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Pricing Strategies for Diagnostic and Treatment Services

Pricing Strategies for Diagnostic and Treatment Services
Kim Cavitt, AuD
December 3, 2012
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This text-based course is a transcript of the live seminar, “Pricing Strategies for Diagnostic and Treatment Services,” presented by Kim Cavitt, Au.D.  Download supplemental course materials.

Today’s seminar is on pricing for diagnostic and hearing aid-related services.  This course is a good complement to the coding series that is also available in the Boot Camp Series of courses on AudiologyOnline.  If you are interested in pricing, I recommend you also view the coding series so you can understand and appreciate the codes that we are going to talk about later in this course. 

Pricing Strategies

First, let’s go through some of the basics.  Most pricing strategies I see in this industry are typically based on nothing.  As a course of my work, I do something called an operation needs assessment for practices that are interested.  As part of that assessment, I review pricing.  When I review this pricing, I always ask, “What is the pricing based on?”  Typically the answer is a question mark.  They do not know how they got to their pricing, nor do they know how it was created.  It just is something that seems to materialize in a practice.  As most people have no idea what their pricing is based on or it is based on nothing, they cannot be afraid to charge for their time and services.  One thing I notice, especially in audiology, is a reluctance to charge people.  Instead, you want to help them and you want to give them things.  This is why, in my opinion, our salaries are low compared to our education, and why some clinics sometimes financially struggle.  We give too much of our services away for nothing as we seem to be reluctant to charge.  The first tenets to me on pricing is all pricing should reflect an understanding of your personal practice breakeven analysis, understanding of your third-party payer fee schedules, and an understanding of the prevailing rates in the area.  We are going to talk about each of these specifically. 

Breakeven Analysis

A breakeven analysis is what your practice need to bring in or revenues per hour, per full-time equivalent provider to cover your expenses or your overhead (salary, utilities, calibration costs, fixed costs, benefits, rent or mortgage, annual fees, dues, and anything that is not specifically related to a product such as the hearing aid or the earmold or the assisted listening device itself as those costs are covered separately by the product itself).  What other costs do you have in your practice?  I always tell people, if you use QuickBooks, it is easy.  You look at your vendor price lists, take all the hearing aid stuff out, and what is left is your overhead.  You need to figure out your overhead for the year.  Then you break it down by month.  Then you break it down by an average number of available hours to be scheduled per full-time equivalent provider per month.  You divide by the full-time equivalent providers, and you have your breakeven amount.  That is the minimum you can charge in order to cover those expenses per full-time equivalent provider.  You also want to add a profit to this.  You will look to the prevailing rates in the area or at your fee schedules to help you get to the profit amount. 

The breakeven itself is the minimum you can charge to cover your overhead expenses.  You want to base your fees for items and services, especially where no fee schedule exists.  There are no fee amounts for Medicare for anything hearing aid related, so it is important that you use this breakeven to help you get to that amount.  People will always ask me, “What should I charge for a hearing aid evaluation?” and what I tell them they need to charge what is needed to bring in to break even and make a profit.  This is going to vary from place to place, from clinic to clinic, from practice to practice, so you need to create a breakeven for you. 

There are some wonderful materials available from the American Academy of Audiology on their website.  They have a guide to itemization that is excellent, and if you are a member of the Academy of Doctors of Audiology, you can find some excellent resources on itemization on our website as well.  Again, you want to base your fees for items and services where no fee schedule exists on this amount and then how much time it will take you to complete the procedure.  Most audiologists schedule an hour for a hearing aid evaluation and selection appointment.  How much do you need to bring in to cover an hour of time per full-time equivalent person?  That is the minimum you can charge.  You add a percentage markup to that, and then that gives you your hearing aid evaluation charge for your practice.

There was an article in Hearing Review last year (2011) that is only average data.  The average gross revenues per hour per professional is about $144.00 in the industry, but you do not want to use that dollar amount.  You want to find out what the breakeven amount is for you and your practice.  Once you have that amount, you want to compare and contrast that to the third-party fee schedule amounts that you are contracted with.  You want to always look at the Medicare fee schedule for your area.  You want to look at your major payers – BlueCross BlueShield, United Healthcare, Aetna, and Humana— and compare those fee schedules amounts, because you never want to charge less than you could have collected from your highest payer.  Depending on your situation, you may have breakeven amounts that are below what a payer would have paid you for a given procedure or period of time.  You always want to make sure that you never charged less than your highest payer would have paid for a given item or service or the code that is represented by that.  You must have a standard fee schedule for all patients, regardless of payer.  It is a typical aspect of a third-party contract that you do not discriminate on price based upon payer.  You have to charge me the same thing that you are charging everyone else.  This is why if you are going to give services away free to one, you need to give them away free for all.

Prevailing Rates

You need a standard fee schedule for every given code that represents every given item or service you provide.  Again, if you charge one, you must charge all the same, or if you give one free, you must give all free.  The least important aspect, but still an important aspect, is once you have gotten your breakeven amount, added a profit to it, compared it to your fee schedules, and raised certain things up to make sure you are charging as much as your highest payer would pay, you need to compare those rates to the prevailing rates in your area.  To me, this is the least important aspect as you must always charge what you need to cover your overhead, and you do not want to charge less than you would have collected.  I am not saying to completely ignore prevailing rates.  I am saying that your breakeven plus profit and your fee schedule amounts are more important.  Just because your competitor is charging less than you could have received or than you need does not make that a smart business decision.  You do want to shop your competitors to look at what their prevailing rates are.  However as so many people base their pricing on little to nothing, you still do not want to base your pricing on your competitor's price.


This is a good place to note that there are books that you can buy, which are not cheap.  They are created by a company called Ingenix, now called Optum, and they can be national.  They can actually be made as small as by zip code, and it will show you all the codes and what the prevailing range of rates are for a given item or service.  These books range in price from $200 to $400 each for a given year, and show you what the prevailing rates are for most procedures.  Not all the hearing aid procedures are always included in these books.  That is something you would need to ask when purchasing one.

Pricing Diagnostic/Treatment Services

Again let’s discuss pricing, diagnostic and treatment services.  When I am talking about treatment, I am talking about things such as vestibular rehab, aural rehab, canalith repositioning maneuver, and cerumen removal. You want to compare your breakeven rate plus profit to that of your highest third-party payer for each individual CPT or HCPC code.  You want to consider how much time you schedule each procedure for, as well as the Medicare rate in your area.  Most insurers base their reimbursement off of Medicare.  They will say they charge 90% of the Medicare rate.  They charge 110% or 150% of the Medicare rate.  As a result, when you are talking about diagnostic procedures and treatment services, not hearing aids, you want to take the Medicare reimbursement rate into consideration.  You want to at least be 120% of Medicare rate.  A good third-party payer would be in the 120% range.  You want to try to avoid being more than 300% of the Medicare rate because when you creep above 300, you may be deemed a billing outlier.  It is those outlier claims that sometimes can trigger an audit or utilization review. 

Again you want to stay in the 120% to 300% of Medicare range, because most insurances base their reimbursement off Medicare, and you need to take that into account.  This is not as important as your breakeven plus profit needs, because that is what your practice needs; but it is something you need to consider.  With the exception of Medicaid, or if you are billing Medicare limiting charge because you are a non-participating Medicare provider, you never charge what you expect to receive.   You always charge the standard fee schedule amount that you have established for your practice. 

Pricing Hearing Aid Services

Services are things such as the hearing aid evaluation, the fitting and orientation, hearing aid verification, hearing aid checks and follow-up, and electroacoustic analysis.  For those types of codes, how do you price those services?  My first question is, “What is your breakeven plus profit amount?”, because that is going to help guide you.  How much time do you schedule for each hearing aid procedure?  I think time is more important than the procedure itself, because time lets you know that you cannot be generating revenue from somewhere else in that period of time for that particular provider.  I think time is a better, more precise indicator of the service itself rather than something subjective, such as how complicated or technologically advanced the procedure is.  Instead, you use how much time you schedule for each hearing aid procedure, because you cannot generate another piece of revenue for that provider.  Again, what is the prevailing third-party reimbursement rate?  You want to take all three of those things into consideration.  For example, when we are talking about a hearing aid evaluation selection appointment, which are 92590 or 92591 if it’s bilateral, or its correlating code in HCPCs, which is V5010, how much time does that take you in your practice?  What is your breakeven plus profit amount?  Then, you compare that to your fee schedule for your payers.  What is the prevailing third-party reimbursement rate?  Take that all into account.  If your breakeven plus profit, for example, is $150, but your prevailing reimbursement rate is $80, you are going to charge $150.  Here’s the flipside.  If your breakeven plus profit amount is $90, but the insurance would have paid you $100, you are going to charge 100.  That is how you determine what you charge for your particular situation. 

Bundling

Bundling is what most practices do use for billing hearing aids.  About 70% of the practices in the country are a fully bundled practice.  In bundling, you bundle or combine all of your hearing aid product and service costs, as well as your professional fees under one singular price and code.  For example, a code for a bilateral or binaural, digital, behind-the-ear hearing aids is B5261.  That is the only code you bill the patient, the only code you put in your system for billing those aids.  That is the only code you would bill to an insurance company.  That is the code you would bill for that procedure.  An all-inclusive hearing evaluation to the end of a three-year trial period should be the only fee the patient has.  That is bundling.  Typically, bundlers do not charge separately for the hearing aid evaluation or consultation and, as a result, receive no payment if the patient does not proceed with amplification following that appointment. 

          Pros.  Some of the pros of bundling are it is easy and you do not have to worry about pricing things out individually.  You do not have to worry about talking to patients about their options, and it is what everyone else does.  Some people may think that a pro of bundling is better patient care.  I do not necessarily agree with that.  Just because you are a bundler does not mean that you are providing great patient care.  Also if you are an itemizer and not bundling, it does not mean you are providing great patient care.  Bundling does not mean that you are thinking more about the patient.  If a national association that represents the hearing impaired thinks that you should be unbundled or itemized and that pricing should be more transparent to provide better patient care, you cannot always use that as your rationale. That is why it is not included in pros. 

          Cons.  Some cons of bundling are that this is not how insurance pays.  We get aggravated when insurance pays us $1,000 and we billed them $2,000 for a hearing aid.  Insurance does not pay for things that have not happened.  While you have bundled three years of service, they will not pay you for three years of service, because they do not pay for things that have not occurred.  They are paying for the product and for the procurement of the product.  Bundling as third-party reimbursement and insurance involvement in the hearing aid world has gotten greater.  Bundling does not always match in the third-party world.  Prices are not transparent to the patient.  They have no idea what they are paying for.  In other consumer goods, patients get the option whether or not they want the extended warranty.  We do not give them the option.  They have no idea what they are paying for, and they do not have the option to opt out of it.  It increases patient cost for many.  What I would say to this is, you may have an existing user who is on their third set of hearing aids, and have never had a problem.  They have been great users.  They are your best patient.  They listen.  They open their battery doors at night.  They keep them in a Dri-Aid Kit.  They clean them every day, and those people never come in to see you.  They have paid more for their hearing aid than your problem patient who does not clean their hearing aids and comes in every week.  Again, if a patient does not have problems, they may not have needed all that service, especially in subsequent fittings.  As a result, you have not given them an option to opt out of it, and it does not reflect your professional time.  You do not get money.  A patient does not get a hearing aid, you do not charge for a hearing aid evaluation, and you do not get paid for that time period.  You have now lost money for that period of time. 

If a patient returns a hearing aid, you refund them.  Many people refund them everything.  You did not get reimbursed for your time or your shipping or supplies that were used.  You do not get reimbursed for that because a bundled cost is not reflecting the professional time involved in the selecting, procuring, and fitting of a hearing aid.  Bundling the price of a single hearing aid and billing it under one code typically includes the hearing aid evaluation, the hearing aids themselves, the hearing aid fitting orientation, electroacoustic evaluation  (the running of a hearing aid in a test box) of hearing aids, verification of perform, dispensing fee, one year to lifetime follow-up service and cleaning of the hearing aids, batteries (sometimes unlimited for the life of the hearing aid), domes or accessories if needed, and counseling, if provided. 

Unbundling

Typically this is how 70% of the practices in the country bill.  However there is an alternative to that, and it is called unbundling, or as AAA likes to term it, itemization.  It is charging separately for each item or service as it occurs.  It is breaking the bundle cost into each individual piece or aspect of care or service. 

          Pros.  You are collecting the amount you need to cover your costs and make a profit.  It is based on your breakeven plus profit analysis.  It is tangible.  You know for this patient that you are covering this period of time with this cost and this fee.  It is a potential for increased revenues long term.  There is very little research on long-term unbundling, but let’s talk about the research that does exist from University of North Carolina at Chapel Hill.  They have shown a steady increase, about 173% from the time they were a bundled practice to being an unbundled practice six years later.  That is a steady increase.  Subjectively, if you talk to bundlers, they will tell you they make more money.  Again, the best unbundlers or the best itemized practices are the ones that believe in this pricing strategy.  The ones that are unsuccessful never really believed and were not able to market it to their patients in a meaningful way.  I know many successful practices all over the country, even in places like Florida and Arizona that have lots of competition from hearing aid dispensers that are very successful unbundlers.  There is a potential for increased revenues long term.  It allows for increased reimbursement in most managed care situations.  I will show an example later how now you are going to bill the insurance company for the hearing aid, the cost of evaluating for it, procuring it and fitting it, but then the patient will pay you privately for service that was not included in the hearing aid cost.  They exhausted their hearing aid benefit, and now the patient can be billed for service. 

You cannot do that in an unbundled world because your third-party contracts are not going to let you treat your insurance cases differently than you treat your private-pay patients.  As a result, it will give you some flexibility in a third-party reimbursement world.  It will make you price-competitive.  If a patient is price shopping apples to apples from a product standpoint as many people call in and they want a product price, you are going to be able to offer them a product price or upfront price, especially for existing users who do not want all this service.  You are going to be able to offer them a price that most of your competition will not be able to touch. 

As a result, it is going to allow you some potential marketing advantages.  You are going to be able to market a different way of approaching the hearing aid dispensing practice.  You are going to be able to show them transparency.  You are going to be able to tell them what they are getting for what cost, and let them make decisions whether or not to opt out based upon their own ideas and their own decisions, rather than you making decisions for patients.  It allows for pricing for Internet or eBay purchases, or someone who procures a hearing aid by an alternative means, such as through Costco or through hi HealthInnovations.  They are paying that third-party vendor for the hearing aid, but they are paying you for everything else.  You are still able to bring them into your practice.  Rest assured, if you treat these patients well and you charge them for your time, they will most likely get their hearing aid next time from you, especially when the hearing aid costs are transparent and they know what they are paying for.  You will start to care less about where the aid came from.  You did not tie all your reimbursement to you dispensing that hearing aid.  Now you have different avenues of reimbursement based upon fittings, verification, reprogrammings, or service.  Those are alternate revenue streams that are not just based upon you procuring the hearing aid for the patient. 

          Cons.  There are some cons to unbundling.  There is a potential for short-term reduction revenues.  Many patients up front may not purchase a service plan, and that may make your revenues, at the outset, lower than they have been in the past.  Hopefully, you will be able to make up for that with greater volume.  I encourage everybody before you do this to go run a day or week or month in your schedule and see how many no-charge appointments you did, how many days you made zero revenue, and then weigh that against some of the short-term reduction revenues that you are going to potentially experience when you initiate itemization or unbundling. 

Unbundling does not work well with managed care plans where you have to take a large provider discount, in plans with defined warranty coverage terms, or in a plan where it is invoice plus.  Some of the United Healthcare plans may still exist out there where you are taking a 40% to 50% discount off of billed charges.  Hopefully, most of those have changed as the United Healthcare policies have changed over, but some still exist.  Unbundling may not work as well in those type environments.  You are going to have to weigh the cost versus benefits of those situations for your situation.  You are going to have to change your office policies and procedures.  You are not going to be able to say, “No charge today.”  You will have to have a good tracking system of people who have a service plan versus people who do not, and how your service plans are working.  You will have to change your office policies, and you will have to be comfortable asking patients for money. 

This is something that we have not done enough work on in graduate school.  We are here to help the hearing impaired, but we will not be able to help the hearing impaired no matter what our work scenario, if we do not bring in revenues.  As there is price crunching from Medicare and Medicaid, it is important that we maximize our revenues across the board, and we have to let go of giving everything away and start charging patients for things that they are responsible for.  That is so important in itemization or unbundling in that you have to be comfortable asking people for money and not feeling bad about the fact that they did not select a service plan.  They could always buy a service plan later.  That is the beauty of this.  The patient is making the choice.  It is your responsibility to properly educate them so they are making an educated decision.  Again, they are paying less up front, and as a result of paying less up front, they may have more expenses down the road.  You are going to have to change your marketing program. 

Unbundled Pricing Model

Let’s go step by step through an unbundled or itemized pricing model. 

          Hearing aid evaluation.  First, there is hearing aid evaluation, selection, or consultation appointment.  On the date of the hearing aid evaluation, you bill the hearing aid evaluation 92590, 92591, or V5010, whichever pays more for your average third-party hearing aid contract through the third-party payer or patient, even if they do not proceed with amplification.  However, and I cannot stress this enough, for private-pay patients to be willing to pay this, you are going to need to do more than just sell them a product, or go over makes and models.  You are going to need to evaluate their hearing aid needs via the use of things such as inventories, QuickSIN, Real-Ear Unaided Response, etc.   You are going to need to do more. 

Now in the doing more, research will show it is going to reap benefits for the patient and for you.  You are going to see them less.  You are going to have better acceptance.  The most successful unbundlers are really evaluating someone’s hearing and hearing aid needs.  They are not just sitting down, talking about makes and models.  They are going above and beyond, and as a result, they are differentiating themselves in the marketplace by the quality of care they provide, by the success people have because they have done the homework, and by returns and exchanges being less.  Again, there are benefits to this.  Patients are paying for a better quality of care, and most third-party payers who cover hearing aids covered hearing aid evaluation, selection charges and fees. 

          Hearing aid fitting.  On the date of the hearing aid fitting, you would bill the following codes to the patient or third-party payer, and you can require whatever you like in this fitting period.

  • V52--: The code for the hearing aid itself
  • V5---: Dispensing fee
  • 92594/5:Electroacoustic analysis (if performed)
  • V5011: Fitting and orientation
  • V5020: Conformity evaluation (if you perform real-ear and/or functional gain testing)
  • V5275: Earmold impression (if applicable)
  • V5264: Earmold (custom) or V5265 Dome (disposable earmold)
  • V5266: Batteries (per battery) for the trial period
  • 92592/3: Hearing aid follow-up appointments during trial period
  • V5267: Accessories
  • 92633: Aural Rehabilitation/Counseling

I like to equate this fitting period to a global period for surgeries.  For this, these are the fees they pay at the fitting, and it is going to cover the patient through the trial period or the global period of that hearing aid.  Everything they pay at the fitting will cover them for that global period.  On the fitting, they would pay you the code for the hearing aid itself, a dispensing fee.  As you will learn in the coding seminar that is available through the AudiologyOnline, a dispensing fee is really the time and its associated costs surrounding the procurement and setting up of a hearing aid, the time surrounding the ordering of the hearing aid, the time surrounding of the checking in the first fit of the hearing aid, and the listening check of the device, not the electroacoustic –that is paid for separately.  This is the time and cost associated with procuring the aid.  I do want to stress that dispensing fees mean something different in the Medicaid world.  Do not equate any Medicare rule or regulation to what we are talking about now.  We are not talking about Medicaid cases.  In the world of Medicaid, you bill according to the guidance by your state.  I am talking about private pay and other third-party insurers, not Medicaid.

On the date of fit, the patient paid for the aid, the dispensing fee, the electroacoustic analysis cost (if it was performed), the fitting and orientation.  Fitting and orientation is when you sit down and fit the aid to the patient, initially set it up, maybe some reprogramming or adjustment, and then going over the use and care of the device.  That is the fitting and orientation.  This visit also may include conformity evaluation or the verification and the earmold impression (if applicable).  The earmold impression could have also been billed to the patient on the day that the impression was taken, if it was done on the same day as the hearing aid evaluation.  That is another option for earmold impression.  The earmold, whether it is custom or dome, would be billed on the date of fitting.  This visit also includes the batteries (per battery for the trial period only), and the hearing aid follow-up appointments for the trial period, whether that is one, two, three, or four; although more than four may be too many.  These are the appointments during the trial period that is part of your protocol.  You would charge for any accessories that are mandatory for your practice, such as requiring people to have a Dry & Store and Oto-Ease.  That is something you would have them pay for on the date of fitting. 

You can require certain things be included in your itemized cost.  It does not mean that the patient gets to select away everything.  You are not going to let them select away verification.  You are not going to let them select away fitting, orientation or dispensing fee.  These can be mandatory costs, but you are showing them what they are paying for.  Then there is any kind of aural rehab counseling.  It could be Listening and Communication Enhancement (LACE) if that is what you choose, if it is provided and it is something you want to include in that trial period. 

          End of trial period.  At the end of the trial period, the patient really has four choices.  They can exchange the hearing aid.  They can return the hearing aid for credit.  They can keep or accept the hearing aid and pay as they go for service, or they can keep the hearing aid and purchase a service package.

Let’s talk about the exchange.  What was the reason for the exchange?  Was it the patient did not follow your guidance, or was it that you misfit or misselected the device?  If it was a patient decision, you may charge a patient with a second fitting fee or a second dispensing fee.  You could rationally do that.  If it was something on your end, that is something you could waive for them.  That is one that you would have to decide on a situational basis.  You should inform people up front when they are making these decisions that, for example if they choose a CIC, it is not appropriate and you have to exchange the device, there may be a second hearing aid fitting fee involved.  Again, this is something in the way you set up your policies and procedures that you would need to take into account. 

Return for credits means they are returning the hearing aid and not getting anything.  As allowed by state law, you would refund the patient only the cost of the hearing aid itself or any unused batteries.  You would retain all the rest of the fees, because you have provided those services.  You would not give patients 100% of their money back.  Again, as we talk about this unbundling model, this is an option.  You can modify or move or change around this.  This is just an option that you could work from to best fit your practice and its needs, but you could very legitimately, as allowed by your state dispensing law, keep everything back but the hearing aid itself. 

Let’s talk about “pay as you go” for service.  You would have a fee established for every item or service and charge a patient or the third-party payer (if their benefits have not been exhausted) for hearing aids by that payer every time an item or service is performed.  You would charge for every visit, regardless of whether or not the hearing aid is in warranty or not.  They decided to “pay as you go” as their service, so anytime they see you or take your time, even if they drop off a hearing aid, they will still be taking up your time for you to review and process the aid.  That may not be billed as a high a price as seeing you for a hearing aid repair appointment.  If they “pay as they go” for service, they need to understand that they are going to be responsible for a fee and what those fees are every time.  The fees are going to be based upon the breakeven analysis and/or cost of goods.  If you want to have tubing costs or wax loop costs or those types of costs, you may need to figure into the equation.  Nothing is ever free or at no charge.  You do not make exceptions.  If you make exceptions, this will never be successful.  You will lose money.  You cannot make exceptions.  The only time you can make an exception is if you have a targeted marketing event that you are targeting these “pay-as-they-go” people for a free 15-minute hearing aid check.  That would be a targeted marketing event that they would need to bring in their postcard to be able to get.  That would just be an example.  Otherwise, every time they take your time, there is a charge. 

The other option for a patient would be to offer them a service package.  This is really, in a nutshell, the service you are currently providing at no charge once the aids or fits are accepted.  It is the difference between everything the patient has paid in the itemized model up through fitting and your current bundle price if you are still bundled.  That difference could be as simple as your service plan and pricing option, or you could actually do the legwork, which is what I recommend, to calculate what your average patient needs for given time periods.  It may mean that you are able to charge more and take in more money than you were before because you were potentially undercharging.  Think of it as the difference between your current bundled fees and the unbundled package cost.  A patient pays you a fixed rate per aid based upon the breakeven analysis for managing their hearing aid accessories and services for a given period of time.  You can include whatever you like in a service plan.  You can make it as cool and as lucrative as possible.  You can add LACE.  You could have aural rehab group visits.  You could add unlimited batteries.  You could add telephone amplifiers.  You could add whatever you want in these service plans to make them attractive.  That is up to you, and then the patient gets to choose whether or not they want to pay as they go or buy a service package. 

Example of Pricing Models

Now we are going to give some examples for illustrative purposes only, and I cannot say this enough.  The prices listed are for illustrative purposes and should not be construed as a recommendation of any given price.  Price needs to be established individually by each clinic.  These prices are truly based on nothing.  They are based upon easy math for me.  As a result, many of them are lower than you could receive from third-party payers.  You want to base your prices on the things we talked about earlier in this presentation.    

          Bundle Pricing.  A patient got hearing aids, digital, behind-the-ear hearing aids for $5,000.00, and they got custom earmolds, $50.00 apiece, for a total of $5,100.00.  They are going to get three years of service, unlimited visits, three years of batteries, everything is included.  They are not going to pay you a dime for the next three years. 

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

          Unbundled Pricing.  Let’s take that same price and unbundle it.  We are going to assume a $200 per hour breakeven plus profit amount just for the sake of argument in this exercise.  The patient paid you $200.00 on the date of the hearing aid evaluation and selection.  That money you already have in your pocket and in your business.  On the date of fitting, the patient is going to pay you V5261.  That is representing the single-unit cost without discounts.  You have made some profit because for the hearing aids, you, in most cases, do not pay a single-unit price.  You pay anywhere from 20%to 50% less than a single-unit price, so you have already seen some profit as that is the single unit price.  Single-unit price is typically what people will see from things such as HearingPlanet, from online vendors, from eBay purchases.  You will typically see a single-unit price; that is typical.  You charge single-unit price.  There are 2 single-unit price hearing aids, a $200 dispensing fee (an hour of total time to procure, set up and fit the hearing aid, get everything ready to fit the hearing aid) 10 minutes at $33 for an electroacoustic analysis of both aids, a 1-hour hearing aid fitting appointment at $200, and verification that maybe done at the fitting or not at $66 for 20 minutes of verification.  Then there are the hearing aid check follow-up appointments one at 2 weeks and one at 4 weeks at 30-minute appointments at $100 apiece and a Dry & Store.  I am a big fan of Dri-Aid Kits.  I am going to bill $150 for it.  For LACE, I am going to bill $125.  You want to require everyone to leave your office with LACE.  You give them eight batteries at $1.50 apiece.  You add two earmold impressions, which took you ten minutes each, $33 times two, and two custom earmolds at $40 apiece. 

  • V5261 (The code for the hearing aid itself ):  $2400 (two aids)
  • V5160 (Dispensing fee, binaural ):  $200 (1 hour of total time)
  • 92595 (Electroacoustic analysis, binaural ):  $33 (10 minutes)
  • V5011 (Fitting and orientation):  $200 (1 hour)
  • V5020 (Conformity evaluation):  $66 (20 minutes)
  • 92593 (Hearing aid check/follow-up appointment):  $100 x 2
  • V5267 (Dry and Store):  $150
  • 92633 (Lace): $125
  • V5266 (Batteries - per battery):  $1.50 x 8
  • V5275 (Earmold impression):  $33 x 2
  • V5264 (Earmold - custom):  $40 x 2

People are going to say, “Why is the earmold only $40?” In the rest of the world, if you add the $33 to the $40, you have a $73 earmold.  That is more consistent with a going rate.  I have just separated the impression from the mold itself. 

After the fitting at acceptance, the patient is going to be told, “If you decide to pay as you go for service, it is going to be $100 for every 30-minute hearing aid check and $50 for every 15-minute reprogramming.  If you drop your hearing aid off for service, it is a $50 charge.”  It does not matter if it is one or two aids.  It is all about the time scheduled, because you cannot see anybody else make any more revenue.  If they have two hearing aids, they are paying $100.  If they have one hearing aid, they are paying $100.  They are paying for your time.  This would be an example of pay as you go.  It can be just as simple as $100 for every 30-minute hearing aid check, $50 for every reprogramming, $50 any drop-off, and this is if the hearing aid is in warranty with manufacturer or not.  If they are out of manufacturer’s warranty, the patient would have to pay that manufacturer warranty cost on top of this. 

An example of a three-year service plan is $875 for one hearing aid with three hearing aids checks for 1 hearing aid, 3 hearing aid checks, 3 reprogrammings, 3 in-house repairs, 75 batteries and two 30-minute counseling sessions.  For for 2 aids, it might not be double.  You could double it if you want.  You could make some adjustments based upon the data that you have for your practice with maybe 5 hearing aid checks, 3 reprogrammings, 6 in-house repairs, 150 batteries and two 30-minutes counseling sessions at $1,300. 

Price comparison in bundled versus unbundled, from a private-pay patient.  In the bundled model, the patient paid $5,100.  In an unbundled pay as they go, all you are guaranteed is $3,502.  However you are also guaranteed that that dollar amount will go up if they need to see you.  If they do not need to see you, you have made less money, but you have seen them less.  You have the opportunity to see other people instead and make money from them.  Also the patient has not paid for things they may or may not need.  We say we care about patients.  We should care about their pocketbook as well and that sometimes we are charging them for services they do not need.  Snowbirds are the perfect example.  You are charging them for service and they do not see you.  They are not even there half the year.  They could not get service if they wanted it, because they are in Arizona or Florida or somewhere even more remote than that, such as Costa Rica, so instead they are paying you.  They are paying as they go for service with you.  They are paying as they go for service when they are at their other home.  If they bought the binaural service package, you would have made $4,802, and you will have known that you have covered your price for that patient. 

Let’s give an example of people buying their hearing aids from an online retailer.  You want to dispense a better hearing aid than an online retailer at a better cost.  You can do that right now.  You would just have to take service out of the equation.  That is the first example.  The patient pays $849 each at an online retailer or a brick-and-mortar retailer for a PSAP or hearing aid, whatever they want to term it, with tax.  Typically there is going to be tax if they buy it from a retailer.  Where we may not have tax, they will have tax in that scenario.  There is no service, no evaluation and selection.  The patient is just getting what they pick online or at the retailer; no verification of that fit; no batteries, or if they get batteries, a very small initial supply; and no follow-up.  They are not being followed up with a professional, no loss and damage coverage and little to no manufacturer warranty.  If they have a manufacturer warranty, there is certainly not going to be a loaner program available if they get sent off.  In Chicago, where I live, with tax, that patient would pay $1,881 for the devices with maybe a limited supply of batteries, a very limited warranty, no loss and damage, no evaluation fitting or follow-up.  You could do the same thing, but you could do it better for less money. 

Let’s assume the patient got two hearing aids.  Again, we are going to try to compare apples to apples.  If the patient is paying $849 for a hearing aid, this is not high-end technology.  This is probably low to low/mid technology.  With low, low/mid in the comparison, for two real hearing aids from a major hearing aid manufacturer, they paid $500 apiece, single-unit price for those hearing aids.  There was $857 in professional fees (using the dollar amount examples from our previous unbundled model).  No tax because they got it from you.  We would not have tax here.  No service.  They still do not have service.  They would be paying as they go for service.  They would have paid for, in part of that $857 in professional fees, a real hearing aid evaluation and selection appointment.  You would know that this aid was appropriate for them.  They had to pay for verification.  They would have paid to have it fit.  They would have paid for follow-up appointments, a three-year manufacturer warranty, loss and damage coverage and initial supply of batteries.  In the end, they would pay less by $100 if there was no tax.  With tax, the patient actually pays you $24 more to get the hearing aid from the retailer. 

The moral of the story is you can compete on price with these online retailers or with these over-the-counter retailers.  You just have to change the way you do things.  You can absolutely compete on price and give them a better product.  You just have to change things, because service is not included in the aid or is not required by you up front.  People do not like when I say this.  I actually gave a talk at AAA, and in the evaluations, people took issue to this.  However, the reality is how people buy things in this country is changing.  This is how you have lost the independent bookstore, the independent music store, and independent shoe retailers.  You can get it through Zappos, Amazon, iTunes or Netflix.  There is no Blockbuster anymore because you can get it from Netflix.  It is not just about money.  It is about convenience, and sometimes people want to get a hearing aid more conveniently than making an appointment far in advance, going to see someone, waiting in the lobby, parking, etc.  Time is money, and we have to realize that a hearing aid is no different than anything else.  It is a consumer product.  It is a medical device, but because it is not surgically implanted, it is more of a consumer product than it is a medical device. 

Buying Hearing Aids Elsewhere

People are going to get these products from various different ways, and we need to change with that.  If we do not, we are going to be in trouble.  When I say the patient buys their hearing aid elsewhere, they buy their hearing aid elsewhere.  It is what happens next that matters.  If they come to you, they want to be your patient.  What can we charge them for legitimately to help them with this equation?  Maybe you will determine that that hearing aid is inappropriate, or that device is inappropriate.  You have charged them for the privilege.  You have given them documentation of that fact.  Maybe now they want hearing aids and they are going to come to you and get them.  If we focus on selling the product rather than selling ourselves, our professionalism, our time and our services, we are going to start losing out on patients in the new world order.  Who cares where they get their hearing aid?  I may get my hearing aid from Costco because it is convenient.  I am there shopping, and it is cheap.  However Costco is not staffed all the time, and I want to pay someone for their professional services and their expertise.  I would like to be able to do that. 

How are we going to handle those people?  You could still charge them $465.00 if we used the figures from before, for electroacoustic analysis, refitting and orientating them to the device, programming, verifying, hearing aid follow-ups.  You could sell them a service package.  You could absolutely sell them the same service package you would sell your own patients or allow them to just pay as they go for service.  You have brought them into your practice and your fold, and you have given them the opportunity to buy the services they need. 

Hearing Aids and Third-Party Payers

Let’s talk about hearing aids and the third-party payer.  Bundled, some people may bill just the $5,000 for the hearing aid and $100 for earmolds.  They may take their bundle and unbundle it with $4,500 for hearing aids, $100 for earmolds, $100 for a hearing aid evaluation, or $100 for a hearing aid fitting, $200 for the dispensing fee, and $100 for verification.  You are going to get $1,700 for the hearing aids, $40 for the earmolds if you are lucky.  These are if things go well.  You will get $70 for the hearing aid evaluation, $70 for the hearing aid fitting, $70 for the dispensing fee and $50 for verification.  You are only going to receive an allowable amount from the payer.  These estimate out to be about $2,000 for that $5,100 in hearing aids, and you cannot balance bill.  You are going to manage that patient for $2,000 for the next three years because that is what all the rest of your patients in your practice are getting, and you cannot discriminate against insurance case.  You took a $3,100 hit, but you still have to provide the same level of care.  You are going to need to manage these aids at this price for the terms of the warranty just like you do for all your private-pay patients.

Let’s say we unbundled it.  You will bill $2,400 for the aids(you get $1,700), $66 for the earmold impressions (you get $30), $80 for the molds (you get $40), $200 for the hearing aid evaluation (you get $70), $200 for the hearing aid fitting (you get $70), $200 for the dispensing (you get $70), $66 for verification (you get $50), and $200 for the hearing aid checks or follow-ups (you get $50).  You are going to receive $2,080 and you cannot balance bill, but the patient can be billed privately for that service, or they can purchase a service plan privately.  You have $2,080 for fitting the hearing aid.  At the trial period, that is $2,080 that ended.  Anything more that the patient wants, they would need to pay for privately.  That gives you a very viable option in the third-party insurance cases.  This is a very complicated topic. 

I really encourage you when you get information from a national association, of which you are a member, you read them.  Go to their websites.  Read the information they have available on pricing, unbundling, itemization, and bundling.  Read that information.  Thank you for viewing this course today.

Signia Xperience - July 2024

kim cavitt

Kim Cavitt, AuD

Owner of Audiology Resources

Kim Cavitt, AuD was a clinical audiologist and preceptor at The Ohio State University and Northwestern University for the first ten years of her career.  Since 2001, Dr. Cavitt has operated her own Audiology consulting firm, Audiology Resources, Inc.  Audiology Resources, Inc. provides comprehensive operational and reimbursement consulting services to hearing healthcare clinics, providers, organizations, buying groups, and manufacturers who want to be better equipped to compete in the managed care and healthcare arenas.  She currently serves on the Board of the Academy of Doctors of Audiology and the State of Illinois Speech Pathology and Audiology Licensure Board.  She also serves on committees through AAA and ASHA and is an Adjunct Lecturer at Northwestern University.



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