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Hearing Journal:
doi: 10.1097/01.HJ.0000286004.91165.37
Cover Story

In an era of corporate consolidation, can the independent still thrive?

Bloom, Sara

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Time was, the hearing aid dispensing practice was typically one in a series of one-person or “mom and pop” businesses dotting a neighborhood'S commercial district. While many of these practices belonged to a national network, such as Beltone or Miracle-Ear, they were usually owned and operated by local practitioners, just as the independent, multi-brand practices were.

But like many other professions and businesses, ranging from optometry practices to drugstores to movie theaters, hearing healthcare has become a big business in which national chains own a large and growing share of the market.

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Over the past few years, corporations have bought up hundreds of independent practices, and they are looking for more. Among their advantages over traditional one- or two-office practices is the size of their advertising budgets, which helps them draw prospective patients away from non-corporate practices with smaller marketing budgets. That is a particular advantage in major metropolitan areas, where solo practitioners are often unable to afford the high cost of media advertising.

As a result, when independent practice owners decide to sell—either because they want to retire, they receive an offer they can't refuse, or they find they can no longer compete successfully—they often wind up selling to one of the corporate entities. That accelerates consolidation of the hearing healthcare delivery system.

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MAJOR CORPORATE PLAYERS

Although various factors are contributing to the burgeoning corporate interest in hearing care, above all it is demographics that are drawing investment money into the hearing industry. This year, when the oldest baby boomers reach age 60, marks the start of an explosion in the potential hearing aid market. Over the next 20 years, the number of Americans with a hearing loss is expected to increase from today'S 32 million to upwards of 70 million. Is it any wonder that interest in hearing care has gone corporate?

Here are some of the key players:

* Amplifon USA, a subsidiary of the Italian-based Amplifon S.P.A., is the biggest hearing aid retailer in the country. As parent company of Miracle-Ear, National Hearing Centers (located in Wal-Marts), and Sonus, it accounts for close to 15% of the hearing aids dispensed in the U.S. It owns several hundred practices and is affiliated with another 2000-plus independently owned practices.

* HearUSA, which is the parent company of HEARx Ltd, HEARx West, Helix Hearing Care of America Corp., and National Ear Care Plan, owns several hundred practices, nearly all of which it started.

* Avada, which began in 2000, owns nearly 200 hearing care centers nationwide.

* Beltone, which is part of the GN Group that also includes GN ReSound and GN Otometrics, has been manufacturing and retailing hearing aids for more than 60 years. Its network includes independently owned practices in thousands of cities across the country.

* Audibel, which was established by Bill Austin, owner of Starkey Laboratories, is a network of about 1000 independently owned practices that dispense hearing aids made by the Starkey family of companies.

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HOW INDEPENDENTS STAY VIABLE

As practice after practice begins to operate under a corporate banner, two questions come to mind: Can small, independent practices remain viable? And what can owners of such practices do to thrive alongside much larger companies? This article will look at some of the strategies that practice owners, especially those not tied to any particular manufacturer, are using to co-exist profitably with their corporate competitors.

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Banding together

There'S strength in numbers, the old adage goes. That'S why, over the past decade or so, a great many practice owners have banded together in various networks that do not take away their professional autonomy. Such organizations—and there are many of them—offer members the benefits of volume buying and assist them in such areas as marketing and practice management, while at the same time allowing them to continue running their businesses as they wish. The bottom line, advocates say, is that group membership enables owners to improve the profitability of their practices while remaining independent.

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Offering business tools and techniques

One such organization is the EarQ Group, headquartered in Syracuse, NY. Edward T. Keller, BC-HIS, president of the network of some 300 audiologists and hearing instrument specialists, says that EarQ “celebrates and supports independents,” because it'S the independent practice owners who are “passionate about what they do, and who offer the highest level of care and the best value for dollars spent.” According to Keller, EarQ'S training tools and marketing techniques show members how to tie patients to a practice rather than to the price of a hearing aid.

In addition, while members can dispense whatever hearing aid brands they wish, they get larger discounts when they buy EarQ brand instruments, which are made by Oticon, Siemens, Sonic Innovations, and Unitron Hearing.

Figure. Edward Kelle...
Figure. Edward Kelle...
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Keller, who owns four dispensing offices in the Syracuse area, joined a group soon after opening his practice. But finding that it failed to give practice owners what they needed, he decided to start a new network, EarQ, in 2001.

At EarQ, says Keller, practice growth is based on a code of ethics to which members must adhere, training tools that help owners and their staffs operate more efficiently, and marketing that emphasizes quality service, quality products, benefits, and good value.

“We're advocates for the independent practice owner,” says Keller, who adds, “With all the competition these days, it'S no longer business as usual. The little guy taking a wait-and-see attitude will get swallowed up by a stronger, better-funded competitor. To vie with big business, you've got to be proactive and accept change.”

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Acquire business skills

When Vince Russomagno owned a dispensing practice in suburban Philadelphia, he discovered that most dispensers knew little about running a business. To help remedy that situation, he started American Hearing Aid Associates in 1995. AHAA now encompasses more than 2200 members (“associates”), including audiologists, hearing instrument specialists, otolaryngologists, hospitals, and universities.

Associates pay $150 to join, which entitles them to many company benefits, says Tina Soika, president of the company, which is headquartered in West Chester, PA. She says that associates have access to reduced pricing from more than 30 major manufacturers, and AHAA has personnel available to consult on financial planning, marketing, office procedures, and training, hiring, and other business operations.

Soika is especially enthusiastically about two new offerings: Performance Network and Strategic Solutions. Performance Network brings together up to a dozen owners of similarly sized practices several times a year to discuss ideas about growth. Strategic Solutions focuses on helping associates buy and/or sell practices.

AHAA staff work with owners interested in expanding, helping them evaluate practices for sale, and, in some instances, financing the buy, says Soika, who adds that staff can also work with owners seeking an exit strategy by bringing buyers and sellers together. “Our mission is to help independent practice owners be successful,” she says. “We stress service. This is a service industry, and the success of amplification depends on service.”

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Establishing audiology as a brand

The strategy at AuDNet, Inc., is to establish audiology as a brand, says David Smriga, MS, president and founder of the 4-year-old Minnesota-based group of about 200 members. “We need to organize ourselves and implement strategies to get consumers to embrace audiology as a brand, rather than to seek out a particular brand of hearing aid,” he says. “This is how we will distinguish ourselves from other hearing care providers.”

Kathy Foltner, AuD, CEO of AuDNet, Inc., says that successful branding of audiology will identify professionals in the field as the hearing experts, who can best deliver quality services and products. The field is poised for growth, she says, and brand recognition can secure it.

Membership in AuDNet is free and, its leaders say, the benefits include marketing strategies tailored to individual areas, volume discounts, help in matching buyers and sellers of audiology practices, and freedom from having to meet monthly hearing aid quotas.

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INDIVIDUAL PRACTITIONERS WEIGH IN

Thousands of practitioners have become affiliated with one group or another, some under a corporate banner, others made up of independent owners who want to remain that way.

Yet, most dispensing professionals in private practice today are still not affiliated with any group. And, while some are struggling, many are doing well, whether they operate just one or two offices or whether their practice encompasses dozens of locations. Some of these independent owners shared their formulas for success with Hearing Journal readers.

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One office can be profitable

Dan Allen, BC-HIS, heads the Allen Hearing Center in Daytona Beach, FL, a single-office operation run by his wife, Carolyn, who manages the business end of the office; a hearing instrument specialist; a receptionist, and Allen himself, when things get busy. At one time, Allen had two offices, but he found that trying to keep up with the business stretched him too thin and diluted the effort needed to service each office. He sold one and says, “That'S when I started to make money.”

During his 17 years in business, Allen says that several corporate groups have tried to buy him out, but he has always refused. The corporate business model calls for a specialist, receptionist, home office, national advertising, and a regional agent, all of whom have to be paid. “That doesn't leave enough for me,” he says. Some of the smaller practices in his area have been absorbed by corporate owners, but Allen is confident that his practice outsells all the competition.

Figure. Edward Kelle...
Figure. Edward Kelle...
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He says the secrets of his success are location, service, reputation, and aggressive marketing, but service is paramount. “If you put your heart and soul into your business, and you try very hard to satisfy every patient, you'll do well, even with just one office,” says Allen.

His statement was confirmed last month when the Daytona Beach News Journal announced that the Allen Hearing Center had been selected as “the Best Around” in the paper'S annual Readers' Choice competition, the second time the practice has been so honored.

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Adding services to compete

David Berkey, AuD, owns The Hearing Center in Asheville, NC, a single-office practice that he opened in 1992 after having sold a large practice in Los Angeles. Asheville was a sentimental choice for him, the location of his first job after college. And he saw his return there as a step toward semiretirement. But it has been anything but.

Today, his practice is even larger than the one he had in California. His success, says Berkey, comes in part from “romancing” his patients and his referring physicians. He doesn't do much traditional marketing because he finds media advertising in his area too costly and his direct-mail solicitations have been ineffective. He does market to his existing patient list, and also gives community talks and publishes a newsletter that he distributes to patients and prospects.

Figure. David Berkey...
Figure. David Berkey...
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Berkey faces plenty of competition. Wal-Mart, Miracle-Ear, and Beltone all have offices nearby. But, he says, expanding his scope of practice to include vestibular care and tinnitus training “has responded to the needs of primary care” and put him in the forefront of his area'S audiologic services.

Corporate competition is among the major challenges to independent practice owners, says Berkey, who is soon to become president-elect of the Academy of Dispensing Audiologists. The best way to beat them, he says, is to hire people with experience, dedication, and drive. While he acknowledges that such people are hard to find, he says they are the ones who will position a practice as a leader in hearing care.

He also recommends to colleagues, “Do your job really well, and deliver quality service and good value, and you will be rewarded. The strength of the bottom line of a practice depends on the person doing the practicing.”

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Groups offer advantages

Terry Brewster, BC-HIS, owns 27 Midwest Hearing Aids offices in Kansas. He is also chairman of Marcon Hearing Instruments, Inc., a long-established, member-owned, national buying group of traditional dispensers and audiologists. The scope of Brewster'S practice far exceeds that of an old-fashioned mom-and-pop shop, but he insists that the route to success is the same. Hiring good people who can deliver high-quality service to patients is the key to a successful practice, whether it'S a single office or a score of them. “Build relationships,” he says.

Brewster urges that every practice owner join some kind of group. He explains, “Independents out there by themselves have no buying power and no mechanism for sharing information on products or, say, a marketing campaign that works.” He adds, “The act of belonging to an organization raises people'S confidence; you know you're not alone.”

What type of group should a practitioner join? That depends on the situation, says Brewster. If someone wants to run a practice without a parent company setting time limits on fittings or adjustments, sales quotas to meet, or other business rules, corporate probably isn't the right choice. If better pricing would help the bottom line, a buying group might be all an owner needs, he says. On the other hand, he adds, if a practice owner is looking to retire, selling to a corporate network is a logical way to ease out, while maintaining services to existing patients.

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Audiology: A private-practice entity

Richard H. Israel, PhD, confines his practice to a single office in Silver Spring, MD, plus a small satellite office across town that is open 2 half-days a week. The way he runs his practice seems to defy the conventional rules of practice management, yet he prospers. For example, the name of his practice is Richard H. Israel, PhD, PA—nothing to indicate what professional services he offers. His office is on the third floor of a medical building, not a storefront. He has never advertised and says he wouldn't go to any doctor who did.

Yet, despite an apparently low profile, Israel has practiced successfully for 30 years in the Washington, DC, metropolitan area, one of the nation'S largest. He has done so, despite many local competitors, including Costco, Beltone, and Miracle-Ear centers. How? On the recognition and reputation of his name and how he treats his patients, says Israel.

“I had a big head start,” he acknowledges. When he began 30 years ago, his office was in an otolaryngology practice, and he treated patients of the ENTs as well as referrals from other physicians and clients he generated on his own. Five years later, he opened his own office, but retained good relationships with the MDs, who continued to refer patients to him. “This was a huge advantage over others who came later,” he said. “I had a following.”

Audiologists starting out today face enormous competition from the chain operations, says Israel, who adds that he is unsure about the future of his profession. He states, “Audiology is structured as a private-practice entity,” which is not responsive to a bottom-line orientation, quota system, loyalty to a single manufacturer, or the control of a large parent organization. “We offer diagnostic services, not just hearing aids, which are the focus of consolidators.” He adds, “As I see it, the development of other models is not in the best interest of audiologists or patients.”

Israel observes that practice growth can come from many referral sources, including attorneys, judges, insurance claims examiners, educators, administrators, and business executives, as well as satisfied patients and their families and friends. Why then, he asks, do so many audiologists keep their identities a secret? For example, why do they sign audiograms with their initials only, anonymous to those reading the documents? The big advantage audiologists have over much of their competition is diagnostic services. He advises, “At the very least, the graduating audiologist should be provided not only with a diploma and certificate, but with a good quality rubber stamp bearing his or her name and phone number.”

Israel says that young audiologists looking to jump-start their careers should be breaking down his door for a job, preparing to take over his practice when he retires. After all, he says, “One audiologist taking over another'S thriving practice: Can you think of a better way to keep independent audiology practices independent?”

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The practitioner grows the practice

David Rich, BC-HIS, operates 20 hearing care offices in Ohio and Michigan. Because of the size of his operation and its payroll, he is constantly mining for new patients in an area rife with competition. Nevertheless, he is unconcerned, and he explains why: Thirty years ago, I started with one office, and I learned that it'S not the number of offices you manage but the individual who is dispensing the hearing care that accounts for the growth of the practice. Serve your patients well, and they will have no reason to look elsewhere and every reason to recommend you to their friends.

Rich has some thoughts on how to run a successful practice: One: Spend money to make money. Last year alone, Rich invested $1.5 million in media advertising and direct-mail solicitations. Two: Pay attention to your patient database and solidify those relationships. Finally, develop ties with physicians, who are always your best source of new patients, Rich says.

He concludes, “Sitting in your chair, looking at the front door, and waiting for people to walk in makes you a target for absorption by a large entity. Practices that remain still rarely remain stable.”

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Bullish on the future

“Every dilemma presents an opportunity,” says Craig Johnson, AuD, president of the Academy of Dispensing Audiologists (ADA) and head of Audiology Associates, Inc., a six-office practice in the Baltimore area. “I look at the chains as a huge advantage to my practice,” Johnson says. “They do lots of advertising, and that raises the visibility of hearing care in general, an effort that feeds my practice as well as theirs. All in all, as I see it, the market is big enough for all—the corporate chain offices and the independent practitioners.”

Johnson senses that the pace of consolidation has slowed in the past year. “The surge to buy up practices has leveled off,” he says, noting that independents have largely held their own against the pressure to join a group. Key to that steadfastness is the service component, he says. “Patients come to a practice to see the practitioner, not just to buy the XYZ hearing aid.” And, according to Johnson, service is where the independent practitioner can excel over a national chain. “The independents have the flexibility to run their businesses to accommodate the individual needs of the patients who walk through their doors. This is a huge advantage,” he says, noting that whether one has one office or many, service generates growth.

Figure. Johnson...
Figure. Johnson...
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In practice 30 years, Johnson is bullish on the future of the independents. In fact, his daughter is currently an AuD student who, one day, will take over her father'S practice. “If I didn't believe in what the future holds, wouldn't I warn my own daughter? Look where we've come in 30 years. I just wish I were young again. This is an exciting time.”

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A one-office wonder

Spending 3 minutes with Gyl Kasewurm, AuD, is enough to fire up the inner entrepreneur in any hearing professional. Kasewurm is president of Professional Hearing Services, Ltd., which she opened as a solo practice 23 years ago in St. Joseph, MI, a quiet town on the east shore of Lake Michigan. From that modest beginning, her business has grown into a dynamic operation that has 10,000 patient visits a year. Professional Hearing Services now has a staff of 12 and, while it is still a single-office operation, that office comprises a sumptuously appointed 4400-square-foot space, to which Kasewurm will soon add another 1500 square feet.

How did she do it? The key to her success, she says, is “outrageous customer service,” which means treating “every patient like a little piece of gold.” Excellent word of mouth, plus consistent marketing to patients and to professionals in the area, accounts for the rest.

Figure. Gyl Kasewurm...
Figure. Gyl Kasewurm...
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Her business plan and the sheer force of her personality have kept her ahead of the competition, which was non-existent when she started, but now includes five other hearing care practices in a community of only 9000 people. She draws also from the surrounding area and has clients who drive 30 miles or more to get to her office. With people making so much effort to see her, she tries to make sure each one feels the trip was well worth it.

In general, says Kasewurm, audiologists don't know how to be good business people. “They work in the business, not on the business.” Make goals, she advises, and drive the business toward those goals. She adds that, thanks to new technology and other recent advances in the profession, “more is possible now than ever before.”

In her mind, failure was never a possibility. She opened her practice and never looked back, as she drove toward her goal of having “one outstanding office.” Today, she describes Professional Hearing Services unabashedly as “the Mayo Clinic of southwest Michigan.”

Kasewurm, who writes a practice management column for HJ, offers one more piece of advice: “Whatever you do, you have to love it to be successful.” She does, and has the success to prove it.

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FINAL THOUGHTS

Consolidation in hearing care is a fact of life. However, practitioners with well-established reputations and loyal clienteles are well positioned to continue to grow their practices, even in the face of stiff competition from large group operations.

On the other hand, new practitioners entering the market without name recognition may find it more difficult to establish themselves in the face of strong competition from national chains—as well as entrenched independent offices. It takes time for any new business to become known, build a client base, and earn a good reputation. Thus, hearing instrument specialists and dispensing audiologists starting a practice from scratch need not only clinical, personal, and business skills, but also sufficient staying power, including perseverance and adequate financing, to survive those early months and years. They would also do well to heed the advice of experienced practice owners, such as those interviewed for this article, who can serve as guides and mentors.

Those just entering private practice should also bear in mind that performing diagnostic procedures, selecting and fitting hearing aids, and providing follow-up to a patient require very different skills from running a business. Some people excel at both, but others are more talented in one area than the other. Those who are unsure of their business skills may find that the rise of corporate-owned practices offers them a good opportunity to pursue their profession in a private setting without having to run the business end.

It would seem, then, that the hearing healthcare field offers more choice and more flexibility than ever. There is room for independent entrepreneurs as well as for national chain operations, for single-office practices as well as those with dozens of offices. As Craig Johnson says, “Every dilemma presents an opportunity.”

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SOME FIND THE RIGHT CHOICE IS WORKING WITH A CORPORATION

The focus of this cover story is on how independent practice owners can compete with the growing number of offices owned by or associated with large corporations. However, that is not to say there is just one “right” type of practice and that everyone should aspire to being an owner. In fact, there are dedicated professionals providing quality care to patients in every type of hearing healthcare practice. One of those who is happy seeing patients as an employee of a large chain is Iris Antonucci, BC-HIS.

She has spent her entire career with what is now the HearUSA network. She apprenticed in 1989, when the group was called Hearing Centers of America, then began dispensing in 1990. Today, working for HearUSA, she is responsible for the everyday operation of a HEARx practice in New Port Richey, FL.

Antonucci is an advocate of the one-office practice that she runs and of the HearUSA network to which it belongs. She describes her employer as “a quality, patient-care company with strong business integrity.” While she recognizes that consolidation is unpopular in some circles, she says that working for a parent organization has been more than satisfactory for her. “Yes, of course, I have to abide by the rules and regulations established by the company,” she says. “But this frees me from dealing with the business end of the office and allows me to concentrate on patient care. The arrangement is good for me and good for my patients.”

She handles some of the marketing responsibilities associated with running a practice, such as reaching out to physicians in the area and following up with prospects and new patients, but corporate handles all of the advertising. Her own marketing endeavors combined with corporate'S management of advertising and business systems keep her office competitive with neighboring practices.

“I love what I do,” Antonucci says. “I love this company and the patients it brings to me. I plan to keep doing this and to stay with this company.”

© 2006 Lippincott Williams & Wilkins, Inc.

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