Unbundling Hearing Aid Sales

Overview

The conventional method for offering hearing aid devices and services is in a "bundled" or "packaged" format, where fees associated with the hearing aid evaluation, selection, purchase, fitting, follow-up care, and service are billed in a single charge. However, according to ASHA's 2012 Audiology survey, a number of audiologists (ASHA, 2012a) are adopting the practice of "unbundling" or "itemizing"-breaking out the costs of the device, accessories, and services associated with hearing aid dispensing and billing for them separately as they occur.

Factors influencing an audiologist's decision to unbundle include

a desire to position audiology as a doctoring profession (itemization of the full range of services highlights the value of professional services over the cost of the device);
a desire to educate medical professionals and consumers about the full scope of practice an audiologist provides and identify the best practices in hearing health care;
consumer demand for affordability, transparency, and portability of services and concerns that hearing aid cost and current service delivery models are barriers to accessing hearing health care (Romano, 2012);
health care reform and regulatory trends that indicate a possible shift toward requiring unbundling for reimbursement purposes (ASHA, 2013);
the entrance into the market of Internet-based, big box store, insurance company, and direct-to-consumer business models, creating increased cost competition;
the opportunity to increase market share by assisting consumers who have purchased online without the benefit of audiologic services and support;
the opportunity to remain relevant as advances in technology allow for remote testing, programming, and fitting of devices.

The entrance of insurance companies into the field of hearing health care and hearing aid delivery creates a truly unique dynamic, given that these companies have the infrastructure-including resources and access to millions of subscribers-that may enable them to negotiate lower rates on hearing aids, create direct-to-consumer delivery models, and develop networks that may not necessarily include audiologists.

Creating a fee structure that separates the cost of hearing aid(s) from the services associated with the evaluation, fitting, orientation, delivery, counseling, and long-term care and management of these devices provides audiologists the opportunity to highlight the importance of the professional services they provide, rather than the device. However, based on the local market, practice considerations, and consumer profile, unbundling may not be appropriate for every practice.

Key Issues

Unbundling v. Bundling

Unbundling offers audiologists the chance to provide transparency regarding fees and services associated with hearing aid purchases and to increase their market potential by serving consumers who have acquired hearing aids elsewhere. In addition, in the changing face of health care, unbundling also highlights the importance of an audiologist's professional services, rather than the device.

Below are some advantages and obstacles to this approach.

Unbundling allows audiologists to

emphasize the value of their professional knowledge and skills;
experience more direct correlation between cash flow and service provision, given that instrument and services are billed as provided;
increase patient choice by customizing services to specific needs;
set prices that better reflect breakeven plus profit needs;
increase market potential by serving patients who procure their hearing aids by alternate means-such as family, Internet, mail order, and retail vendors-but who want to utilize the practice for service;
increase price competitiveness with Internet and big-box retailers by separating device cost from service fees;
provide transparency to consumers;
increase their negotiating potential for third-party payer reimbursement;
position their practices to respond to changes in health care delivery models.

Unbundling may require audiologists to

educate consumers accustomed to a bundled pricing model;
shift billing and payment practices;
change their marketing approaches and introduce a new model to the market ahead of competitors;
change office policies and procedures, including tracking more fees and reimbursements;
provide a full-range of audiologic services related to hearing aids;
serve patients who may choose not to return for all recommended services.

In addition, unbundling may be inconsistent with managed care plan reimbursement methodologies.

Audiologists must weigh the pros and cons to determine if an unbundled approach is best for them. In implementing unbundling, some audiologists offer patients a choice of several packages of services. For instance, the device cost and dispensing fees may be mandatory charges, but the number of follow-up appointments may vary, depending on the package the patient chooses (e.g., mid-range vs. high-range).

Practice Considerations

In order to determine whether to bundle or unbundle services, audiologists must first evaluate current business practices. Successful unbundling requires that audiologists provide treatment that reflects the full scope of practice for hearing aid services and are able to measure and communicate the value of these services to their patients.

To determine whether or not to unbundle, audiologists consider the following issues.

What range of services is provided? Services to be unbundled might include hearing aid evaluation; hearing assistive technology; functional communication assessment and patient satisfaction measurement; hearing aid fitting and probe microphone verification; hearing aid follow-up, training, and counseling; and individualized and group auditory rehabilitation.
Are best practices and evidence-based hearing aid evaluation, dispensing, care, and counseling being followed? Unbundling requires that audiologists are able to communicate the value of specific services provided to consumers.
What role does the sale of hearing aids play in the practice model? Does the audiologist have options in place to accommodate consumers who arrive with a hearing aid purchased elsewhere?
Are the costs associated with the care provided transparent to the patient? If appropriate, are the costs of services currently itemized? Unbundling requires that audiologists are able to break out costs associated with specific services.
What are the policies of competitive entities in the immediate locale? Are services clearly defined and valued in contracts with payer groups? Audiologists should consider the general competitive landscape, including what is commonly practiced in the community and how receptive consumers will be to a different practice model.
Are there services the audiologist considers essential to be included in a hearing aid purchase? Unbundling introduces patient choice and the possibility that patients may not return for all necessary visits.

Financial Considerations

To determine if an unbundled approach is appropriate, audiologists evaluate the financial implications of this approach by reviewing current pricing and fees and determining costs associated with hearing aid sales and services.

Evaluate Current Pricing Structures

An evaluation of pricing structures includes the following.

What is the current billing model? How effective is this model?
What products and services does the practice provide and with what frequency are they provided?
What is the protocol for hearing evaluation, hearing aid selection, evaluation, dispensing, orientation, and follow-up? Does the billing system include the codes to bill for the products and services in the protocol?
What is the demand for services without the purchase of a device?
What is the current accounting model? How will a shift to unbundling impact cash flow?

After evaluating current pricing models, the audiologist determines the specific costs associated with hearing aid sales and services, as well as desired profit, to determine an appropriate pricing structure.

Determine Current Income Associated With Hearing Aid Sales and Service

In a practice that bundles hearing aid sales and service in a single fee, determining the current income associated with hearing aid sales begins with determining the hourly rate received from the bundled price. To determine this rate, the audiologist analyses what the practice includes in its bundled rate and how often the services are rendered.Beyond the device, other services included in the bundled price might include initial recommendations, fitting, verification, orientation, ongoing counseling, electroacoustic measures, repairs and modifications, reprogramming, and documentation. Accessories or batteries, walk-in office visits, auditory rehabilitation, warranties, and educational sessions are additional services that may be included in the bundled cost.

Identify the Costs Associated With Hearing Aid Sales and Service

Determining costs associated with hearing aid sales and services requires a detailed cost analysis of both direct and indirect costs. Direct costs are those clearly and directly associated with the provision of the hearing aid, such as purchase of the device and accessories; indirect costs are those costs associated with the fees. Examples of costs to be included in this analysis are

overhead (electricity, phones, rent, maintenance, etc.);
salaries and benefits;
hired labor (billing specialist, marketing help);
equipment (amortized costs, calibration, maintenance, dues and subscriptions, office management systems, computers, etc.);
hearing aids;
supplies.

A thorough financial analysis of the practice may be conducted as part of the cost analysis. Indirect costs should be allocated based on the percentage of the practice's overall revenue represented by hearing aid sales and services.

Determine an Appropriate Cost and Fee Structure for Services

Determining an appropriate cost and fee structure requires comparing the total costs associated with hearing aid sales and services with the current rate received. A specific cost should be associated with each code billed, and the audiologist should incorporate desired profit into the fee structure. When determining rates, the audiologist considers contracts with private insurers, Medicaid and Medicare allowable payments, and cash payments, as well as a complete list of services and devices, and the most current billing codes. The Medicare fee schedule and other fee analyzers can be used to help the practitioner determine what is reasonable for specific services in a given market. Practitioners may want to consult with an accountant or finance specialist regarding the current worth of the practice, future financial goals, and daily revenue necessary for reaching goals.

In addition to cost, audiologists consider the following factors when deciding whether to unbundle hearing aid sales and service.

Which model is preferred by the insurance companies being billed? Hearing aids and hearing aid services are not a benefit of Medicare, but may be benefits of state Medicaid programs and some private health insurers' programs. It is important for the audiologist to understand contracts with private insurers and be able to bill accordingly. Standard fee schedules must be consistent, regardless of insurance type or private payer. Payment accepted depends on the contract negotiated with the individual company.
What market conditions impact the practice? Unbundling may offer a way to differentiate a practice within the marketplace, but may also require additional marketing and consumer education activity because consumers are less familiar with the unbundling model. A thorough competitive analysis will help the practitioner determine the best approach.

Increasing Transparency

Regardless of whether audiologists bundle or unbundle, increasing transparency to consumers is an option. If the practitioner determines that bundled billing practices are most appropriate for the specific setting, he or she may develop a bill that itemizes services and equipment to reinforce the value of the audiologic services.

Avoiding Collusion/Remaining Competitive

Instead of asking other providers about their rates and risking collusion, audiologists should consult the Medicare fee schedule and other fee analyzers to determine what is reasonable for specific services in the market being served.

Insurance companies will negotiate reimbursement rates. Before committing to contract obligations with third-party payers, practitioners should understand all of the terms of the contract. See Important Considerations for Audiologists When Reviewing Third-Party Payer Contracts.

State and Federal Laws and Regulations

Before determining whether to itemize hearing aid services, audiologists should check the professional code of ethics, state licensure rules, and legal and regulatory guidelines that impact their specific practice settings (e.g., anti-trust policy, coding and billing practices). Licensure and regulatory requirements for audiologic practices, including hearing aid dispensing, vary by state. Medical clearance, trial periods, return policies, and payment options are often included in the legislation dictating the requirements for audiology and hearing aid dispensing practice. See ASHA's State-by-State pages for summaries of state requirements pertaining to hearing aid dispensers.

Audiologists must follow the specific guidance outlined by their respective Medicaid programs when billing Medicaid.

State regulations regarding dispensing hearing aids may be based on the U.S. Food and Drug Administration's (FDA's) definition of hearing aids as medical devices. This means that all hearing aids must comply with the required conditions for sale mandated in the Code of Federal Regulations (FDA, 2009). The conditions of sale adopted in a specific state may limit an audiologist's ability to unbundle services or charge for returned hearing aids.

When investigating rates and prices for unbundled or bundled hearing aid devices and services, audiologists must keep in mind the obligation to comply with federal and state antitrust laws. The Federal Trade Commission Act established the Federal Trade Commission and gave it rule-making, investigative, and enforcement authority to protect the public from unfair pricing, monopolies, and mergers. Many states also have laws related to unfair business practices. Antitrust laws bar a group of businesses-including, for example, those that dispense hearing aids-from price fixing (i.e., collaborating to set prices for products and services or entering into an inappropriate referral network or monopoly).

Billing and Reimbursement

Although Medicare guides coding and billing practices nationally, hearing aids are not a Medicare benefit; hence, hearing aid codes for treatment are scarce. Many audiologists, private insurances plans, and Medicaid programs use the Healthcare Common Procedure Coding System Level II (HCPCS) codes that represent hearing aids in bundled pricing. HCPCS Level I codes are also referred to as Current Procedural Terminology (CPT) codes, which are procedures classified in numeric format. The HCPCS and CPT codes related to hearing aids, including hearing aid examination and electroacoustic evaluation of hearing aids, can be used to unbundle the services and may be used by private health plans and Medicaid programs (ASHA, n.d.). When pulling out the services from the price of the code, audiologists should adopt codes that are most frequently used by their primary payers and that best represent the service provided. In setting charges for specific service codes, the practitioner must not differentiate between patients based on payer.

See the comprehensive list of codes for codes for hearing devices.

Before discussing hearing aid charges with the customer, the audiologist should always verify hearing aid benefits with the insurance plan or other third-party payer, using specific codes. The practitioner should document such conversations (e.g., date, time, and name of the person spoken to, along with the information provided).

Communicating With Patients

Because unbundling represents a change from traditional pricing practices, audiologists may need to provide additional consumer marketing and education as their practice makes this transition. The essential value of the professional audiologic services included in the hearing aid sales process should be incorporated into all forms of marketing and communications.

Audiologists are responsible for communicating the message that hearing health care requires their expertise and skills to ensure patient safety and satisfaction and to provide the best possible outcomes from hearing aid use. Consumers are most interested in understanding what is necessary to achieve good outcomes and how much will it cost. Providing transparency by unbundling and/or itemizing services and the cost of devices can increase consumer awareness of range and importance of services provided.

When a practice owner decides to unbundle hearing aid sales, he or she educates staff on the new billing model so that they can communicate effectively with customers and bill appropriately. The practice should develop understandable, easy-to-read forms and materials that outline billing practices. See Marketing and Promoting Audiology Professional Services.

Resources

ASHA Resources

Additional Resources

This list of resources is not exhaustive and the inclusion of any specific resource does not imply endorsement from ASHA.

Organizations

Center for Medicare and Medicaid Service (CMS)

References

American Speech-Language-Hearing Association (n.d.). Health care commom procedure coding system (HCPCS) Level II codes. Retrieved from www.asha.org/Practice/reimbursement/coding/hcpcs_aud/.

American Speech-Language-Hearing Association. (2012a). 2012 Audiology Survey summary report: Number and type of responses. Rockville, MD: Author.

American Speech-Language-Hearing Association. (2012b). 2012 Medicare fee schedule and hospital outpatient prospective payment system for audiologists. Retrieved from www.asha.org/siteassets/uploadedfiles/2012-Medicare-Fee-Schedule-Audiology.pdf.

American Speech-Language-Hearing Association. (2013). 2013 Public Policy Agenda. Retrieved from www.asha.org/Advocacy/2013-ASHA-Public-Policy-Agenda/.

Romano, T. (2012, October 23). Vast array is challenge in choosing hearing aid. The New York Times, p. D5.

U.S. Department of Health and Human Services Food and Drug Administration Center for Devices and Radiological Health. (2009). Guidance for industry and FDA staff: Regulatory requirements for hearing aid devices and personal sound amplification products. Retrieved from: www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/ucm127086.htm.

About This Content

Acknowledgements

Content for ASHA's Practice Portal is developed through a comprehensive process that includes multiple rounds of subject matter expert input and review. ASHA extends its gratitude to the following subject matter experts who were involved in the development of the Unbundling Hearing Aid Sales page:

Citing Practice Portal Pages

The recommended citation for this Practice Portal page is:

American Speech-Language-Hearing Association (n.d.) Unbundling Hearing Aid Sales. (Practice Portal). Retrieved month, day, year, from www.asha.org/Practice-Portal/Professional-Issues/Unbundling-Hearing-Aid-Sales/.

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