Embrace Hearing Blog

Navigating the cacophonous streets of New York City can be daunting process for practically anyone -- and for people who wear hearing aids, the task has long been made more difficult by constant background noise and a lack of infrastructure to make the process easier.

Fortunately, there's an easy solution -- hearing loops, which allow wireless connectivity to hearing aids with telecoils, effectively transmitting sound from its source directly to the hearing aid, and mitigating the effect of background noise. Unfortunately, adoption of hearing loops, which are widespread in Europe, has been painfully slow.

Until recently, that is. Largely thanks to the founder of the Hearing Access Program, Janice Schacter, New Yorkers are benefiting from increased accommodations for hearing aids:

Following a successful pilot program, the Taxi and Limousine commission announced that it had approved the induction loop technology for voluntary installation across all TLC-related industries, including taxi cabs. The transition to 100% looped taxis (which London has enjoyed since 1998) was accelerate when it was announced that New York's "taxis of tomorrow" will all have induction loops to help people with hearing aids communicate more easily with their drivers.

In addition to taxis, the Hearing Access Program has brought hearing loops to such public spaces as the New York Historical Society, the Lower East Side Tenement Museum, and the Metropolitan Museum of Art, and the new Yankee Stadium.

Additionally, the Hearing Access Program spearheaded a drive to install hearing loops at all of New York's ~450 subway stations, which is now complete.

Finally, the hearing aids on the subways have been getting some extra attention lately from the New York City Department of Health, with advertisements that caution headphone users to turn down their music to avoid permanent hearing loss. It's worth noting that Starkey, a hearing aid manufacturer, helped funds these advertisements, and deserves praise for its role.

We think New York City is mostly on the right track recently with hearing aids -- hearing loss should be prevented where possible, and people with hearing aids deserve to benefit from hearing loop systems in public spaces wherever possible. We wish that New York and other governments could see fit to bring resources to bear on making hearing aids more affordable -- but at least for now, it looks like it's up to private companies to play this role.

In our last article, we discussed some anecdotal suggestions that hearing aid dispensers in California are likely working far below full capacity. In this post, we’ll dig into the evidence. While this topic may be pretty far removed from the mind of the average consumer considering a hearing aid purchase, it’s important to understand nonetheless – when you pay high hearing aid prices, you’re not paying for $6,000 of electronics… you’re paying your hearing aid dispenser’s rent and other fixed costs of doing business!

Thanks to publicly available data at the Hearing Aid Dispenser portal, we know that there are approximately 1,967 licensed hearing aid dispenser and dispensing audiologists in California, as of July 2013. With a few assumptions, we can also arrive at a rough estimate of the amount of time spent fitting hearing aids.

Hearing Aid Assumptions:

-          California’s rate of hearing aid adoption is approximately the same as America’s

-          The average hearing aid wearer visits a dispenser twice per year. (This may be overstating things – recall that the average hearing aid purchaser returns for a follow-on visit less than twice in the year immediately following a hearing aid purchase – and visit rates are almost certainly lower after the first year)

-          The average visit takes 60 minutes

This back-of-the-envelope analysis suggests that California’s hearing aid dispensing system is operating at only 31% of capacity – or said another way, that the typical hearing aid dispenser or dispensing audiologist spends only 614 hours in a full 2,000 hour work-year actually fitting hearing aids.

But before we hang our hat on these numbers, a few disclaimers!

First – dispensing audiologists offer many important services in addition to fitting and dispensing hearing aids – so we would not expect their practices to work anywhere close to 100% capacity with respect to dispensing hearing aids.

Second, 100% capacity isn’t realistic, plenty of time has to go into running a practice. (That said, a realistic goal might be in the 80% range, which would imply 32 hours per week spent fitting hearing aids).

And third, since there are several assumptions involved, there is also significant uncertainty. Below is what the numbers might look at if key assumptions were adjusted one way or the other.

 

All caveats aside – in our view, the data do seem to confirm that the hearing aid dispensing industry operates far below capacity. As an independent check, a recent survey of hearing care professionals funded by Phonak suggests an average workweek among full-time hearing care professionals of less than 30 hours per week – or less than 75% of full-time capacity.

So why does this matter?

Well, in most oversaturated retail categories, some individual stores decide, sooner or later, to compete on price. These stores tend to attract more customers, and the stores that decide to keep prices high are eventually forced to shut their doors as customers shop elsewhere. Thanks to concentrated customer demand, the remaining locations are pushed closer to full capacity, enabling them to turn a healthy profit, despite charging lower prices. While consumers may not have as many store locations to shop at, they benefit from lower prices.

So in an industry characterized by both overcapacity and high prices – such as hearing aids – we’d eventually expect some participants to exit the market as competition for scarce customers pushes down prices. Instead, we see this!

 

Even in an industry plagued by overcapacity, the number of dispensers has actually increased by over 30% since 2001. Typically, industries expand when there is so much demand everyone has to work overtime – not when there is so much slack that 30-hour weeks are the norm. But hearing aids don’t appear to follow the rules at all!

Unfortunately, this expansion of practices has not led to lower prices, nor is it likely to. We believe that this is because hearing aid dispensers are forced to charge high prices to those that can afford them just to cover their fixed costs stay in business, even if it means everyone else is priced out of the market.

Paradoxically, the more hearing aid dispensers have entered the market, the more prices have climbed –more dispensers means fewer customers per dispenser, which means increasing hearing aid prices is the only way to stay in business.

The only way that hearing aid dispensers can both lower prices and remain economical, is if they can manage to operate closer to full capacity – but as long as the market for hearing care is oversaturated with practices, sub-30-hour weeks will remain the norm and hearing aid prices will stay high to pay inefficient fixed costs in underutilized offices.

In our next post we’ll try to get a sense of just how much money is being spent to maintain the overcapacity of the system. In the meantime, we’ll end with this thought: The manufacturing cost of a typical high-end hearing aid is less than $100, and the wholesale cost is around $500. Any system that charges customers $5,000 for hearing aids is a broken system.

This is the second of a three-part article on the California hearing aid market, and the contribution of an inefficient distribution network to high hearing aid prices.

 

This is part one of a three part series discussing evidence for the inefficient traditional market for hearing aids.

I wanted to share a shocking personal story that I thought followers of our blog would find interesting. On a Wednesday afternoon a few months back, a friend traveling in San Francisco was having some issues with name brand RIC hearing aids. He was scheduled to leave the country on Sunday, and he was new to hearing aids, so he called me up and asked for help making an audiologist appointment on short notice.

I did a quick search on the manufacturer’s website and found 12 hearing aid dispensing practices in San Francisco that serviced my friend’s RIC hearing aids. I was expecting to place one or two calls and book an appointment for Thursday and Friday.

I ended up calling all 12 numbers, and I was shocked by the results. All nine of the calls were sent straight to voicemail. I left eight messages, but received only two follow-up calls – one on Friday afternoon, and one the following Monday; neither was much help.

On the three calls on which I was able to speak with a live receptionist, I was also disappointed. One receptionist promised to call back later that afternoon when she had a better idea of the audiologist’s availability; she never did.

The final two calls were the most surprising of all. I was informed that the hearing aid dispensers had unusual schedules – both took Fridays off, one was out of town that week, and the other worked Mondays and Wednesdays in San Francisco and Tuesdays and Thursdays at a location on the outskirts of the Bay Area.

This meant he maintained multiple office locations to better be able to service his far-flung customer base; however, it also meant that he was paying the rent on two seven-day-a-week leases that he used only twice a week – hardly a model of cost efficiency.

I could hardly believe the result, but in the end I had to call up my friend friend and apologize; I wasn't able to make him an appointment on two days’ notice.

At the very least, it’s safe to say that the business practices that I had stumbled into did not prioritize customer accessibility to hearing aids. The hearing aid practices did not seem to be operating efficiently, as almost all of my voicemails went unreturned. And most perhaps most crucially, these dispensers did not seem to be operating at anywhere near full capacity – I confirmed that two practitioners were working reduced workweeks and schedules that left offices vacant several days a week; and reaching nine answering machines suggested to us that a number of offices were likely sitting vacant that Wednesday as well.

That said, I knew I was dealing with a small sample set, and that my experience might not be representative. I also know that customer accessibility on the first phone call and the number of hours a week a dispenser works may have nothing to do with the excellent standard of hearing aid care provided at his practice.

But we at Embrace Hearing were interested in learning more.

One of the core arguments for online distribution is that it is more cost-efficient than selling through brick & mortar stores. This is especially true if stores are operating at less than 100% capacity. To the extent that a large number of independent hearing aid dispensers work shortened business hours or less than full workweeks, as discussed above, the rent paid on their offices during downtime is essentially wasted. This “extra rent” is a hidden cost embedded in an inefficient distribution system and ultimately is balanced out by higher hearing aid prices. In other words, customers would end up subsidizing their healthcare providers’ operational inefficiency.

Said another way – in a properly competitive industry, the solution to chronic under-capacity would be the least-profitable dispensers exiting the market. Eventually, the number of stores would fall, but those remaining would operate at closer to peak capacity and be able to turn a profit without increasing prices.

The hearing aid industry is characterized by the strong pricing power wielded by hearing aid dispensers. Because hearing aid dispensers raise prices in lockstep, hearing aid stores can continue to churn a modest profit, while still operating far below peak capacity. The winners are hearing aid dispensers, who stay in business, and the losers are people with hearing loss, who are forced to swallow ever-higher prices.

This is a strong claim – so to back it up, I wanted to see some hard numbers. But data on the subject is hard to find… This wasn’t a situation where I could Google “hearing aid dispenser under-capacity” and expect to find anything meaningful.

Still, we think it’s an important question to be asking, so we decided to do some digging. Because state-level information isn’t aggregated at the federal level, we thought we’d take a look at the state with the largest population in the country – California.

As it turns out, there is some very interesting data on hearing aid dispensers publicly available at the Hearing Aid Dispenser search portal at the California Department of Consumer Affairs. In our next post, we’ll explore this data, pose some tough questions and suggest some interesting conclusions about the market for hearing aids in California.

Hearing aids are characterized by steady progress in technological advancement, even while the lack of progress in lowering hearing aid prices and improving distribution continues to frustrate hearing aids users. We’ve frequently written about issues with hearing aid costs and hearing aid distribution; this entry will focus on technological progress, as represented by the increasing popularity of receiver-in-canal technology.

Within the behind-the-ear hearing aid category, hearing aids can be further subdivided into Receiver-in-the-Aid (“RITA” or “traditional”) and Receiver-in-the-Canal (“RIC” or “external”). The receiver – or speaker – amplifies sound, which must pass through a tube to the ear canal (in an RITA) or is simply projected directly into the canal (in an “RIC”).

If it seems obvious that placing the speaker in the canal will yield better, relative to forcing sound to travel an extra distance through an external tube… well, that’s about right.

A 2010 paper for the Journal of American Audiology that compared RITA to RIC hearing aids found that RIC models were equal or superior in all measured respects. Specifically:

·         RIC hearing aids reduced feedback. They were able to produce higher gain (louder amplification), without feedback.

·         76% of study participants preferred RIC hearing aids to RITA

·         This preference held both for new hearing aid users (74%) and experienced hearing aid users (80%)

In short, the study strongly suggested the superiority of RIC hearing aids for mild to moderate hearing aids (and is one of the reasons Embrace Hearing sells RIC devices). So if the study was released in 2010, why is it newsworthy today?

Because hearing aids are only replaced once every several years, it takes time to observe whether the implications of academic studies are actually being observed in clinics across the country and translating into differences in recommendations and ultimately hearing aid fittings.

By comparing 2012 statistical data from the Hearing Industries Association to 2010 data, we can see that far more people in 2012 are wearing RIC hearing aids than in 2010.


This is great news, because it shows that the hearing aid distribution system worked. In just two years, a combination of technical advancements, empirical academic studies, and coordination between manufacturers and audiologists and hearing aid dispensers let to a major improvement in the types of hearing aids distributed. The real winners here are hearing aid users, who are likely to experience improved satisfaction with their hearing aids and ultimately improved quality of life.

 

Recently, we posted a blog entry explaining why some commonly cited reasons not to buy hearing aids online, despite much lower hearing aid prices, do not apply to Embrace Hearing.

This is the second of a two-part post focusing specifically on the last reason proposed by Neil J DiSarno in his recent March 6 Q&A piece in The New York Times.

Mr. DiSarno states that: Audiologists are professionals who can provide adjustment and programming of the devices, counseling, hearing training and support when you obtain hearing aids from them. Hearing aids bought online do not include these services.

We completely agree with this statement, but we also believe that the model of “bundling” hearing aids and follow-on services serves to obfuscate the true costs of hearing aids and hearing aid services, and allows audiologists to charge more for the services than they would be able to charge on an easier-to-understand visit-by-visit basis.

To demonstrate this point, we’ve calculated the effective price of hearing aid follow-on services.


 

Above and here is our analysis of the effective cost per visit of the “training and support” referenced by Mr. DiSarno, when purchased as part of a bundled package. This analysis assumes that an audiologist pays $1,000 for a set of hearing aids from a manufacturer, sells it to a consumer for $5,000, and that the “fair price” for that sale is really much lower. It then asks the question – how much is the customer really paying per follow-up visit, depending on 1) how often he returns for follow-up visits, and 2) what hearing aid price he considers “fair” in the first place?

At the risk of stating the obvious, we submit to you that these are very high numbers!

In our view it is unlikely that hearing aid wearers would be willing to pay per-visit prices at these levels, if given a transparent choice. Hearing aid “bundling” is so common because it allows audiologists to include these exorbitant hidden costs in the up-front $5,000+ hearing aid price. First-time hearing aid buyers may not know whether $5,000 is too much to pay for a medical device – but they would suspect that $1,000 is too much to pay for a follow-on visit.

While it is impossible to know Mr DiSarno’s true motivations, we note that he has “spent the last 35 years as a practicing audiologist” and therefore has likely benefited financially from profits created by the practice of hiding high per-visit costs in an opaque “bundle.” We leave it for our readers to decide whether this conflict of interest might influence the thinking of audiologists who advise consumers not to buy hearing aids online because doing so deprives consumers of the ability to obtain “adjustment and programming of the devices, counseling, hearing training and support” from audiologists.

To this argument, we say – if you really want to ensure that all consumers have access to these services, then why not charge for them on a per-visit basis, no matter where consumers originally purchased their devices?

In a more transparent system, the free-market price for these services would decline to the level that consumers feel is fair. In an environment with lower prices, it is highly likely that many of the 27 million Americans with untreated hearing loss would purchase hearing aids and achieve an improved quality of life. And shouldn't that be the goal of everyone involved in the hearing care industry?

On March 6, 2013 The New York Times ran the second in a series of Q&A pieces with Neil J DiSarno, chief staff officer at the American Speech-Language-Hearing Association. The series of articles addresses topics of interest from hearing aid prices to new hearing aid technologies. In this article Mr. DiSarno recommended that consumers avoid buying hearing aids online.

We have assessed Mr. DiSarno’s reasons for warning against online hearing aid purchasing, and we agree with each of them – which is why we designed Embrace Hearing to sidestep each potential issue with online purchasing.

While Mr. Disarno acknowledges that purchasing online can reduce hearing aid costs and provide consumers with convenient options, he warns that:

“A hearing aid is a complex medical device, not a simple sound amplifier”

We agree – that’s why we sell state-of the art hearing aids directly comparable to hearing aids sold by audiologists

Hearing aids have digital technology that can be set by an audiologist to meet your personal hearing needs”

We agree – that’s why our 100% Board Certified specialists program each set of hearing aids to our customers’ individual hearing loss profiles, based on a combination of their hearing test results, and any specific customer requests

“Hearing aid bought online without a complete hearing test and other necessary hearing therapy/treatment services may not meet your needs”

We agree – that’s why we require that each customer undergo a professionally administered hearing test, prior to ordering hearing aids online

“Setting hearing aids for your needs requires specific computer software that audiologists may not have access to if the devices were bought online. For some online businesses, getting the hearing aid settings changed may only be possible by shipping the hearing aid back to the manufacturer, which means you will have to go without your hearing aid for a while.

We agree – that’s why we will supply the necessary software to any audiologist who doesn’t already have access. We do offer by-mail reprogramming – for free – because some customers prefer the flexibility of not paying for adjustments, and not having to make an in-person appointment. We also support customers who seek in-person adjustments, and will even work to facilitate these in-person visits (though we don’t receive any fee for doing so).

Online hearing screens cannot tell you the cause of hearing loss — the cause may be something as minor as too much earwax or as serious as a brain tumor.

We agree – that’s why we require every customer to undergo a professionally administered hearing test, prior to buying hearing aids online

The F.D.A. strongly recommends that you see a physician to rule out medical causes of hearing loss before buying hearing aids. If your doctor determines your hearing loss is not medically treatable, ask to be referred to a licensed audiologist to see if you are a candidate for hearing aids.

We agree – We require each customer who buys hearing aids online to submit a waiver that acknowledges understanding of the F.DA.’s recommendation.

Audiologists are professionals who can provide adjustment and programming of the devices, counseling, hearing training and support when you obtain hearing aids from them. Hearing aids bought online do not include these services

We agree – however we believe that the model of “bundling” hearing aids and follow-on services serves no purpose except to obfuscate the true costs of the product and the service, and allow audiologists to charge more for the services than they would be able to, if they charged on an easier-to-understand visit-by-visit basis. We'll go into more detail on the price of hearing aid follow-on services in a future entry.

Mr. DiSarno has assembled a number of convincing reasons to avoid many online hearing aid vendors. However, we believe strongly that none of these reasons applies to Embrace Hearing.

We do not believe all consumers should buy hearing aids online. But we do believe strongly in consumer choice, and we  believe that customers can evaluate for themselves the wisdom of paying $5,000+ for hearing aids in person or $1,000 - $2,000 online, for near-identical devices.

Finally, we believe that since 27 million Americans are living with untreated hearing loss, the legacy distribution system of brick & mortar audiologist practices is failing many of the people it is theoretically supposed to help -- largely because the inefficiencies of running individual practices with high fixed costs forces audiologists to charge through the nose, pricing millions of consumers out of the market.

You’re in need of an affordable hearing aid.  The search for this – with newspaper ads, phone calls, referrals, and Internet surfing – has been an arduous one.  Or has it?  

Probably not, thanks to e-commerce creating a new industrial order.

Today, it is difficult to detach “commerce”, the act of buying and selling, from its prefixed “e” with 2012 online sales totaling $820 billion  (up 15% from the year before). Ten years ago, the process of purchasing something might involve a pile of print ads and, unbelievably, actually going to a store.  But what if your ideal product didn’t advertise?  What if the store was out of stock?  What if no one else in your life could give you a tip or a deal or a review?

This is the issue e-commerce aims to solve; it is a consumer-centric industry aimed at helping people find exactly what they want to buy.  The Internet is a single hub for searching, finding, comparing, advertising, and, most importantly, purchasing. The result? It comes right to your door.

Though once a brick-and-mortar industry controlled exclusively by audiologists, the hearing aid market is now also going online. There is no longer a need for retail markups. Advertising costs are reduced with the facility of search. Overall, online industry brings down consumer hearing aid prices and increases customer potential from select to global, allowing e-commerce sites like Embrace Hearing to enter and change the market.  

With hearing aid prices starting at $399, wouldn’t you agree?

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