” hearing examination at a nearby office. More than a dozen Audibel hearing centers on Florida's East Coast are posted on the web site, along with a toll-free number for information about other locations.

Starkey declined to comment on its Audibel network for this article.

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AuDNET (www.aud-net.com)

Keeping independent audiology practices alive and healthy is the main goal of AuDNet, a new network scheduled to begin operation late this fall, according to audiologist David J. Smriga, its president and founder. AuDNet plans to offer its services exclusively to members of the Academy of Dispensing Audiologists (ADA).

Smriga explains, “Our purpose is to provide a professional endowment support service to audiology.” The network's position statement says: “AuDNet will work to provide independent audiologists with the tools and resources they need to maintain their independence in the face of consolidation competition.”

Eventually, AuDNet will offer its members marketing support, research, and financial services. The last will include, for example, lower rates for health insurance and other benefits for practices and employees, business loans, and a business exit strategy. Smriga says, “When members are ready to transition out of owning their practice, we'll help find an entrepreneur buyer and also help finance that transaction.”

Another AuDNet goal is to create the Independent Research Network (IRN), which will pool members into a research network for testing patients “on an as-needed basis,” Smriga says. For example, hearing aid manufacturers could use the IRN for proprietary clinical studies, and research could also be conducted for consumer advocacy materials.

AuDNet will charge no membership fees to AuDNet, so funding will come from the members' purchases of products through AuDNet. For purchases, AuDNet will charge members 10% above AuDNet's negotiated rate; that hold-back will be split to cover the network's operating expenses and to fund ADA professional activities. Smriga is currently seeking to negotiate bulk purchase arrangements with manufacturers.

Smriga is a 26-year industry veteran, who spent 8 years in clinical practice and the remainder in the manufacturing sector. He expects AuDNet membership will “start out conservatively but then grow very rapidly” among ADA's 1200 members.

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AVADA (www.avada.net)

Hearing professionals seeking a business exit strategy—either immediate or gradual—are the focus of expansion plans at Avada, a network of company-owned practices. The operating subsidiary of Hearing Healthcare Management (HHM), Avada describes itself as “an audiology-based organization that provides an array of audiological services.”

“Outside of treating medical conditions, our full range of hearing health care services allows us to not only serve patients but also our audiologists and employees by providing them with the opportunities for which they are searching” says Steve Barlow, CEO of HHM. “By providing a full range of services, we not only serve patients but also our [members] by providing them with the opportunities they're looking for.” In this regard, Barlow says Avada also seeks people who “want more opportunities than are traditionally experienced in this industry.”

Avada currently has 15 regional directors responsible for 200 locations. Currently, it has concentrations of practices in North Carolina, Kentucky, Ohio, Texas, and New England, but it plans to expand nationwide. Along with Barlow, HMM is managed by Richard Walters, the chief financial officer. David Sand, MD, is the medical director.

The founders, who all have many years of dispensing experience, formed Avada in 1998 “for the dual purposes of providing our operators a better chance to fully use their diagnostic services and capabilities, as well as to dispense hearing aids,” Barlow says. He adds that Avada has created a model for “excellent patient care and employment opportunities. Our purpose now is to take this model throughout the U.S.”

Avada relies heavily on the diverse expertise and experience of its founders, says Barlow, who adds, “In our stores, the management, training, and financial skills are being taught, monitored, and implemented on a daily basis by people who have been in this business for 2 to 3 decades or more.”

In 2000, William Demant purchased a 47% interest in HHM, and since then Oticon and other Demant companies have been Avada's principal hearing aid suppliers. However, Barlow says that members “have the ability to fit any brand—outside of Beltone or Miracle-Ear—to meet their patients' needs.”

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BELTONE (www.beltone.com)

Beltone describes itself as the “number one recognized consumer brand in the hearing health care industry among people 50 years or older.” Despite popular misconception, most Beltone dispenserships are neither owned by Beltone (which itself is owned by GN ReSound) nor are they franchise operations.

“We are the largest independent hearing care network in the country,” says Barb VanSomeren, Beltone's vice-president for marketing. Network members own their businesses and are “bound by an agreement to support our products,” she explains. “In return, we give them a full package of business-development and technical support.”

Generally, Beltone dispensers represent that company's products exclusively, though practitioners can dispense other brands under special circumstances. However, VanSomeren says, “Ultimately, we are looking for committed partners who will support the product line exclusively.”

The network currently numbers more than 1300 independently owned locations in the U.S. In addition, Beltone operates service centers plus several new corporate-owned stores in Florida.

“It's not our intention to grow the corporate store business,” says Jim Curran, Beltone's president. “Primarily, we started them not only to serve Beltone patients in those areas, but also to gain knowledge as a hearing care provider. It helps us provide better support to our network.”

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The Beltone package

Network members receive exclusive territories and an array of services, including national and office traffic marketing, training through Beltone University, and technical support. For example, the company offers training in practice management, demonstrating products, and consultive care, an approach designed to help patients accept amplification.

The company also has a managed care business that handles national and local hearing care contracts between third-party contractors and the Beltone network.

It recently launched a national marketing campaign featuring actor Peter Graves, who starred in Mission Impossible and now hosts Biography.

No fees are charged to join the network or to receive any network services. “It's a supplier relationship,” explains Curran. “We become your exclusive supplier. You become our exclusive representative in specific territories.”

Currently, the network is expanding aggressively. Twenty-nine locations opened in 2001 and, as of mid-June, another 24 dispensers had joined. Curran says, “Our strategy is to add 60 hearing care practitioners this year, representing 100 new locations. But we're very selective in who represents our brand. They have to meet standards and be committed to supporting the brand and their community in a high-quality way.” He adds, “We also have to be very careful to make sure we carve out reasonable space for people to work in.”

Founded in 1940, Beltone has a long track record. Curran notes, “Dispensers have been with Beltone for 45 and 55 years. It's multigenerational. Children join the practice, many with audiology degrees, and work side-by-side with their parents, uncles, and aunts. That reflects a lot on the caring nature of the people we work with.”

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COSTCO (www.costco.com)

Costco Hearing Aid Centers were operating in 102 Costco retail stores as of mid-June, and the company envisions adding about 15 more this year. Locations of the new centers, which are owned by Costco, will depend first on “the success of the [retail] warehouses,” says Paul Sass, director of Costco's Hearing Aid Centers. But, he adds, the centers, which are staffed by licensed dispensers, are catching on.

“We do things a little bit differently,” Sass says. First, employees do not receive commissions for their sales. And according to Sass, Costco “leads the industry in everyday pricing.”

Costco stores sell only programmable hearing aids, with a 60-day money-back trial period.

As for staffing the centers, Sass says, “People have heard about Costco and are coming to us, asking what we're doing. We've got some appeal out there.”

Noting that Costco normally does not grant interviews, Sass declined further comment for this article.

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EAR Q (866/432-7500)

Independent audiologists and hearing aid specialists are joining the Ear Q Group for marketing support and purchasing discounts on the new Ear Q private-label brand. Formed last year, the group is already profitable and doing “very well,” says President Ed Keller, BC-HIS. “We've just added five national salespeople.”

Keller says that national consumer advertising will begin this fall for the Ear Q, “The Intelligent Hearing Aid.” It's actually a private-label hearing aid supplied by two manufacturers that Keller would not identify but says “were hand-picked to represent the highest quality.”

Group members can sell any brand of hearing aid, but Keller says the array of Ear Q products available will likely fit most patients' needs. “Most people have no problem buying most of their products through us,” he says, but adds that no sales quotas are imposed.

“We set ourselves apart with this brand and that's why we've been successful. If you're going to influence the 80% of consumers who have a hearing loss but aren't motivated to get help, you've got to represent change. That's what we're about.”

Advertising and marketing communications are handled by the Crawford Advertising Agency. Its services for Ear Q Group members include media research, planning and buying, creative services, radio and television commercial writing, organizing direct-mail campaigns, and public relations.

More than 100 dispensing offices in 20 states have become affiliated with the Ear Q Group, says Keller, who envisions up to 400 affiliates by the end of this year and over 1000 by the end of 2003.

“Everybody keeps their independence and has a protected territory,” says Keller, who ran dispensing practices in the Syracuse, NY, area for 11 years. He adds that Ear Q is owned by its directors, “people who are experienced in this industry.”

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HEAR USA (www.hearx.com, www.helixhca.com, www.hearusa.com)

It finally happened. On June 26, more than a year after merger plans were announced, stockholders of HEARx Ltd. and Helix Hearing Care of America Corp. voted at separate meetings to approve the merger of the two companies into a new entity named Hear USA, Inc.

The merger creates a hearing healthcare organization of multiple divisions: The Hear USA Advantage network for independent practitioners; the National Ear Care Plan network of managed care providers; company-owned HEARx centers in the U.S; and a Canadian division of Helix-owned centers. Exactly where the U.S. centers formerly owned by Helix will fit in and what they will be called had not been decided by press time.

“The merger took a lot longer than we all thought it would, but it was a good move,” says Paul A. Brown, MD, chairman of the new company. Brown founded HEARx in 1987 and, before the merger, was its chairman and CEO. Stephen Hansbrough, formerly president and COO of HEARx, is CEO of Hear USA and Steve Forget, former Helix president and CEO, is president and vice-chairman of Hear USA.

At the time of the merger, HEARx owned and operated 79 hearing healthcare centers in California, Florida, New York, and New Jersey. They will retain the HEARx name as they serve many patients referred by health insurance and managed care organizations. They also serve self-pay patients.

Helix brings a large number of its own clinics to Hear USA. Through subsidiaries, it owned or managed 128 centers, including more than 50 in the Canadian provinces of Ontario and Quebec, plus others in Massachusetts, Pennsylvania, New York, Ohio, Michigan, Wisconsin, Minnesota, Missouri, and Washington.

It also has ties with independent practices, a managed care component, and a growing Internet presence, including e-commerce. According to Helix, “thousands of visitors” go daily to such web sites as audiologists.com, hearingaids.com, hearingaidbatteries.com, hearingrepairs.com, and hearusa.com. Its managed care wing, the National Ear Care Plan, came to Helix through the acquisition of Auxiliary Health Benefits Corporation.

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For independent practices

Another element of Helix, the Hear USA Advantage network of independent practices, will continue as a division of Hear USA. It offers four levels of membership with varying requirements for product purchases. Higher levels of membership require larger minimum monthly purchases of products and offer larger discounts. There is no membership fee to join the Advantage network, but there are obligations to remain with the network for a specified time, depending on membership level.

Hear USA has strong ties with Siemens. Brown says that 90% of the hearing aids that HEARx dispensed were made by that company and its subsidiaries. Last December, HEARx and Helix obtained a financing commitment of up to $70 million from Siemens AG, conditioned on meeting certain business goals. Of that sum, $25 million will be used for additional acquisitions by Hear USA.

Network members receive discounts on products made by Siemens and its subsidiaries as well as access to a new electronic ordering system that eliminates paperwork. However, Brown says, “There is no mandate to an individual network member to buy 90% of its products from Siemens.” He adds, “We're also discussing [group purchase arrangements] with several other hearing aid manufacturers so that we aren't a single-manufacturer product network.”

Beyond product discounts, a key benefit of network membership is more patients, Brown asserts. These will come through referrals from national marketing and the managed care program.

The combination of all this “makes us very different from the other networks,” says Brown.

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MIRACLE-EAR (www.miracle-ear.com)

The Miracle-Ear name dates back to 1955, when the first hearing aid by that name was introduced by Dahlberg, Inc., which began in 1950. In 1984, Dahlberg created the Miracle-Ear network of centers to dispense the product.

Now, however, Miracle-Ear is owned by Amplifon USA, a subsidiary of Amplifon S.p.A., of Milan, Italy, which has a distribution network of more than 1800 sales outlets, 300 authorized centers, and some 2000 hearing aid dispensers in 10 countries.

Amplifon USA acquired its Miracle-Ear subsidiary from Bausch & Lomb in 1999. The Miracle-Ear network includes 850 franchised dispensing centers, plus 160 corporately owned locations, many of them in Sears stores.

In June, Amplifon USA announced its intent to purchase Sonus Corp. (see below)

Miracle-Ear officials declined to comment about the network for this article.

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NEWPORT AUDIOLOGY CENTERS (www.newportaudiology.com)

Newport Audiology Centers “is now in a period of expansion,” proclaims the web site of this network of practices, which is based in Mission Viejo, CA, and spans the Pacific coast states, plus Arizona, Nevada, and Texas.

All current 80 Newport Audiology locations were “started from scratch, which makes us very different,” says Laura Smallen, president of the company that she founded in 1970. “We've never made an acquisition.” Smallen also asserts the company's difference lies in its focus on service, rather than sales.

“Our goal is to improve the quality of people's lives, and we do a great job at that. So we don't really consider ourselves as retail. We provide a service.”

That service is offered by approximately 90 employees, whom Smallen calls the key to Newport's success. “The people make this organization. They are unbelievably flexible and motivated and truly have the patients' best interests at heart.” All locations are staffed by audiologists.

To consumers, Newport Audiology advertises offering “most major brands of hearing aids.” However, the chief suppliers are Phonak, GN ReSound, and Rexton.

What's ahead? More locations will be opened, possibly in additional states. But Smallen isn't in a rush. “We're a strong regional player and like controlled growth,” she explains. “It's much safer that way in today's changing market.”

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SONUS (www.sonus.com)

Sonus calls itself “North America's largest audiology-based retailer of hearing instruments.” And the pending acquisition of Sonus Corp. by Amplifon USA will “bring an upside to the resources available to us and our network members,” says Dan Quall, president of the Sonus Network, the division of Sonus consisting of independently owned practices. The $38.4 million cash transaction is expected to be completed by October 31.

Quall says the Sonus Network name will be retained under the new ownership, and that the network program will remain as is. “Amplifon's relationship with worldwide manufacturers should strengthen our position for product offerings and expand our services,” he adds.

Sonus emerged in 1997, built on a base of clinics in the U.S. and Western Canada. Its stated vision was to “become the premier network of hearing centers in North America.” The company grew rapidly through acquisitions, and it currently owns 96 clinics. In addition, the company founded the Sonus Network, now comprising approximately 1350 independently owned clinics in the U.S. and Canada, representing 894 members.

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A range of services

The Sonus Network offers its independent members an array of audiologic and business services. “No two practices are the same,” says Quall. “They all have different needs for success, so we assess those needs and offer our tools to enhance their programs.”

Marketing takes several avenues, including national Sonus brand advertising, independent clinic advertising, and co-op arrangements with manufacturers. Members also receive purchasing discounts, business services, an exclusive franchise territory, audiologic and business management training, continuing education credits, human resources services, billing services, an e-commerce web site, equipment and computer systems, access to managed care contracts through its Hear PO subsidiary, legal assistance, and an exit strategy program.

Notable is the Greenhouse Training Program, a 4-week management course for clinic personnel covering professional and business skills.

Three primary suppliers—Phonak, Sonic Innovations, and GN ReSound—manufacture Sonus private-label hearing aids. However, Quall notes, more than two dozen companies provide purchasing discounts, which ensures “choice and independence for members in meeting their patients' need.”

There are no membership or annual fees. Sonus provides most of these options at no cost under a licensing agreement, or at a “below-market rate fee system.”

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Creating a national brand

Quall, an audiologist and certified hearing instrument specialist who was in private practice for 18 years before joining Sonus in 1998, says a key strategy for the network is to create national consumer awareness of the Sonus brand for “process quality,” in other words, quality patient care. “It all comes down to the person providing the services to patients. That's the critical spot of this business,” he says. “Quality is what will bring more people through our doors.”

Although the company has slowed its acquisition of clinics, the Sonus network grew approximately 40% last year.

“We'd love to see that kind of growth continue, but it's up to us to bring the value,” Quall says. “How can we help you as a professional, and how can we bring more people through your door? That's what we focus on, and I think we're moving in the right direction.”

© 2002 Lippincott Williams & Wilkins, Inc.

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