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“Competing with Costco

Is it Time to Unbundle Prices?”

Pallarito, Karen

doi: 10.1097/01.HJ.0000413500.49857.f2
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Audiologists and hearing aid dispensers haven't always made it easy for patients to know what they're getting for their money. Practitioners quote prices that typically lump together the cost of hearing instruments and professional services, and advertisements in newspapers often use confusing industry jargon to endorse the latest hearing devices.

The Hearing Loss Association of America (HLAA) advocates unbundling the price of hearing aids from professional services, and it launched its Campaign to Make Hearing Aids Affordable in April 2011 to encourage itemization by hearing health practitioners. It's not a new concept, but HLAA has embraced it as part of a broader effort to remove barriers to treatment. “We think that consumers have a right to know what they're paying for,” said Brenda Battat, HLAA's executive director.

Six months after HLAA launched its campaign, the UnitedHealth Group in Minnetonka, MN, began offering low-cost hearing aids through its hi HealthInnovations unit directly to people who take online hearing tests. (See FastLinks.) The insurer promoted a “simple, convenient, and affordable” approach to dealing with hearing loss. Audiology groups immediately criticized the initiative on quality-of-care, patient safety, and legal grounds, concerned that the online delivery method removes professional services from the equation, but HLAA, in support of more options, said the model should be given a chance so that consumers can decide for themselves. For better or worse, the initiative put price back on the front burner.

“I think it's the elephant in the room because they're [UnitedHealth Group] talking about hearing aid prices, which are significantly less than are charged nowadays,” said Mark Ross, PhD, a retired professor emeritus of audiology at the University of Connecticut in Storrs.

Amyn M. Amlani

Amyn M. Amlani, PhD, an assistant professor of audiology in the department of speech and hearing sciences at the University of North Texas in Denton, suggested that UnitedHealth's plan for service delivery could be transformative. “Even though the model is a little bit outside the box at this point, I [have] a feeling that it's going to be the disruptive force that's finally going to force audiology to rethink its service delivery, and I think that's a good thing,” he said.


Some superstores, such as Costco, have already begun making hearing aids more affordable. Costco is the third largest retailer in the United States, trailing behind Wal-Mart and Kroger, and the seventh largest retailer in the world, ranking 25th on the Fortune 500 list. Interestingly, Costco Hearing Aid Centers are one of the largest retailers of hearing aids in the United States, selling more digital hearing aids than any other independent retailer, according to RetailSails. (See FastLinks.)

Costco lumps hearing aids into the category “ancillary and other,” along with optical, photo, and pharmacy, and the approximate percentage of net sales for that category was 18 percent in 2011, according to Costco's most recent annual report. (See FastLinks.) That's six percent more than “fresh food” and eight percent more than “softlines” such as clothing, jewelry, and cosmetics. Costco reported it had 427 hearing aid centers in 2011, marking a seven percent increase from 2009. The giant discounter does not provide specific data on hearing aids sales.

Costco also markets its own line of discounted hearing aids under its Kirkland brand, in addition to selling instruments from other manufacturers. Fees associated with Costco's hearing aids are itemized, with the bulk of the price going to the hearing aid. Hearing tests, follow-up appointments, adjustments, and cleanings are promoted as free. Combined with Costco's push to increase hearing aid centers and sales each year, some audiologists are feeling the pressure to rethink their pricing model. Costco's strategy has its downsides, however. Some customers feel they are giving up service when paying less, according to online blogs. (See FastLinks.)

Representatives from Costco declined to comment when contacted about its pricing strategy for hearing aids and the level of its audiologists' experience.


Audiology's decades-old practice of providing a single price for a hearing evaluation, hearing aids, testing, fitting, and adjustments may be one aspect of the old model that's ripe for change. Unbundling proponents say bundled rates don't inform the consumer. “I think most individuals feel like they're paying for a product, and what we're trying to show our patients is [that] a significant portion of the payment goes toward professional services,” said Barbara Winslow Warren, AuD, an audiologist at the UNC Hearing and Communication Center and a clinical assistant professor in speech and hearing sciences at the University of North Carolina at Chapel Hill.

Barbara Winslow Warren

The practice's interest in unbundling was sparked by a 2004 journal article that said patients should not be billed for services they haven't received, said Stephanie Sjoblad, AuD, the clinic coordinator at the UNC Hearing and Communication Center and a clinical associate professor in speech and hearing sciences. “After [patients] have concluded their 30-day trial period, don't bill them for two years of services up front and call it the price of the hearing aid,” she said. “Have patients pay for those appointments as they go.” One benefit: It makes the up-front costs more affordable for patients. “We've done it very successfully for the past seven years now, and we've more than doubled our patient growth and revenue in that time period,” Dr. Sjoblad added.

Stephanie Sjoblad

Professional organizations such as the American Academy of Audiology are providing instruction on the topic. “A Guide to Itemizing Your Professional Services,” just released in January, outlines key steps in the itemization process and provides links to additional resources. (See FastLinks.) Although unbundling is a hot topic, industry experts said many practitioners are more comfortable collecting fees up front, and worry that a shift in payment design will decrease revenue. “One of the major concerns [is] that the patient will go elsewhere or won't return, or the clinic will lose money,” Dr. Warren said.

It's also hard work assessing practice costs and overhauling the fee structure, added David A. Taylor, who runs a mobile audiology practice in Newport News, VA. Mr. Taylor attended an unbundling workshop sponsored by the UNC Hearing and Communication Center this past December, and said he has decided to unbundle. His patients will now receive a form itemizing a few separate components, such as hearing aid or aids, professional services, and ear molds, he said.

Figure. David
Figure. David:
A. Taylor

“It does two things in my mind: Number one, it provides transparency for the process, and number two, it promotes the value of my services,” Mr. Taylor said. Patients will have a better understanding of what they're paying for, he added. But instead of receiving lumpsum payments up front, Mr. Taylor said he will adjust to a revenue stream that's spread out over time.


Some evidence suggests, though, that empowering consumers may be the ticket to boosting hearing aid adoption rates, according to preliminary findings from a University of North Texas study. Dr. Amlani and colleagues recruited three groups of 40 retirees with mild to moderate hearing loss and annual household incomes under $42,000. Half of each group was experienced hearing aid users; the other half had no prior amplification.

The data showed that the manner of advertising greatly influenced their willingness to pay. Vague industry terminology “really doesn't mean anything to them,” Dr. Amlani said, but when presented with evidence-based benefits of the technology, “then they're more likely to say, ‘I'm interested in this because I'm really having a hard time hearing [or] I don't like whistling or whatever the case may be for that particular individual.’”

The study also found that people in each group were willing to pay more for the same device and services unbundled than for a single bulk price. Dr. Amlani likened it to paying à la carte for menu items at a high-end restaurant. “When you unbundle the price, people [start] to see the quality of the product, and because [of this], they're willing to pay more because at the end of the day they believe it's going to produce a better quality of life for them,” he said.


Much of the federal government's hearing health research focused on hearing loss and hearing aids in past years, not the hearing healthcare system. The National Institute on Deafness and Other Communication Disorders convened a working group in 2009 to develop a research agenda to boost hearing healthcare access and affordability for adults with mild to moderate hearing loss. (See FastLinks.) It currently has three initiatives in this area, according to the NIDCD.

NIDCD held small sessions last June to discuss outcomes and health services research. Several national organizations (the American Speech-Language-Hearing Association, the American Academy of Audiology, and the American Academy of Otolaryngology-Head and Neck Surgery) participated, along with scientists from the NIDCD research community and the Department of Veterans Affairs. The NIDCD is currently soliciting administrative supplements from funded NIDCD grantees to encourage and expand collaborative research on outcomes and health services, and has published a request for information in the National Institutes of Health guide. The NIDCD continues to call for research grants addressing the many recommendations noted in the 2009 working group report.


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