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Pricing and Delivery Strategies in a Direct to Consumer World

Pricing and Delivery Strategies in a Direct to Consumer World
Kim Cavitt, AuD
August 24, 2020

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Learning Outcomes

After this course learners will be able to:

  • Describe the pros and cons of the different hearing aid pricing and delivery models.
  • Define the differences between bundled and unbundled pricing.
  • List what is typically inclusive to a current bundled hearing aid price.

Introduction

Dr. Kim Cavitt: After this course, participants will be able to describe the pros and cons of the different hearing aid delivery models, define the differences between bundled and unbundled pricing as it relates specifically to hearing aids, and list what constitutes as bundled hearing aid price package.  If you have questions about the specific codes that we are going to discuss in the pricing models, they are covered in The Essentials of Audiology Item and Procedure Coding: CPT, Modifiers, HCPCS, and Place of Service course.  If you have questions about how insurance works concerning dispensing hearing aids, please refer to the course, Managing Managed Care: Audiology and Hearing Aids in a Third-party World.

Pricing Strategies

In the course of my consulting work, I review many pricing strategies.  I often ask, “How did you come up with your pricing?”  The most typical answer is a question mark or some multiple of invoice (when it comes to hearing aids).  Most pricing strategies are not based on anything tangible or any sort of formula.  I sense a tendency for audiologists to be reluctant to charge for things.  They feel they have to compete in a world of “free.”  I do not believe you need to do that.  We have a lot of codes and procedures at our disposal, indicating that we are the most qualified people to provide those services, and we should feel comfortable charging for those procedures. 

Hearing aid or procedure pricing should reflect an understanding of your personal breakeven analysis, an understanding of your third-party payer fee schedules, and an understanding of the prevailing rates in your area.  We will talk about each individually. 

Breakeven Analysis

It is vital to figure out what your business/practice needs to bring in every hour per full-time equivalent revenue-generating provider to cover your overhead, no matter if you work in private practice, an otolaryngology practice, in a hospital, or non-profit.  Factor in your fixed expenses, such as salaries, rent, utilities, calibration, continuing education, benefits, office supplies, impression material, equipment, and/or annual fees.  For all of your overhead and expenses, what do you need to bring in every hour to cover it and make a profit?  Hearing aid procurement costs, or the cost that you pay for the hearing aids and earmolds or assistive listening devices that you re-sell, would not be part of this calculation because they are variable and are replaced with their own specific revenue.  This is about everything other than those costs of goods. 

To create your breakeven, add up all of your expenses, including salaries and overhead for the fixed period of time, preferably twelve calendar months. From this expense report, remove all items that you sell or dispense separately, as they are variable and cover their costs in their pricing.  This includes items like hearing aids, earmolds, assistive listening devices, and accessories.  Add the remaining expenses together. Now, divide this number by the number of months of data you reported.  This is how much your practice needs to bring in each month to break even.  Now, divide this number by the number of full-time equivalent, revenue-generating providers in your practice. This is how much each provider needs to bring in to cover your overhead. Finally, divide this number by the number of hours, on average, a provider is available to see patients. This final number is your breakeven rate. 

Your breakeven point is the minimum that you can ever accept.  That is what you need to bring in every hour per full-time person to cover your expenses at a minimum.  If that minimum is too high, you need to bring your expenses down.  If that minimum is low, that will allow you to maximize your profit to a better degree.  This figure helps you to have better control of your expenses.

Ultimately, at breakeven, you will want to add a profit to that.  The rule of thumb is you do not want to be outside of the gray zone, which for audiologists is somewhere between $200/hour and $250/hour for a breakeven plus profit.  Once you start going above that, it is challenging to achieve profitability, given your discounted reimbursements from third-party payers.  You want to use this breakeven plus profit data to create your usual and customary fees for every procedure and service you provide in your practice. 

Third-Party Fee Schedules

Take your breakeven and find how your procedures line up based on that breakeven-plus-profit amount and the time you are taking to perform them, and then compare those codes based upon the breakeven-plus-profit analysis to your third-party fee schedule amounts.  You never want to charge less than your highest payer would have paid you for an item or service.  You may need to raise some prices if you have done an excellent job controlling expenses and breakeven plus profit is too low.

The vast majority of third-party contracts I read indicate that you have to have a standard fee schedule.  If you are going to charge them X for something, you need to charge X for something to everyone you provide that item or service to in your practice.  If you charge one, you will need to charge all.  You must create a standard fee schedule or charge master (what a hospital calls it) for every service or procedure you provide and every item or service you deliver or dispense, and have a fixed price for all of those.  The only variable ones will be hearing aids, earmolds, and accessories, where you have a singular code that translates a lot of different things and technology levels. 

Prevailing Rates

The third thing you need to take into consideration is the prevailing rates.  To me, this is the least important aspect of pricing.  You have to charge what you need to cover your overhead ultimately.  You cannot charge less than you can afford to take to cover your expenses, and you do not want to charge less than you could have collected from a payer.   The free, low-cost, and low-end that goes on in the prevailing world when you financially cannot compete is a recipe for failure. 

Pricing Diagnostic/Treatment Services

When looking at pricing diagnostic and treatment services, you want to compare the breakeven-plus-profit amount to that of your highest third-party payer for each code.  Go back and consider how much time you schedule for each procedure.  Another rule of thumb is to be somewhere between 120% of the Medicare allowable rate and not much over 400%.  You do not want to be an outlier on price.  You want to consider the charges for service such as audiograms, canalith repositioning, or aural rehabilitation, as these are often patient-responsibility payments as well.  You want to make sure that you are not charging too much for the procedures that the patient ends up having to take on themselves.  That is where you do not want to charge more than the market can bear. 

Never charge less than your breakeven rate; that is your minimum for each period.  If your breakeven rate is $200, you need to be charging at least $50 for every 15 minutes.  Your breakeven is your minimum, but you do want to make sure how much profit you add to it is what your highest third-payer pays you and what the community can manage, especially things for which patients are ultimately financially responsible. 

Never charge what you expect to receive, except in the world of Medicaid.  It is an excellent time to point out that when we are talking about coding conventions or how to break things apart, Worker’s Compensation, Medicaid, and the Veterans Affairs (VA) work in their world.  As a result, you need to follow their strict guidelines about how they want things billed to those payers.  Otherwise, you never charge what you expect to receive.  You always charge your standard rate or fee schedule amounts.

What is your breakeven-plus-profit amount?  How much time do you schedule for each hearing aid procedure?  What is the prevailing third-party reimbursement rate? What can your market bear in terms of price?

Bundling

What is bundling?  Bundling, in the hearing aid world, is billing all items and services associated with the evaluation, fitting, and management of a hearing aid as well as its related goods and supplies under one code on the date of fitting.  Why do the majority of practices bundle their hearing aid prices?  Audiologists were granted dispensing rights in 1978.  We followed the model that existed in that time frame, which was bundling.  That is how dispensers priced.  Also, insurance coverage of hearing aids was virtually nonexistent at that time. We did not have to go through a medical model of pricing. 

More things can be billed to third-party payers, and in defense of third-party payers, they are not going to pay for a bundled period of something that may or may not happen.  They are there to pay for the patient to be evaluated, to be fit, and for the device itself.  Beyond that, the patient can only be held responsible if all the private-pay people are managed the same way.  You cannot treat an insurance patient differently than you treat your general population.  This is where itemization of your entire practice can make this hearing aid and insurance world a little easier to manage.

Why bundle?  That is a question that you can only ask for yourself.  Despite the changes in medical and retail sales, the influx of audiologists in the delivery paradigm, and the changes in technology, hearing aids are mostly being delivered today in the same manner that they were 50 years ago.  We have not evolved in our pricing or delivery model.  Hearing aids can be procured in many different ways.  We have had significant growth in insurance coverage of hearing aids or at least discounting of hearing aids.  Technology, again, makes the hearing aids we fit, how they are adjusted, and the patient’s control of them much different than they were before.  Everything has evolved from the device standpoint, but not in how we deliver the device from a retail standpoint.

I always ask people, “Do you buy commodities?”  While we like to say a hearing aid is a medical device, it can still be purchased online and from big-box retailers.  Many audiologists market them as a retail product.  When it came into the retail space, and we took it out of the medical space, we made it a commodity.  Do you buy things the same way you did in 1978?  I suspect the answer is no.  We need to look at how our patients want to buy things and what their purchasing habits are to think about how we might evolve that delivery and pricing strategy.  If we do not modify our thinking, we are forcing our patients into that same delivery and pricing model we have always had. 

The bundled pricing strategy in hearing healthcare is typically based on nothing tangible.  When looking at pricing, 80% of the time, it generally is a rudimentary calculation of the invoice times something.  It does not take into account overhead or account for expenses.  It is typically just a calculation above the invoice.

Bundled Pricing

Let’s talk about pricing.  Bundling is when you bundle all of the hearing aid products and service costs as well as your professional fees under one price and code.  The patient sees on a bill of sale or invoice one price when they buy a hearing aid.  They do not see everything else that goes into that price.  Because you do not charge separately for the hearing aid evaluation or consultation, you could receive no payment if a patient does not proceed with amplification. 

Pros

First, bundling is easy.  A lot of people who bundle also have tiered pricing.  Sometimes they may only have between three and six price points in their practice.  It is straightforward to explain and manage.  Another pro is that it is what everyone else does.  The vast majority of practices in this country are still bundling, and that number is even higher for hearing aid dispensers.  It can be good for cash flow.  You are getting paid upfront essentially for any service you are providing to the patient. 

Cons

The cons of bundling are that prices are often not based on something meaningful or business-centered.  It is merely a markup of the invoice.  It does not take into account overhead needs, breakeven needs, managed care allowable rates, or claims processing of the needs of your community.  It is not how insurance pays for items and services.  Insurance pays for what has happened.  You do a hearing aid evaluation.  They pay for a hearing aid evaluation.  You fit a hearing aid.  They pay for a hearing aid and the fitting.  They do not pay for services that might occur in the future.  The patient has no choice in how their hearing aids and associated care are priced or purchased. 

This was one of the things that struck me.  My patient, who listens, who cleans their hearing aid every day, opens the battery door, puts it in a dry aid kit, does not get it wet, does not get hairspray on it, follows the communication strategies I gave them, is not the one I see all the time.  They have paid for a service that they may never access in a bundle.  Whereas someone else who has been more enabled, who comes in all the time, may take up more of their time paid for in a bundle.  Did you make money off of them when seeing them so often?  Patients do not have a choice in how the devices are given to them. We are forcing them into long-term service arrangements that they might now want or need. 

Patients have no idea what they are paying for since prices are not transparent in a bundle.  They have no idea the service, evaluation, and the skills that go into fitting a hearing aid or evaluating the patient for a hearing aid and managing a hearing aid.  They do not see what all those prices mean or the reasons for them.  This will increase the patient cost for many of your patients.  Many people do not access the service for which they are paying, especially if they are a snowbird or an experienced user who comes in to see you once or twice a year to have their hearing aid checked and cleaned.  They paid more than they needed to pay for a hearing aid. 

A bundled price does not reflect your professional time.  It is not showing all the services you are providing.  You may be collecting less than you need to receive to cover your average patient.  You may not be making what you think you are making.  Coding has a role outside of reimbursement, and that is data collection. I encourage you to consider how many days you have where all you see are no charge follow-up visits.  That means you have collected $0 in revenue.  That is a significant and empowering figure.  In an average week, how many no-charge follow-up visits do you do?  What percentage of your patients does that account for?  If you see follow-ups, you cannot see new people.  It is important to base this analysis and decision on your breakeven-plus-profit, but also on the data of your practice. 

How many hearing aid evaluations do you do?  How many hearing aids do you fit?  How many repairs do you do?  How many accessories do you sell?  How many no-charge follow-up visits do you do?  How many overall patients do you see?  This is something that you need to have at your disposal when you start analyzing different pricing models. 

A bundled package typically includes the hearing aid consultation, evaluation, and selection appointment.  You will sit down during this visit and determine the recommendation for a device.  The earmold impression, if required, is done.  An electroacoustic analysis is completed when the hearing aid comes in from the manufacturer.  I am an advocate for doing electroacoustic analyses of new and repaired hearing aids.  My experience and Dr. Sjoblad’s experience has been that somewhere between 10% and 20% of these devices fail the electroacoustic analysis when they are new or repaired.  You would be fitting devices that are not functioning appropriately. 

The bundled package includes the hearing aid itself, the fitting and orientation appointment, the dispensing fee, which is your practice fee that covers the time required to order, set up, and fit a device that is not encompassed by another code.  The bundled package includes verification performed, a dome or custom earmold if required, batteries for the life of the hearing aid in some cases, accessories, manufacturer warranties, loss and damage coverage, one year to a lifetime of follow-up office visits, checks, in-house repairs, and cleanings.  It might include aural rehabilitation and counseling.  While all these things may be included in the bundled package, all the patient sees is the singular device cost and code.   

Unbundling

Unbundling is charging separately for each item or service as it occurs.  Why would you unbundle?  You are going to set your prices and collect the amount you need to cover your costs and make a profit.  It is going to be based on something tangible, namely the breakeven-plus-profit amount of these visits that you will be conducting.  The price then will better reflect your true financial needs.  It allows for increased revenues in the long term. 

Pros

Some of my colleagues that have unbundled tell me that they never had any short-term loss in revenue.  They immediately were continuing an upward growth.  However, in the long-term, the data does show that it has some increased potential for long-term increases in revenue.  It allows for increased reimbursement in most managed care situations.  The insurance benefit will typically be exhausted by the fitting. Then the patient can be billed privately for service, as long as your private-pay patients are being billed privately for those same services.  If your private-pay patients have to pay as they go for service or a service plan, your insurance patients can be handled in that same manner.  It will also make your price competitive.  People will be able to get into a product at markedly lower costs. 

It allows for patient choice on how their hearing aids are delivered.  The patient gets to determine if they want the service or not.  When bundled, we are making every one of our patients buy an extended warranty.  They do not have a choice.  In an unbundled manner, the patient gets the choice of whether they want that extended warranty or not.  It will force a higher standard of care.

 What I mean by that is that patients are not going to pay you for the opportunity to sell them something.  If you are going to be able to charge for a hearing aid evaluation/consultation, you will need to truly evaluate someone using a communication needs assessment, inventories, speech-in-noise testing, acceptable-noise-level (ANL) testing, and/or unaided real ear measurements.  You will need to evaluate your patient to warrant them paying you X number of dollars for that time when they could go to Costco and get the same thing for free.  There is evidence to show that people are willing to pay for quality.  You just have to provide it. 

It also allows for some potential marketing advantages.  You can market yourself as a different way of delivering a device.  It allows for the pricing of online or eBay purchases.  Let’s say a patient gets a hearing aid from one of the online vendors, but they want someone to teach them how to use it.  They want a clean and check.  They want it verified.  In an unbundled manner, you would have price points for all of that.  You could bring them into your practice and even charge the patient for the benefit of showing them that what they bought online is inappropriate.  They would be charged for those types of visits.  In that case, they pay for everything but the cost of the hearing aid itself, and you cannot care less about where the aid comes from.  You are going to make a profit for the time you spent with the patient, and that profit will be service driven, rather than device-driven. 

Cons

One con is the potential short-term reduction of revenues, although many people tell me that that has not been the case.  It does not work well with managed care plans where you take a large provider discount off of the device or plans with a defined warranty or coverage term.  If you have an insurance contract that says they reimburse 50% of billed charges, and you have unbundled that hearing aid, the hearing aid is likely going to get below your invoice. In this situation, you may have to rebundle the claim to make participation in this plan financially viable. In those percentage of dollars off situations, it is more challenging to be itemized. The same is true for a situation like TruHearing, where you have three visits.  You are still locked into that, even if you are in an itemized or unbundled delivery model. 

You are going to need to change your office policies and procedures.  You will have to be comfortable collecting money from the patient for the services you provide and with the decisions your patient makes.  If your patient decides to pay as they go for service, you need to be comfortable with that.  They could always buy a service package if that is something you want to offer in your practice.

You also have to be comfortable charging people.  You will need to change the way you market yourself.  It cannot be all device-driven.  It needs to be service-driven as well. Finally, you have to value YOU and the care and service you offer to your patients. If you do not see the value, the patient will also not see the value. 

Making the Leap to Itemization

The hardest part of making the leap to itemization is taking the time to analyze your financial needs and what are the financial risks versus the potential financial rewards.  It is overcoming the fear of the unknown.  The unknown should be reduced if you have a strong knowledge of your financial needs and your breakeven-plus-profit needs.  It is overcoming the fear of change, valuing yourself, your skills, and your time, knowing that your time is worth something and that you are offering something better to patients than an online vendor, big-box retailer or your hearing aid dispensing colleagues.  You are offering something patient-centered and evidence-based and are forced to practice audiology. 

Audiologists have adopted some habits where they end up practicing like educated hearing aid dispensers.  They do not practice their full scope of care, even as it relates to the hearing aid delivery model.  It is essential when you go to an itemization model where people are paying for every visit that you are making that visit valuable to them.  It will force you into that higher standard of care and practice audiology to the top of your license. 

The hardest part of charging for testing and hearing aid evaluations comes from patients being used to the world of “free.”  Are those evaluations free?  I would explain to the patient that they were paying for it all along, just wrapped into the device or other services.  Now, they are only paying for them as they occur.  Another hard part is practicing the doctrine mentality and prescribing solutions rather than selling a product. 

I went to Costco and got glasses.  When I went to Costco to get glasses, I was evaluated by an optometrist, who gave me two prescriptions.  One was for over-the-counter reading glasses, and one was for a prescriptive lens.  In both cases, he gave me a full evaluation report, and he made a prescription to me.  He told me that I do not have to get them at Costco.   He gave me my prescription and said I could take it anywhere. I would like to get what I need.

We can also work in that optometric-doctrine model where we give prescriptions, plans of care, and recommendations.  The patient may get the hearing aid from us, but maybe the patient will get the hearing aid at Costco, and then they come back to you for service, and they pay you for that service.  That is going to become much more of the world model as people can get devices accessibly in their home or at a big-box retailer, and then they will want to come to you for care and service.  How we handle this will help define our future.

Another big leap in itemization is letting patients make decisions and living with the consequences of those decisions.  They may not want to buy a service package if you offer one, or they might want a service package if you do not offer one.  You have to be comfortable with the paradigm you have set up.  Raising the bar on the standard of care provided means patients will not be willing to pay for the privilege of you selling them something when they can get that same service for free online or at big-box retailers or dispensers. 

Unbundled Pricing

Let’s talk through my version of an unbundled pricing model.  This will be for an appointment on the day of the hearing aid evaluation, or the communication needs assessment.  On the date of the hearing aid evaluation, you would bill the hearing aid evaluation (codes 92590/1 or V5010) to the third-party payer or the patient, even if they do not proceed with amplification.  You are going to truly evaluate the patient, make them a prescriptive recommendation, and a plan of care.  Most third-party payers who cover hearing aids will cover a hearing aid evaluation.  You could also bill for the earmold impression if the custom earmold was warranted.  That could also be billed this day.  You would evaluate the patient and charge them for this visit. 

Let’s say they decided to purchase a hearing aid from you.  On the date of fit, they would come back, and you would bill the following codes to the patient or the third-party payer if they had a hearing aid benefit:

  • V52--: The code for the hearing aid itself
  • V5---: Dispensing fee (based on monaural or binaural fit or CROS of Bi-CROS)
  • 92594/5: Electroacoustic analysis (if performed) with date service that is was performed
  • V5011: Fitting and orientation
  • V5020: Conformity evaluation (if you perform real-ear and/or functional gain testing)
  • V5264: Earmold (custom), or V5265 Dome (disposable earmold)
  • V5266: Batteries (per battery)
  • V5267: Accessories

This could all be done on the date of fit, and they are all individual line items on a claim or an invoice to a patient. 

Then you have your evaluation adjustment period.  During that evaluation adjustment period, which I also like to equate to a global period as surgery had, you would bill one of the hearing aid check codes, whichever is highest paid by the payer, on the date of each follow-up visit.  If private pay, you could bundle that into your dispensing fee.  You could bundle that into the service visits upfront.  You could have them pay or rebundle your evaluation adjustment period if you wanted of all the visits within 30, 60, or 90 days, as covered as part of the hearing aid purchase.  You can think about that in many different ways.  During this evaluation and adjustment period, if you wanted to itemize individually, you would use the hearing aid check code. 

At the end of the evaluation adjustment period, the patient has four options.  They can exchange their hearing aid.  They can return their hearing aid for credit.  They can keep their hearing aid and pay as they go for service, or they can keep the hearing aid and purchase a service package. 

Exchange

Let’s start with exchanges.  How can we minimize those?  It starts with thorough evaluations and lifestyle assessments, financial needs assessments, and inventories.  You are driving the recommendations rather than letting the patient drive the recommendations.  Let’s look at the reason for the exchange.  Was it patient-driven?  If so, you could charge the patient a second fitting and dispensing fee and verification fees to re-fit a second device.  If the exchange was because of something you did, you might absorb that cost, but that is something you would need to determine from the beginning in your itemization. 

Return-for-Credit

They could return the hearing aid for credit as allowed by state law.  Let’s use California as an example.  You cannot retain any monies when a hearing aid is returned; anything related to the hearing aid has to be refunded.  That is why we have to be careful about state laws.  As allowed by state law, you would refund the patient only the cost of the aid itself.  Most state dispensing laws say that you cannot retain monies related to the hearing aid, but services you can keep.  Because you provided those services, you should be able to retain those monies, unless it is prohibited by state law. 

Services

If the patient has accepted their hearing aid and would like to keep it, you can have them pay as they go for service.  This means that you have an established fee for every item or service you provide in your clinic.  You can base this upon the timeframe of your breakeven plus profit and the hearing aid follow-up visit. 

For example, you might charge $100 for the service, and whatever happens within that 30-minute time frame is covered under the $100.  You could approach it as any service you provide in that time period is covered under that $100, but if you do a tube change or new batteries, you will charge them for those other parts and pieces.  You can charge for each procedure you provide.  You could charge for a hearing aid check.  You could charge separately for reprogramming and separately for electroacoustic analysis.  You need to have a line-item and a protocol of how you are handling those follow-up visits.  All your fees would be based upon the breakeven plus profit analysis, and nothing would ever be free or no charge. 

Alternatively, you could create a service package.  The best way to describe a service package is providing, at no charge, the services necessary once the aids are fit or accepted.  You could break that service apart from the fitting and have it become optional for all of your patients.  It is essentially the same thing.  You can repackage that service into a plan based upon a number of visits if that is what you want.  You can build something like unlimited visits based on the number of typical visits for your average patient.  The patient will pay a fixed rate per aid based upon the breakeven analysis for managing their hearing aids and services for a given period of time.

Pricing Examples

Here are some examples.  The prices listed below are for illustrative purposes only and should not be construed as a recommendation of any given price.  The price must be established individually by each clinic and should be based upon your breakeven plus profit figures. 

This would be the most typical way hearing aids are billed in the United States right now. 

  • V5261 (Hearing aid, digital, behind-the-ear, binaural): $5000
  • V5264 (Earmold, not disposable, each):  $50 x 2

This comes out to $5,100.  Let’s say you took that same device and broke it down into its pieces.  In this case, you would have:

  • V5261: The code for the hearing aid itself:  $2400 (single unit, two aids)
  • V5160: Dispensing fee, binaural:  $200
  • 92595: Electroacoustic analysis, binaural: $33 (10 minutes)
  • V5011: Fitting and orientation:  $200 (1 hour)
  • V5020: Conformity evaluation:  $66 (20 minutes)
  • V5266: Batteries (per battery):  $1.50 x 8
  • V5264: Earmold (custom):  $40 x 2

These are billed on the date of fit as separate line items and separate dollar amounts.  We can assume in an example of a $200 per-hour fee (breakeven plus profit), the hearing aid evaluation of $200 and $33 x2 for ear mold impressions were paid on the date of the service.  One the date of the hearing aid evaluation, the patient, paid you $266.  Then each $100, 30-minute hearing aid check would be billed on each of those dates of service or bundled in the fitting on the previous visit. 

In your unbundled package, they paid $266 on the date of the hearing aid evaluation, $2,991 on the date of the fitting, and then $200 total for the two 30-minute follow-up visits within the evaluation and adjustment period.  In the unbundled package, by the date of acceptance, you had collected $3,457. 

In the unbundled pricing model example, the patient would pay $100 for every 30-minute hearing aid check and $50 for every 15-minute reprogramming.  You may have another fee for electroacoustic analysis.  You may have another fee for accessories, wax guards, or batteries.  It does not necessarily have to matter whether it is one or two aids; it is more about the time scheduled where you cannot see another patient. 

You could also create a service plan.  For example, you bill $875 for one aid over a three-year period of time, and they get three hearing aid checks, three reprogrammings, three in-house repairs, 75 batteries ($862 rounded up) or $1,575 for two aids with six hearing aid checks, three reprogrammings, six in-house repairs, and 150 batteries.

If we make a price comparison of this particular example of bundled versus unbundled in a private-pay world, you would have collected $5,100 for the hearing aids and earmolds in the bundled example.  In the unbundled scenario, you would have collected $3,457 by acceptance of the aid, but they would pay as they go for service.  We do not know how much they would end up paying for the devices.  It might be less or more than $5,100, depending upon how much they come in.  The moral of the story is at $3,457; you do not have to see them for unlimited follow-up visits.  If the patient bought one of the service packages, such as a binaural service package, you would have collected $5,032.  It would be very close to what you would be collecting in your current bundled model. 

How to Dispense Better than a Retailer

You want to dispense a better aid than a retailer at a better cost.  For example, a patient pays $1,620 at $810 each at an online healthcare-backed retailer.  The patient bought two hearing aids with no tax, no service, no evaluation, and no verification.  They got 30 batteries, a package of wax guards, no extra domes or earmolds, no follow-up visits, no loss-and-damage coverage, and no manufacturer’s warranty because there is no manufacturer for repairs due to wax or moisture. 

Let’s say you used an unbundled model in your practice with the prices that we used above.  You could collect $857 in professional fees.  That is for the evaluation, fitting, and the evaluation and adjustment period.  Then you could fit two hearing aids with prices of $400.  You would have no tax and no additional services.  The patient has no long-term service, but neither do they have it from the online device retailer.  However, you evaluated them, the fitting was verified; they had two follow-up appointments, custom earmolds, a three-year manufacturer’s warranty for any repair issue, loss-and-damage coverage, and eight batteries.  You got very close at price in an unbundled manner to what they were able to purchase online. 

What about insurance reimbursement if you are unbundled?  In the bundled world, you bill the insurance carrier $4,000 for binaural, digital, behind-the-ear hearing aids using V5261.  Insurance will pay you an allowable amount of $900 each or $1,800.  The patient cannot be balanced billed.  They cannot have additional out-of-pocket expenses.  Because you are bundled to your private-pay patients, you have to manage that aid for the same number of years as you would a private-pay patient.  Instead of $4,000, you got $1,800, and you are still managing that patient, and you still had to buy the hearing aids for the same price. 

Unbundled, you would have gotten $2,175 total.  You would bill the insurance carrier in an unbundled manner.  You would still receive $1,800 for the hearing aids. Yet, because you billed them separately, you will receive $50 for the hearing aid evaluation, $40 for earmold impressions, $80 for the fitting, $80 for the dispensing fee, $25 for electroacoustic analysis, $60 for real-ear measurement, and $40 for the earmolds.  The patient can pay as they go for service in this case or purchase a service plan.

You got more and in an unbundled manner, and you are not managing them for the next X number of years because all of your patients are itemized, and you are treating them like you would your private-pay patients.  If they want to pay as they go for service, they can, or they can buy a service plan if they would like.  In this scenario, not only did you get money upfront by the time you got through the acceptance period, you can make even more money on the service in this scenario.  Again, the patient will pay as they go for service or purchase a service plan. 

Elsewhere? Who Cares?

If the patient buys their devices from someone else, who cares?  They are coming to see you now.  We are going to see more and more people buying their first devices online.  Those devices are either going to be personal sound amplification products (PSAPs) or hearing aids.  They are going to buy them online or from big-box retailers.  While Costco is having a significant influx of sales, their repeat sales are not the same as their first-time sales.  The result is that these clients may go out in the community to seek service. 

Remember that big-box retailers are not staffed seven days a week, eight hours a day, like an audiology practice.  They are not even staffed eight hours a day, five days a week.  The patient does not have access because they do not offer all the things that we can offer.  The online market is even more limited than the big box.  Bring them into your practice.  They want to see you.  They just got the device somewhere else.  You can charge them separately for the electroacoustic analysis to find out how the aid runs.  You can charge for the fitting.  If you can reprogram it, reprogram it.  If not, you could charge them for verification the way it is set.  You can charge for one follow-up appointment.  That would give you $450 for one visit. 

Sell them a service package if you want.  Allow them to continue to pay as they go for service.  Remember, you just made $450, and you are not seeing them again at no charge.  This is something we need to be thinking about, as it could be what the new world order looks like.  It is full of exciting opportunities.  We have to be open to exploring the change in the way we price and deliver products. 

Conclusion

Now that you have learned some of the basics of bundling and unbundling, you can take that knowledge into your practice and decide what makes the most economical and professional sense for your business.  Continue to evaluate your needs and be willing to make changes as the healthcare landscape evolves.

Citation

Cavitt, K. (2020). Pricing and delivery strategies in a direct to consumer world. AudiologyOnline, Article 26717. Retrieved from http://www.audiologyonline.com

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kim cavitt

Kim Cavitt, AuD

Kim Cavitt, AuD was a clinical audiologist and preceptor at The Ohio State University and Northwestern University. Since 2001, Dr. Cavitt has operated her own Audiology consulting firm, Audiology Resources, Inc.  Audiology Resources, Inc. provides comprehensive operational, compliance and reimbursement consulting services to hearing healthcare providers. She is a Past President of the Academy of Doctors of Audiology (ADA), serves as the Chair of the State of Illinois Speech Pathology and Audiology Licensure Board, serves on the Audiology Quality Consortium and serves on committees through ADA and ASHA.  Dr. Cavitt is an Adjunct Lecturer at Northwestern University, a visiting lecturer at Western Michigan University and the Executive Director of the Think Audiology initiative. 



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