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Interview with Paul Brown M.D., Founder of HEARx

Paul Brown, MD

September 27, 2004
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Topic: HearUSA and Related Topics

Beck: Hi Dr. Brown. It's a pleasure to speak with you, and I want to thank you for your time this morning.

Brown: Hello Dr. Beck. Thank you for the invitation. I'm glad to be here.

Beck: Before we talk about the impressive growth of HEARx and HearUSA, I'd like to learn a little about your professional education and history. Would you please tell me where you went to medical school, and when did you graduate?

Brown: I attended college at Harvard, then attended Tufts medical school and graduated with my MD in 1964.

Beck: Did you know you always want to be a physician?

Brown: Well, no. Actually I was a reluctant attendee of medical school. My father was a physician and he was on the faculty of both Harvard and Tufts medical schools and he wanted me to become a doctor. If I recall, the deal was that if I went to medical school, he was willing to pay for that, but if I went to business school, that was going to be my fee to pay. So I went to medical school!

Beck: Sounds like you made the right choice! What happened after you left Boston?

Brown: After my internship in Boston, I went to New York to do a residency in pathology. I was at Columbia-Presbyterian for four years, and then in the military at the Portsmouth Naval Hospital.

Beck: And then you started a company in the lab business - is that correct?

Brown: Yes, while I was a resident at Columbia, I "moonlighted" and worked at Park East Hospital. I was absolutely amazed at how bad the quality of the lab work was for the patients -- it was just terrible. I decided to try and change the field. As a young resident, and as a young man with the "business bug," I spoke to my professors in Boston and New York and we figured out what needed to be done. We opened in April, 1969 as Metropolitan Pathology Services, and later became MetPath, and then Corning Diagnostics and finally Quest Diagnostics...a lab with annual revenues in excess of $4.5 billion. We did a lot of things right and we changed the landscape of pathology lab services.

Beck: I know you've been written up in Business Week, and Fortune Magazine and Forbes -- how did you become involved with hearing aids?

Brown: Well, after retiring from MetPath I looked around for a couple of years, but nothing really got me excited, until I researched hearing care. When I looked closely at the industry, there were many similarities to the lab situation when I entered that field. There were many independent practices with little regulation. In fact, in my home state, Massachusetts, to get a dispensing license, basically you just had to be able to fill in the application. I found the field interesting and challenging and I realized the opportunities to educate consumers and health care practitioners about the importance of quality hearing care.

Beck: Did you ever think about becoming an ear, nose and throat doctor?

Brown: No, not really. My introduction to ENT was less than fascinating while I was in medical school, and I wasn't interested in becoming a student or a resident again!

Beck: Where was your first hearing aid dispensing office?

Brown: The first office was called HEARx and we opened it in southern Florida in Dade County. We knew the demographics could support the business, but what we really wanted was a medical business, where the customers were physicians and insurance companies, not solely the patient.

Beck: So you were looking for a business model similar to that which worked in the pathology model, where the professionals were the customers?

Brown: Absolutely. We knew that was the way to go from the beginning, and we also knew that we needed multiple access points, because big insurance companies with hundreds of thousands of patients need to know their patients can be serviced. If you have only one office you're just not likely to get the contract. To obtain a Medicare Managed Care contract, service points must be located every twenty minutes, or 20 miles, from the patients. We needed a lot of centers, and we also needed standardization - so policies and procedures would be consistent from center to center. We also realized that family practitioners, GPs, internists and others really knew very little about hearing or hearing loss, and they certainly don't understand the quality of life issues related to hearing. Otolaryngologists and audiologists are formally trained and they spend years studying hearing loss, they are the experts.

Beck: So your first office was in Dade County, and although you knew you wanted to have many centers, there had to be a first! So what happened when you opened the first office?

Brown: When we opened the first office -- we starved! There were so many challenges and the market was not nearly as receptive to a quality-oriented chain of hearing centers as I had hoped. It took seven years to get our first insurance company contract.

Beck: Seven years is a long time. How many contracts do you have now, in 2004?

Brown: We have about 175 different contracts with healthcare insurance providers. Last year about 50% percent of our business was "directed" business, meaning insurance companies directed the business to us.

Beck: And now you've recently received a VA contract in Florida?

Brown: Yes, and with that new contract, we expect our directed business portion will be over 60 percent.

Beck: And is the big "umbrella" at this time HearUSA?

Brown: Yes, it is, but this gets complicated! The name of the company is HearUSA. The original stores in New York, New Jersey and Florida operate as HEARx. In Southern California as a result of a joint program with Kaiser, we operate as HEARx West. There are also the Helix centers in Ontario, Canada, while the remaining centers, which we acquired, are called HearUSA. Of all of those that I just mentioned, only the HEARx and the HEARx West stores are accredited by the Joint Commission. Overall we have 157 centers in 11 states and an audiology network consisting of over 1,500 participating providers (formerly National Ear Care Plan).

Beck: With all of that expansion, you must have a large work force, and I suspect you're looking for additional professional employees?

Brown: Yes, we do have openings. Right now we have about 515 employees, and approximately 150 are audiologists, and of those, some 20% have their Au.D.

Beck: Can you tell me what sort of revenue was generated in 2003?

Brown: We generated about 70 million in revenue in 2003. And in order to increase that, we do need to attract audiologists to perform diagnostic testing, hearing aid dispensing and to join the network.

Beck: As you've learned and studied more about hearing loss, are there things about hearing that you know now, that you wish more people and professionals knew?

Brown: The first thing is that when you're visually impaired you know you have a problem before anyone else knows you have the problem. But, when you're hearing impaired, everyone else knows before you do! Another issue is the importance of hearing and how it impacts the quality of life. I know you've heard the Helen Keller quote a million times...When asked if she could have her hearing or her vision, she chose hearing. She said vision keeps you in touch with things, but hearing keeps you in touch with people. The ramifications of not being able to hear are enormous...isolation, depression, anxiety, hopelessness. It is an amazing and invisible problem and we really need to focus more on hearing and hearing loss. Another issue is that "un-amplified" hearing loss patients, meaning people who have hearing loss but do not wear hearing aids, visit their doctor three times as often as patients with normal hearing. So there are many quality of life issues associated with hearing loss, and many real secondary health issues that hearing loss impacts.

Beck: Can you share your thoughts as to the changing demographics of hearing healthcare?

Brown: We know that the people coming into our offices are, in general, younger than the patients from ten or twenty years ago. In the old days, hearing loss was thought to be a problem for the retirees, and they were told to just turn up the TV. But now, it's younger people diagnosed and managed, and the patients are not just retirees, but they are from the work force too. So we're identifying and managing problems sooner, which allows a better quality of life. Of course the products are also infinitely superior now. Digital hearing aids are so superior to analog instruments, there's really nothing to debate. Digital technology is amazing, and the best keeps getting better all the time. There are probably some 28 million people in the USA with hearing loss, and probably half of them, or about 14 million people could benefit from hearing aids. Nonetheless, only about 5 or 6 million people wear hearing aids, so we're reaching about 1 in 3 of our actual potential hearing aid wearers, which means we have a long way to go. There are still millions of people who can benefit from what we do. So the future is very bright.

Beck: One thing that has always impressed me with your offices is they offer Aural Rehabilitation (AR) classes, is that right?

Brown: Yes. The A.R. class is very important to the whole process of better hearing. Aural Rehabilitation classes have reduced our return rate to about 8 percent, which is about half the national average. The AR class is an important part of the patient's success, it's a whole process. The AR class is three sessions and it runs about 4.5 hours, and we know that if the patient does not participate in the AR class, the return rate is higher!

Beck: Dr. Brown, I want to thank you for being so generous with your time. It's a pleasure to speak with you.

Brown: Thanks Dr. Beck. It's been fun for me too. You've really done some wonderful things with Audiology Online and Healthy Hearing and I am happy to participate.

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Paul Brown, MD

Founder of HEARx