By Robert Oliveira, PhD
There are many dynamics in the hearing health care market that favor the widespread use of entry-level (or starter) hearing devices, from manufacturing changes, to delivery changes, to economic changes. The advent of this new product class may be extremely beneficial—for consumers, professionals and the industry—and should provide an easier pathway for people who are seeking hearing help.
During last year’s Academy of Dispensing Audiologists (ADA) convention in San Diego, I was invited to moderate a panel on the topic of starter hearing devices. The seminar was in response to a presentation made to the ADA Board members, who agreed that these devices represent a potentially useful class of product for the patients we all serve and that more information should be disseminated about them. Since then, a number of new products and events have have come to light. This article will explain some of the changes occurring in the market and some of the ramifications of these changes.
One of the central questions behind the entire product category of entry-level devices is, Do these devices have the ability to expand the market? This question may be the litmus test for starter hearing aids. When speaking about “expanding the market,” we are actually talking about reaching those people who are currently not being served by hearing health care professionals and amplification products. Can entry-level devices bring more hearing-impaired people to recognize sooner the benefits of amplification and audiological services?
The intervention of a hearing care professional and the subsequent remediation of hearing loss earlier in an individual’s hearing loss “life cycle” could significantly improve customer satisfaction. By gradually moving people to quality hearing solutions earlier in their lives (i.e., as opposed to them waiting an average of at least seven years before taking action), the hearing care field may have a better chance of creating more educated, experienced users who have a larger number of practical options.
Market Statistics and the “Typical” Client/Patient
Market penetration of hearing instruments has declined from about 24% in 1984 to about 20% in 1997.1 During the last few years, the average retail price of hearing instruments in the U.S. has increased by about 35%, from $1099 in 1997 to $1450 in 2000.2 It should be pointed out that this is not because hearing instrument prices per se are rising, but that the market share of high performance (i.e., more expensive) products—namely, programmable and digital products—has grown to a point where these instruments now comprise half the market. Most hearing care professionals will agree that people purchasing these devices are getting a lot more for their money. In fact, they are getting some phenomenal technology. However, the perception of the cost of hearing instruments—and even the definition of hearing instruments—may be changing for consumers.
To illustrate this point, I often tell a story about my mother, who comes from Florida to see our family in Minnesota every summer. She is a very bright 89-year-old who lives alone and comes with her “stack of stuff,” which includes books and magazines. Last summer on top of the stack was a Crystal Ear ad. “What do you know about this?” she asked. “Well, I know a lot about this,” I said, “because we studied this device.” And then she said, “You know it is not a hearing aid.” I asked her, “Why do you say that?” Her reply was, “My friends spend thousands of dollars for hearing aids.” So her perception is that a person is able to distinguish a hearing instrument from its price alone.
Getting Past the Traditional Barriers to Amplification
My opinion about some of the recent mass-marketed hearing devices that are heavily advertised on television and in consumer magazines is that some of these companies are marketing the right product but in the wrong way. For example, one of these companies is offering a well-designed, low-power (safe) analog, Class D (good quality) hearing instrument, but uses their ads to denigrate more complex hearing instruments (which have been shown to be more effective in terms of satisfying customers3). The company implies that consumers are getting “ripped off” by the higher prices and the audiological services that are essential to the fitting of those devices.
For the moment, let’s try to put aside our feelings about these types of marketing strategies. The fact is that some consumers who have recognized their own early hearing loss are starting to believe that real hearing instruments are too expensive for serious purchasing consideration. This presents the hearing care field with an opportunity to recognize this problem and offer some quality alternatives that are marketed and dispensed appropriately.
My mother, for example, has a slight, early hearing loss. So the next question I asked her was, “Mom, I have a lot of talented friends in your area. Why don’t I have someone help you out and get the work done.” To this, she said, “I don’t want to.” When I asked, “Why not?” her response was “I’m afraid they are going to sell me something.”
For almost any consumer, there is a concern about being sold something. As an example, manufacturers (like myself) at conventions can make the mistake of being too excited or too eager to explain the benefits of their products. The new product might be something remarkable, and the work that went into it gives the manufacturer the impetus to show it to everyone. When people walk by at a convention, if the manufacturer gets too eager, convention attendees may walk towards him/her then veer away. People do this because they are afraid that the manufacturer might try to sell them something. My mom viewed going to the office of a hearing health care practitioner in much the same way.
A better way to engage potential consumers is to find a more comfortable, gradual stepping stone to the purchase. The hearing industry needs a method to initiate the consumer more gently into the hearing care process. Our perception of reality and hearing care is not necessarily that of my mother’s peers. There is a threshold that needs to be gently broached.
|Fig. 1. Most other medical pathways for a progressive disorder include options of various levels of treatment.|
If you look at virtually any other health care field, there are often several levels of care that provide for varying degrees of patient involvement. For example, people who have heart problems may first be provided with special diets and inexpensive medicines, then progressively more expensive pharmaceuticals, then options for more radical treatments that might include surgeries, pacemakers or transplants (Fig. 1). The point is that there are a range of options tailored for the severity of the problem, and some of these options serve as stepping stones to other treatments (in the event that the previous treatment strategy proved unsuccessful).
|Fig. 2. Unlike many progressive disorders, hearing loss has relatively few options for treatment.|
There is no such treatment path for the predominant type of hearing loss, presbycusis (Fig. 2). Before the advent of entry-level/disposable instruments, it was essentially an all-or-none treatment proposition. It can be argued that assistive devices can also act as a “bridge” to hearing remediation, but unfortunately these devices remain extremely underutilized by both hearing care professionals and consumers. Due to this, the opportunity for starter or entry-level devices remains an excellent option.
Paradigm Shifts in the Hearing Aid Delivery Process
At least three significant changes are occurring in the hearing care field which represent paradigm shifts in the manufacturing, delivery and the economics of hearing instruments.
Manufacturing paradigm shift: Handcrafted shells with hand-wired components are moving toward instant fitting, advanced electronic capsules or “caplets” with sophisticated components. This capsule approach gives the practitioner adjustable circuits and replaceable external fittings that allow nearly instant delivery. From another perspective, the price/value of the hearing instrument is moving away from the handcrafted outside shells—where much attention was focused 10-15 years ago—to inside the shells. Inside the aid is where manufacturers’ research has made available advanced circuits that provide the practitioner with the ability to perform precise, interactive acoustic fittings.
Most hearing care professionals have toured hearing instrument manufacturing plants and have seen a lot of technicians with binocular microscopes doing fine wiring of components. Today, much of this type of activity is changing. Manufacturers are assembling these components as prewired faceplates overseas, leaving the final assembly to be done at domestic labs.
Other innovations continue to change the manufacturing process. For example, at the recent 2001 AAA convention, Phonak and Siemens displayed their laser-scanned impression approaches for mechanizing the shell-making procedure. This is another step toward eliminating the “art” behind shell manufacturing and increasing consistency of product. In some cases, manufacturers are using robotics to assemble components found inside the hearing devices. To date, this is commonly done with BTE-style devices and is beginning to be done with some instant-fitting ITE devices.
Beyond efficiency, the objective of these new manufacturing procedures is to reduce returns and their effect on the price of hearing instruments. Currently, almost one-fifth of all hearing instruments are returned for credit, and these returns roughly make up 12% of the selling price of a hearing aid. Remakes also can contribute a significant amount to the cost of hearing aids. Finally, repairs to hearing instruments under warranty can make up another 10% of the cost of a hearing aid. Together, these factors can push the price of hearing instruments up by 25-30%. Returns, remakes and repairs are major headaches for manufacturers, dispensing professionals and clients/patients alike. Estimates from Bray et al4 suggest that up to 50% of the cost of an aid are in these “3Rs.” It is clear that a significant amount of the cost of an aid is from the handmade shell feature. When one considers the active nature of many ear canals5,6, there are other practical forces (e.g., needs of the physical fit) which may drive the industry away from the traditional handmade shell technology.
Delivery System Paradigm Shift: With former fitting protocols, hearing care professionals used more steps during the first fitting. They performed the hearing evaluation, took the impressions of the ear canals, then sent those impressions to the manufacturer. An instant-fit hearing instrument was virtually inconceivable 10 years ago, because everyone relied on the manufacturer to take the audiogram and to integrate the required matrix into the hardware. For the hearing care professional, programming was limited or non-existent.
Today, the hearing care professional is in the driver’s seat as he/she should be. The professional adds value to the entire process by understanding the client’s/patient’s objectives, goals and individual amplification needs, then directly adjusts the parameters of the hearing instrument accordingly.
With instant fitting devices, no impressions are necessary. One of the most significant liabilities in providing hearing aids—the physical fit of the shell—is eliminated. In addition to having real-time acoustic fitting, the practitioner can assess and adjust the physical fit of the device. A different size of replaceable tip or the entire device is changed on the spot. It is no longer necessary to send the device back to the manufacturer for a costly remake.
Economic paradigm shift: A number of major economic shifts are occurring in the hearing care market. The U.S. economy has been soft since the end of 2001 HIA statistics indicate a continued erosion of market share, and the number of hearing aids sold into the North American market is flat.
The amount of profit growth in the industry may also be limited. Many European countries have had large proportions of digital and programmable hearing aids sold compared to analog circuits. France has achieved a penetration of 70% programmable and digital hearing devices. The U.S. is at 50% market penetration. The year 2000 may well have been the peak profit year for both the hearing instrument manufacturer and the hearing health care practitioner. This is especially true since Knowles MarkeTrak numbers1 show that hearing care professionals have been selling a large number of instruments to existing hearing aid wearers. Staying on this course while the population of hearing-impaired individuals continues to burgeon is not an acceptable alternative.
Starter Devices and Market Growth
The advent of high quality, instant-fit starter devices could beneficially change the economics of hearing instrument delivery for all participants in hearing health care. One example is the recent announcement of the first digital, instant-fitting device, Sonic Innovation’s Conforma CIC. Bray et al 4 recently published on the economic benefit of eliminating the 3Rs with their instant-fitting device. They have reportedly been able to reduce the selling price of the device, which features a replaceable compliant foam sleeve, by about 50% of the selling price of an identical circuit with a handmade shell. They report this is possible because of a dramatic reduction in the manufacturing costs of the 3Rs.
At the provider level, some major changes in charging for delivery of hearing health care products and services are taking place. Unbundling of product charges from professional service fees is becoming a greater necessity. This is especially evident for those interested in the dispensing of the Songbird disposable hearing instrument. The manufacturer of this product advocates separating the fitting fee from the product fee. According to Fred Fritz, president of Songbird Medical, the manner in which the product is dispensed provides an ongoing generation of profit for the practitioner. Again, this demonstrates that there is a change from the traditional up-front fee to ongoing fees as product is repurchased and services are provided.
|Fig. 3. In the last two years, the choices of starter and disposable hearing instruments have become much greater. Clockwise from the upper left: A & M Hear & Go; Audio ‘D’ Simplicity; Songbird Disposable Hearing Aid; Sonic Innovation Conforma and GN ReSound Avance.|
The concept of ongoing sales is a different way of looking at private business/practice economics. Replaceables take on a new importance to hearing care professionals in this type of economic model. In looking at A&M’s Hear and Go, Audio ‘D’s Simplicity, GN ReSound’s Avance, Sonic Innovation’s Conforma and the Songbird device (Fig. 3), the instruments are either totally replaceable themselves, or they have a replaceable component that is designed to improve the physical seal in the ear canal and/or improve the product’s reliability because of a built-in cerumen guard. These replaceable components are an opportunity to generate client loyalty, and clients are dependent on the practitioners’ replaceable products to maintain these devices.
This is a different type of economic model that promotes patient loyalty, much in the same way as battery sales and battery clubs. There are excellent economic incentives to selling batteries, and undoubtedly one of the best incentives is to develop and continue relationships with the clients. Additionally, there is always the potential with battery sales to update clients on new technology whenever they come into the office. From an economic perspective, battery sales provide excellent return on investment and provide a defensive measure in that they lessen the chance that the client/patient will go elsewhere.
HMOs and PPOs were successful when they first started because they succeeded in maintaining “patient flow.” Similarly, the hearing care professional benefits by seeing more patients, because that has the greatest potential to shift practice economics. This is not to suggest that all clients/patients will be utilizing starter/disposable instruments. Rather, there is likely be a continuum of customers who see these devices as either long-term or intermediate solutions to their hearing problems.
The average hearing instrument user repurchases hearing aids every 5.25 years.7 The average time a person delays the purchase of a hearing instrument after recognizing a hearing problem is 7-8 years. If the average first-time customer’s age is 65, there might be the opportunity for the average individual to purchase 2 or 3 sets of hearing instruments in a lifetime. This is one more reason from a purely economic standpoint, why entry-level devices make sense. From the more important aspect of client care, the dispensing professional gets patients involved with amplification devices earlier, hearing care centers are able to ease the client toward the hearing care process, and the professional is rewarded with the possibility of dispensing one more cycle of instruments. One cycle added to 2 or 3 is a 33-55% increase in business per client, so the practices of hearing care professionals who provide the extra services required by these devices will be well rewarded. Best of all, more people requiring help will have access to hearing care sooner.
The definition of hearing aids goes back to 1976—aquarter of a century ago. All those who are familiar with hearing instruments would agree that major techonological advances have been made since then.
In the author’s opnion, hearing instruments should be defined in light of contemporary times. It seems reasonable that there be two categories of devices to assist hearing-impaired individuals. One category would be that of ear-level consumer electronics that are of limited power, unable to cause harm to existing hearing. Safety would also be increased by the fact that consumers would be fit without an ear impression. The second category would be hearing instruments as we tend to know them now. The first category would be unregulated, the second category would be regulated as CLass 1 devices, as hearing instruments are now. Tom answer the often-made “if it looks like a duck and walks like a duck” argument against this division, I offer the precendent set by the FDA for pharmaceuticals: they have ruled that weak forms of regulated drugs are allowed to be sold without prescriptions over the counter.
In hearing care, there are several dynamics occuring on many fronts, from manufacturing to delivery to economics, that favor the success of entry-level hearing devices that will bring more people to hearing help sooner and provide enhanced travel down that path to improved hearing health.