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From 'Free Service' to 'Fee for Service'

From 'Free Service' to 'Fee for Service'
Charles Stone, AuD
January 3, 2005
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As the profession of audiology progresses, I believe we'll need to make changes in the status quo. When considering the future, it's helpful to review our history and our evolution towards independent practitioner status, in order to better fulfill tomorrow's promise, hopes and desires.

The commercial dispensing of hearing aids began in the late 1930's and early 1940's, before audiology existed as a profession. Audiology was born at the end of World War II, fulfilling the aural rehabilitative and amplification needs of veterans with military-based noise-induced hearing loss. Audiology spread from military bases and hospitals, to university clinics, ENT offices, multi-practice clinics, and finally -- to private practice.

Although the "birth" of audiology may appear (in retrospect) to have undergone a somewhat natural evolution -- in which a need existed and was filled by a professional -- the ability to dispense hearing aids was much more controversial. Audiologists were essentially not dispensing hearing aids until 1978, when ASHA changed its position on dispensing audiologists. In my home state of Minnesota, it wasn't until 1982 that audiologists were allowed to be the actual seller of the hearing instrument.

As audiology moves ever closer to becoming a doctoring profession, it seems prudent to re-evaluate how we are paid for our professional knowledge.

I believe the "conventional methods" of dispensing should, arguably, be changed to better reflect what we do and how things actually are! Most private audiology practitioners earn the majority of their income from dispensing hearing instruments. Over the past 28 years, only about one third of my practice's revenues came from billings based on diagnostics, and this is a common finding in private offices. The majority of the monetary flow into my practice originates with hearing instruments, and similar scenarios are common across many healthcare professionals.

Do dentists make more money on annual checkups and teeth cleanings or on bridges, crowns and fillings? Do podiatrists earn their living from office appointments or on prosthetic and orthotic devices and foot surgeries? Do general surgeons make their living diagnosing, or actually performing the surgeries they recommend? Do optometrists make more money on diagnostics or contacts, frames and lenses?

If you were to ask the professionals (noted above) if they were salesmen, they would each say no. But who convinces you that you need crowns, fillings or a bridge? Who advises you to have foot surgery? Who recommends surgery for medically-diagnosed problems? Who recommends bi-focals and contact lenses?

Based on these precedents, shouldn't we consider the recommendation and provision of amplification part of our professional responsibility rather than a "sales" dimension? I believe the answer is obvious. Dispensing hearing instruments is indeed, only a portion of what we as professionals do, to maximally manage the hearing healthcare of our patients.

Therefore, with the above as the basis of my professional viewpoint and personal philosophy....I'd like to respectfully ask:

QUESTION: What would happen if all major health insurance companies started to pay for hearing devices?

ANSWER: More than likely, they would negotiate the best price from the manufacturers, and then find a network of vendors to fit and service the product, at a greatly reduced cost!

To address this concern, I believe our profession must quickly and comprehensively identify and define two important concepts.

The first is "billable professional services." These are services which are covered by insurance carriers, as well as those traditionally paid by the patient "out of pocket." Secondly, we should consider 'product related services" which are provided at no additional charge during the hearing instrument's warranty period.

Extended second, third and fourth year product warranties that include professional services are not doing our practices any favors! Some extended warranties lead the patient to assume all office services are included -- at no additional charge. I am concerned because as insurance companies start paying for hearing aids and offering their own extended warrantees, the warranty fees will likely not cover your professional time and your overhead costs.

For example, the dental industry markets "preventative care" by convincing patients that routine office visits can prevent costly dental work. Though the majority of dental revenue comes from major dental work such as crowns and fillings, by including preventative care under the umbrella of professional services, they emphasize the importance of their time and services.

As insurance companies enter the hearing aid market, we should stand steadfast in our belief of professional charges for professional services. We need to clearly illustrate to patients, professionals and the third party payers, that our professional time and knowledge comes with, and is worthy of a price tag.

From "Free Service" to "Fee for Service"

Those who have competed in the market place with franchised chains, discount operations and other independent practitioners, will likely relate to these problems and solutions more readily. The following problems and solutions are my suggestions to facilitate a change to a "fee for service" mentality, without losing your competitive edge.

Of course, change is always difficult. Therefore, let me be clear, I am not suggesting an abrupt change in how you run your business. However, I do suggest gradually changing your practice to a "fee for service" orientation, over a few years, seamlessly, and with little or no negative effect.


Problem 1: You need to develop a way to separately bill for product and for services.

Solution 1: Use a "superbill" and a "service contract" to delineate services, products and associated charges for those products and services. The service contract should be designed to address services not covered under conventional health insurance plans and it should delineate all services you will provide for at "no additional charge" for the first year. Importantly, this delineation lets your patient know which services are built into the instrument price. Your superbill should describe each procedure performed in your office and the associated fee for that procedure.

Problem 2: "Unbundling" is too much of a change from my standard procedure. What if patients say they don't want to pay for things I include in every fitting?

Solution 2: Don't change the price of what you sell; merely put into writing what services come with each price level, and assess a procedural charge for those services, and for extensive services.

Problem 3: How will this help me convert my practice to a "fee for service" philosophy?

Solution 3: When you deliver the hearing instrument(s), tell the patient what the manufacturer's warranty is, and what the professional services are. Give them a copy of the service contract along with the purchase contract. By doing this, you separate product from service in the patient's mind, from the very beginning.

Problem 4: How can I set this up in my office?

Solution 4: One starting point is to make a list of services you routinely provide, which are not billable to most insurance carriers, i.e., fitting modifications, post-fitting visits, half hour sessions, video-otoscopic exams prior to fitting and at each of the post-fitting visits, orientation procedures, verification procedures, ear mold cleaning and modifications, tube changes, ear wax removal, drying and suctioning receiver and microphone ports, etc. If you don't already use a superbill in your office, acquire or create one, and assign a reasonable fee to each service listed on the superbill.

Problem 5: Once I set-up my superbill items and fees, how do I get patients to pay while my competition gives away 3 years of free everything?

Solution 5: When the competition "gives away" 3 years of free everything, they appear to be "somewhat cheesy" and frankly, most patients know there is no free lunch! At the time of fitting, give the patient the manufacturer's warranty, and explain that the manufacturer's warranty does not cover you or your professional services. Therefore, you're including your service contract with the device. The service contract covers all services, office calls, charges, etc., for the first year. By doing this, you're telling the patient up front that there is a limit to "free" services. You should also determine an annual renewal fee for the service contract and market this to your patients at the time of delivery, or in subsequent years. Whichever method you decide do use, the concept is to separate product from service right up front.

Problem 6: How should I handle my current patients when they come in for service?

Solution 6: You have a few options... You might state up front that starting on a given date there will be office charges assessed for procedures not covered by third part insurers. Or, you can announce you have a new plan that covers office procedures! You might consider charging a reduced rate, or perhaps wave the first year fee for loyal patients. Some professionals have used this model as a tool to get people back in the office in a way that is not "product oriented." I believe you'll find most patients do not object to office charges, particularly if they know ahead of time, and if you provide outstanding service. What I learned was -- patients like service contracts and renewed at a rate just over 80 percent. The service contract helped me separate product from professional services, and service contracts eventually became a major source of practice revenue.
To become truly autonomous practitioners, we must deal with the commercial element of what we do and we must view that element as part of our total professional repertoire.

As demonstrated above, it is possible to gradually convert to a fee for service model. The changes to customary procedures in your office are important and are not difficult to accomplish.

The rewards to your bottom line and your professional mental health will be a welcome relief once you are truly paid for your professional time, knowledge and talents, separate from the products you happen to sell.

*Tools to accomplish these changes can be obtained on the AAA New Practice Management disc, recently released or, through ESCO at 800-992-3726.

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For More Information about ESCO, Hearing Aid Financing and/or Hearing Aid Warranty Services CLICK HERE

Industry Innovations Summit Recordings Available

charles stone

Charles Stone, AuD

Founder and CEO of ESCO



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