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Unbundling Hearing Healthcare Pricing

Up-Front Work Pays Off

Shaw, Gina

doi: 10.1097/01.HJ.0000471624.21855.f2
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Those hearing healthcare providers who haven't unbundled their pricing yet have probably at least thought about it. In the American Academy of Audiology (AAA)’s 2012 billing practices survey, 33 percent of providers said that they separate charges for products and services, compared with 20 percent of providers in the 2011 survey—a jump of 13 percent in just one year.

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Although unbundled pricing still is seen only in a minority of hearing aid-dispensing practices, it's likely to continue to become more popular over the coming years, said Kim Cavitt, AuD, president of the Academy of Doctors of Audiology (ADA) and owner of consulting firm Audiology Resources, who will lead a workshop on how to unbundle pricing at the ADA Annual Convention in November.

“I think this is something that every practice needs to consider. We essentially have priced hearing aids in the same manner for the last 60 years. But to compete in today's marketplace, with the big-box retailers and the fact that people can get amplification online, we need to place a value on what we as the audiologists are doing.”

Bundled pricing keeps the focus on the product itself instead of the provider's expertise.

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“Our services, and our time, have value associated with them,” said Ian Windmill, PhD, clinical director of the Division of Audiology at Cincinnati Children's Hospital Medical Center. “How are we showing patients that value?

“When people come in and express interest in hearing aids, and we conduct an evaluation, tell them they're a candidate for hearing aids, and explain the charge, and they say, ‘No thank you; I can't afford that,’ and leave without having to pay anything, that gives the impression that your time is worth nothing. It also reinforces the view that hearing aid charges are all about the device and not the services.”

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Making a change from the old model that everyone knows and understands can be intimidating, said Amyn Amlani, PhD, associate professor of audiology in the Department of Speech and Hearing Sciences at the University of North Texas, who will be coleading the workshop with Dr. Cavitt. However, unbundling can substantially help increase trust between the professional and patients, he said.

“Patients know exactly what they're getting and what they're paying for it, which is very important to the new generation of patients coming through the door.”

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PRACTICAL ANALYSIS

For those who have decided to take the plunge and enter the world of unbundling, the process starts with developing a comprehensive understanding of the practice, Dr. Cavitt said.

“In my old life, I ran one of the largest audiology/otolaryngology clinics in the country, at a university hospital. I could tell you how many patients each audiologist saw, how many hearing aids they fit, how many no-charge appointments they had, how many repairs, and so on. It's not easy, but it's not impossible.”

That level of understanding begins with coding. The AAA guide to itemization recommends assigning procedure codes to all identified services, even for cases in which insurance will not be billed, and even though a significant number of hearing aid procedure codes do not, at present, have nationally agreed-upon definitions (bit.ly/AAA-Itemizationhttp://bit.ly/AAA-Itemization).

“Coding isn't just reimbursement,” Dr. Cavitt said. “It's the data metrics for your practice.

“You need to know how many no-charge visits you're doing. For every hearing aid you fit, how many no-charge follow-up appointments do you have? How many repairs do you do? How many returns for credit? You need good data on your practice and what you're seeing patients for.”

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DETERMINING HOURLY RATE

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The next step in moving to an itemized, or unbundled, model is calculating the break-even hourly rate, said Stephanie Sjoblad, AuD, clinical associate professor of audiology at the University of North Carolina (UNC), who coordinates the UNC Hearing and Communication Center's clinical audiology program and will also colead the unbundling workshop at the ADA conference.

“Start by figuring out how much time you actually spend with patients. Each audiologist might work a 40-hour week, but you aren't seeing patients 40 hours a week. Some of that time you're doing other things that can't generate revenue.”

For example, each audiologist in the practice may have 30 patient contact hours per week, 48 weeks per year. (Don't forget to deduct time for vacation and sick or personal days.) If a practice has two audiologists, the calculation would be 30 x 48 x 2 = 2,880 contact hours per year.

“Once you have that number, you need to calculate the annual expenses you need to run the business—salaries, benefits, overhead, and so on, excluding the cost of things you'll resell, like hearing aids, assistive devices, and batteries,” Dr. Sjoblad said.

The sum of annual operating expenses divided by the total annual contact hours equals the minimum hourly rate needed to break even. A for-profit practice will want to set the hourly rate somewhat higher in order to generate additional revenue, and even a not-for-profit practice should build in a cushion for unexpected expenses, new equipment, and salary increases.

To compute the hourly rate, add the desired annual profit to annual expenses, and divide that number by the total patient contact hours.

Say the hypothetical practice in the previous example has annual expenses of $250,000 and would like to generate another $50,000 in revenue. The practice would need to generate $104.17 per hour for patient services in order to meet the expense and profit projections: ($250,000 + $50,000)/2,880.

“This is the most common way of calculating fees for services in an unbundled model,” said Dr. Windmill, who launched an unbundled approach in his previous clinical practice at the University of Mississippi Medical Center. “You just calculate your cost per unit of time and use that as the basis for charges. Most practices should be able to make those calculations fairly easily.”

Next, identify all services that the practice provides, such as:

  • hearing aid assessment,
  • devices,
  • dispensing fee,
  • fitting and orientation,
  • conformity evaluation (real-ear measures, functional gain, validation),
  • batteries,
  • earmolds,
  • earmold impressions,
  • accessories,
  • follow-up visits,
  • aural rehabilitation,
  • hearing aid reprogramming,
  • hearing aid checks, and
  • electroacoustic analysis.

Then, set pricing for each service based on the hourly rate and how much time the procedure typically takes. In the hypothetical example, a half-hour follow-up visit should bill around $52. The rate can be rounded up or down for convenience.

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ONE SIZE DOESN'T FIT ALL

Some unbundled models take a slightly different approach to pricing. At the University of Mississippi Medical Center, Dr. Windmill's group assessed the complexity of each patient and charged accordingly.

“The more complex the patient, the higher the hourly charge,” he said. “A patient with a mild hearing loss who will simply take what you recommend is different from a person with unilateral tinnitus and poor speech recognition.”

Dr. Sjoblad's practice at UNC is more of a partially unbundled model, she said.

“We believe that there are certain tests and procedures that should not be negotiable; the patient can't say, ‘I don't want to pay for that; that's not necessary.’ For example, the patient should never go home with a hearing aid on which we haven't completed electroacoustic analysis, whether after a repair or a new device.”

Dr. Sjoblad and her colleagues use the AAA Task Force Guidelines for the Audiologic Management of Adult Hearing Impairment to select procedures to be itemized as nonnegotiable professional services.

“Each patient has 45 days of services included upon being fit with new hearing aids to ensure the devices are meeting their previously outlined communication goals,” Dr. Sjoblad said. “However, at each visit, the bill reflects the itemized codes and procedures so the patient understands the services that were provided.

“Once patients are out of the 45-day initial fitting and evaluation period, they are billed fee-for-service, unless they elected to purchase an extended service plan. Billing for insurance would include all the codes that are allowable.”

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PREPARING STAFF MEMBERS

Before making the transition to an unbundled model, a practice must fully train staff members in the new system.

“Even the person who answers the phone has to be able to answer general questions about the charge structure because a lot of people price shop on the phone to compare practices,” Dr. Windmill said. “Conduct an in-service workshop and develop a few scenarios for staff members to practice what they would do and how they would respond.

“For example, what if a patient decides not to buy a hearing aid from you, and you still charge $35 for the evaluation, and the patient says, ‘But the other place doesn't charge.’ How would your staff react to that line of questioning?”

Consumer education is key in moving to an unbundled model, he added. For patients who are new to the practice, especially those who are new to hearing aids and audiology in general, unbundling will just be the way things are.

“We found that new patients who came to our practice didn't have an objection or question about being billed separately for the device and services,” Dr. Windmill said. “They had assumed they would be charged just like with other healthcare providers. But returning patients and patients who had been to other places and then came to ours required some education regarding the new model.”

Most practices that move from a bundled to an unbundled model grandfather previous patients for a period of time.

“We gave patients about a year—the length of their warranty,” Dr. Windmill said. All services were included during that period; services provided after that time were charged under the pay-as-you-go, unbundled model.

Dr. Amlani's university practice sent an explanatory letter to all active patients when it made the transition.

“And when patients came in for their appointments, we had the billing office staff spend a few extra minutes in conversation with them,” he said. “As long as you are up-front with your patients, many of them understand that healthcare reform is ongoing. It's not a static platform. They didn't all like the change, but many of them appreciated the fact that they now knew what they were paying for.”

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AN UNBUNDLE OF JOY

It does take extra work during the first year of transitioning from a bundled to an unbundled model, but the results are almost universally positive after that, the experts agreed.

“I was recently following up with two colleagues at the practice in Mississippi, and, at 14 months into the unbundled model, they just had their best month ever,” Dr. Windmill said. “They are doing better than ever, month over month, in terms of numbers and volume.”

The UNC Hearing and Communication Center, where Dr. Sjoblad practices, has had a similar experience, with a 10-year track record of unbundling and positive revenue stream.

Dr. Cavitt said she's seen that pattern as well, on an even larger scale.

“In my boot camp, I've been talking about itemization since 2009, and, by a rough estimate, I've probably had 600 people participate. In all that time, I know of only one person who's ever told me they've done it and failed. Many others—dozens—have said it was a good move.

“We need more national survey data on unbundling outcomes, but, from everything I've heard, it has been a successful transition for the vast majority of practices.”

The move to an itemized model can be an enjoyable experience as well, Dr. Amlani noted.

“Unbundling is the future of hearing healthcare, and we're going to have to jump on that bandwagon,” he said. “For some it can be scary and uncomfortable, but, like any other roller coaster, once you get on, it can be a fun ride.”

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