Bundling vs. Unbundling

Author: Kim Cavitt, Au.D.

The current typical hearing aid pricing model in the United States is a bundled model, where everything that goes into the evaluation of purchase and fitting of, and long-term service related to a given hearing aid is included in and billed under a singular HCPCS code and price. This model is one that has been successfully used by both audiologists and hearing aid dealers over the past 30 plus years.

This pricing model was created in an era in which there was little to no third-party payment of hearing aids in the marketplace. An ever increasing portion of the hearing aids dispensed in this country either have a discount available or some type of funded benefit from a third-party payer or insurer. Also, while there were mail order hearing aid companies, who have historically shipped products directly to consumers, most patients still continued to go directly to a hearing aid dispenser to obtain their amplification. Now, with the prevalence of Internet sales, discount retailers (such as Costco, which offer markedly reduced hearing aid costs), the existence of national consumer driven discount programs (such as the AARP/HearUSA program), and the current national employment and economic situation, our current, bundled pricing model offers challenges in these changing, often difficult times.

Our current bundled pricing model has several positives. First, the bundled model is easy. All of the goods and services associated with the evaluation, procurement, fitting, verification, maintenance, and service for a defined period (often the life of the hearing aid) are covered under a singular code and price. It is this ease and service driven approach that make it popular. Audiologists choose this model because it is how everyone else (hearing aid dealers, discount retailers, and other audiologists) prices their products.

The bundling price model, however, has several negatives as well. First, third-party payers are not intrinsically set up to pay for items and services, such as the three years or lifetime service, which is built into the bundled pricing model. They cannot pay for items or services that have not been provided or have not occurred. Yet, that is what we are asking them to do in a bundled pricing model. Second, bundled pricing is not transparent. The consumer has no clear idea what they are paying for and why. It does not illustrate what the individual professional services are that go into a hearing aid fitting, why those services are important, and what items can be omitted at the patient’s request. Third, bundling can also increase prices for consumers, who never fully utilize some of the services they are buying. Experienced users may not need to utilize the same level or amount of professional services, yet their bundled price is the same. This is why the Hearing Loss Association of America (AHLAA) is advocating for a more transparent, unbundled pricing approach.

Unbundling, or breaking the costs into the individual items or services that are provided as part of the evaluation, fitting and service associated with hearing aid dispensing and care, should be evaluated by all private practice audiologists in this changing environment. In an unbundled model, pricing would be based on what is required to cover your overhead (the results of a breakeven analysis) and make a profit. This model allows for the separation of the hearing aid (product) from the professional services, making it a viable option for dealing with many difficult managed care situations. The clinic could bill the third-party payer for the evaluation (even if the patient does not receive a hearing aid), fitting and verification and bill the patient for the long-term, post-fitting services. Furthermore, unbundling would allow you to better manage those patients who procure their hearing aids by alternate means (Internet, gift, discount retailer, mail order, EBay) and want you to provide fitting and service. It makes a clinic price competitive and allows for several marketing advantages, as it allows the patient to have better control over their costs and level of service.

Finally, unbundling has the potential to increase long-term revenues.  It could allow a clinic to see more patients, where the cost each patient pays at each visit better reflects the financial needs of the clinic.  Data from the audiology staff at the University of North Carolina-Chapel Hill Hearing and Communication Center suggests unbundling increases clinic revenues, while maintaining high quality patient care (the September/October issue of Audiology Today will contain an article from Stephanie Sjoblad, AuD and Barbara Winslow Warren, Au.D discussing their experience with unbundling and the results to date).

Many audiologists ask, “What would an unbundled model look like?” First, an audiologist would need to charge every patient for a hearing aid evaluation (92990, 92991 or V5010), regardless of whether they proceed with amplification or not. This hearing aid evaluation could be billed to third-party payers, even if the patient does not receive a hearing aid, where the service is a covered benefit.

On the date of a hearing aid fitting, the patient and/or third-party payer could be billed for the following services:

  • Hearing aid(s)
  • Electroacoustic evaluation (92592/3; if provided)
  • Dispensing Fee
  • Fitting and Orientation (V5011)
  • Conformity Evaluation (V5020)
  • Earmold Impression (V5275)
  • Custom Earmold (V5264; if applicable)
  • Domes (V5265; if applicable)
  • Batteries (per battery; V5266)
  • Accessories and Supplies (each; V5267)
  • Aural Rehabilitation and/or LACE (92630/33; if provided)
As allowed by state hearing aid dispensing laws, if the aid(s) is/are returned for credit, the patient would only be reimbursed for the costs of the hearing aid(s) and any returnable items (i.e. batteries, unused or unopened accessories, rehabilitation that has not been provided).

On each of the hearing aid follow-up appointments during the trial period, the patient and/or third-party payer would be billed for a hearing aid check (92593/4). The patient would be informed of these potential charges during the hearing aid evaluation appointment and discussion.

On the date of acceptance of the hearing aid(s), the patient could be afforded the opportunity to choose how they want to manage their long-term service. The patient could be offered:

  • A “pay as you go” service pricing model, where the consumer pays a defined service visit fee, even if the aid is under a manufacturer warranty, every time they are seen for a hearing aid service visit, in-house repair appointment, hearing aid adjustment, and/or reprogramming
  • A service package model, where the consumer pays a defined dollar amount to receive unlimited service, in-house repairs, hearing aid adjustments, and re-programming for a defined period of time. This option affords a clinic a mechanism for continuing to offer their patients a service-driven option for long-term care.
Bundled versus unbundled pricing models will be something that will be discussed as we continue to see changes in the marketplace and competition. It is important that audiologists educate themselves on their pricing options and make an informed decision about what is best for them and their practice.
References
Hearing Loss Association of America website: (http://www.hearingloss.org/docs/Battat_columns/Battat_Column_JulAug_2011_HLM.pdf and http://www.hearingloss.org/SpringAppeal_2011.asp)

Kim Cavitt, Au.D. is currently the owner of her own Audiology consulting firm, Audiology Resources, Inc., which provides comprehensive operational and reimbursement consulting services to hearing healthcare clinics, providers, buying groups, and manufacturers. She also currently serves as the Co-VP of Governmental Affairs for the Illinois Academy of Audiology and is a contributor to ADA.