The Value of Time in Patient Care: A Primer on How to Price Audiology Services



Author: Tad Zelski, MBA and Brian Taylor, Au.D.

Today, most audiologists include the cost of the professional service provided to their patients in the retail price of the hearing aids they dispense. Commonly referred to as a bundled pricing model, this strategy has been both popular and effective for decades.

Now, after a nearly 50-year run, the bundled pricing model used by most audiology clinics might change. Although many patients seem to like the bundled pricing model because it is simple and easy to understand, several competitive pressures are driving it to change. From a patient’s perspective, however, there are three reasons a bundled pricing model is effective:
  1. It provides clear choices at distinct price points.
  2. It guides the patient through the hearing aid selection process.
  3. It allows the individual to make what they feel is an informed price decision.
The Challenge
As the marketplace for hearing care services changes, audiologists must face the distinct possibility that the hearing aid sales and distribution process will become deregulated. Deregulation of sales and distribution is likely to mean a growing number of individuals will purchase hearing aids on-line, and then seek the services of a licensed professional when they have a question or problem. There are three underlying reasons driving the deregulation of the sales and distribution process, thus putting profitability of the bundled pricing model at risk:
  1. The rise of big-box retailers (who enjoy tremendous buying power and other economies of scale) make it difficult for audiologists to compete head-to-head on the retail price of hearing devices. Because of their built-in efficiencies, many big-box retailers can offer retail pricing at 30% to 50% less than private practices and medical centers. For example, industry analysts indicate that Costco will continue to experience substantial growth over the next five years with many locations adding additional licensed professionals to meet the growing demand (Bernstein Report, 2017).
  2. More older Americans are now opting to purchase Medicare Advantage insurance, which is an alternative to Medicare Part B that often provides beneficiaries with a hearing aid benefit. Typically, patients buy hearing aids directly from the health benefit manager (e.g., TruHearing, Amplifon Hearing Health Care, etc.) with the audiologist receiving a set fee from the health benefit manager for providing professional service over a finite amount of time. According to Bernstein (2018) the number of older Americans who are members of a Medicare Advantage program that offers a hearing aid benefit are expected to more than double over the next four-to-six years.
  3. By 2020, there probably will be a new category of over-the-counter (OTC) hearing aids sold directly to consumers. Above all other factors, OTC hearing aids will likely lead to a deregulation of the distribution process in which professional services are sold separately from hearing aids.
These three factors could force audiologists in private practices and medical centers to reduce the cost of hearing aids at the retail level, where the price is typically 3-to-4 times the wholesale price. Additionally, these three factors will be a catalyst for an unbundled pricing model, and will place market pressure on audiologists in private practices and medical centers to operate more efficiently.
The Questions
Given the changes to the hearing healthcare marketplace, audiologists are likely to have questions about the viability of the bundled service model, as sales and distribution of products at the retail level undergo deregulation. Those questions include:
  • Can I sustain the bundled pricing model given price competition from OTC, big box stores, internet purchases and third-party, managed care hearing aid purchasing?
  • Can I make money and continue to take exceptional care of my patients who are in a third-party, managed care hearing aid contract, or who decide to purchase hearing aids on-line?
  • How will OTC and internet sales affect my business?
  • What other revenue producing services can I offer patients in my audiology practice that provide value to my patients and enable my business to stay profitable?
These and other questions are on the mind of many audiologists who have been using a bundled pricing model for dispensing hearing aids. No one has a crystal ball, but the market pressures described above probably will force many practices into new pricing strategies for their hearing healthcare business to stay competitive. This article will present a model for calculating the time value of audiology care that can be used to develop an alternative, unbundled pricing strategy.
The Fundamental Problem
The real value of audiology care is based on the professional knowledge and the skill of the audiologist to apply that knowledge for their patients. It is this expertise that the consumer depends on when they chose to seek hearing care from a professional source. Rather than simply relying on their own information sources to make their hearing aid purchase decision, a significant percentage of patients will seek professional guidance prior to purchasing a hearing device. It is the audiologist’s time and skills that are valued by these patients.

Therefore, if the value is in the audiologist’s skills and knowledge, then the pricing model must reflect this fact. To move away from a bundled pricing model, it is imperative that the profession creates business models that allow audiologists to provide services that are both beneficial to patients and sustainable for the practice.

To better understand how to price audiology services in the dispensing of hearing aids, let’s review three ways that audiologists add value to hearing aid purchases.

  1. Audiologists are skilled in the selection and fitting of hearing aids. These skills enable the patient to make an informed decision about their hearing aid purchase. At a deeper level, audiologists add value to the hearing aid purchasing process because:
    • They are knowledgeable about hearing aid manufacturers.
    • They know the differences between brands and the various levels of technology offered by manufacturers, and can articulate those differences to their patients.
    • They are well versed on the various fitting options and performance settings and can conduct an individualized fitting and verify the performance of the fit.
    • They know how to custom fit the hearing device(s) to maximize the comfort, function and acoustic properties of the selected technologies.
    • They are trained on the use and benefits of the related assistive devices such as remote microphone, TV listening, telephone, direct mobile phone and t-coil options.
    • They know how to best handle service issues to minimize the inconvenience of being without the hearing aid.
    • They can effectively instruct the patient in the use of their hearing aids.
    • They can counsel the patient and concerned family on the social impact of hearing loss and provide strategies for maximizing their residual hearing.
    • They can provide hearing loss self-management skills.
  2. Audiology care is more than just selecting, fitting and adjusting hearing aids and related hardware:
    • Audiologists also provide auditory training for patients who wish to further improve their communication skills.
    • Audiologists both advocate and provide information and services for hearing conservation.
    • Audiologists can advise and counsel their local community on group listening systems and communication strategies.
  3. In addition to hearing rehabilitation, audiologists can also choose to offer other services, including:
    • Comprehensive audiologic diagnostic testing, including electrophysiology testing
    • Vestibular testing and balance therapy
    • Cochlear implant management
    • Tinnitus testing, treatment, and counseling
A glimpse of this list makes the underlying problem very apparent: Audiology has much to offer individuals who are seeking better hearing and communication, yet the value of the professional service is not generally recognized by the public or even the healthcare community. In a bundled pricing model many of these professional services remain invisible to the consumer.

A key reason these professional services are not recognized by the public is in large part a failure of marketing by the audiology profession. Most audiology practices are hearing aid centric. This means the hearing aid recommendation is at the heart of the audiologist’s plan for treating and management of a patient’s hearing loss, and therefore central to their business revenue strategy. For several decades, the price of hearing treatment has not been based on the value of hearing care delivered. Rather it is based upon the level of technology purchased, which is the core of bundled pricing model.

The result of the bundled pricing model is the patient is given the message that communication improvements are directly related to the type of hearing aids purchased, and not the skill of the professional. Even though the practice literature and website might try to explain the value of their professional care, when the price of care is defined by the “level” and brand of technology, the message of professional audiology services being vital to long-term success is often completely lost.

Figure 1 is example of how hearing care and their prices are conveyed to patients.

Figure 1. An example standard retail pricing guide. Most professionals use some version of this format.
Type Entry Standard Advanced Premium Elite Luxury
Monaural $1,095 $1,595 $1,845 $2,795 $3,445 $3,645
Binaural $2,095 $2,995 $3,495 $6,395 $6,695 $7,095


Hearing care in this example is shown by hearing aid technology levels. Although the number of technology options and their accompanying retail price points vary, in our experience most practices dispense hearing aids using this basic format.

The patient sees these choices and, in many cases, would naturally adopt a retail shopping strategy familiar to them. The patient who adopts this shopping strategy may go on-line to find out which hearing aids are “best” for them and where they can get the lowest price. For the patient who stays with the audiologist’s care, behavioral economists predict that the buyer will most likely gravitate to a price that is somewhere in the middle of the pricing scheme shown in Figure 1 (Ariely, 2008). In both situations, the patient will have reduced opportunity of receiving whatever optimal follow-up care that meets their needs. In short, the bundled purchasing process often fails to deliver the best value because the decision being made by the patient is based on the wrong criteria, that is, the model level of the hearing aid technology and not on hearing treatment plan.
One Solution: Calculate VPM
To be clear, an unbundled or itemized pricing strategy is not new. Coverstone (2012), Sjoblad (2015) and Lewis (2018) have all provided excellent examples of how an unbundled pricing strategy can be successfully implemented in an audiology practice. Our goal is to build on their work and demonstrate how a prescriptive approach can be applied to an unbundled pricing strategy. This simple idea is this: If all key stakeholders in a practice know the Value Per Minute of audiology care, the true worth of services is known, and these services can be delivered with the utmost attention and efficiency.

Given the market forces at work, we believe now is the time for a larger group of audiologists to re-evaluate their ability to charge a fee for the delivery of professional services. What follows is a prescriptive approach to the essential elements of providing unbundled professional services.

The overarching goal of what follows is to determine the value of your professional time by conducting a time and cost analysis. Professional time spent with a patient, undoubtedly, has value. The challenge for audiologists is knowing how to price the value of the services they deliver. To do this, audiologists must know how to price their time. This process starts by following the three steps outlined in Figure 2.
Figure 2. Three steps of implementing a fee for service pricing structure


Step 1. Define the clinical protocols used in your practice and ensure all providers buy-in to using them consistently.
  • List the best practice protocol standards for your practice each of the services your practice provides.
  • Meet with staff every two weeks and discuss the components of your protocol and the rationale behind each one. Be sure everyone has a say in the components and has ample opportunity to voice their opinion.
  • Gain a basic agreement on a working clinical protocol.
  • Determine the time it takes the audiologist to provide each of these procedures.
To complete this final task successfully, think of each professional service as a “product”. For example, when you do a hearing test, you can bill for that “product.”

What procedures do you include in that hearing test and how long does it take to administer these procedures? The practice must examine the time estimates for all components of a basic audiological assessment procedure. For a group of average adults without cognitive or physical disabilities, measure the amount of time it takes to complete each portion of the assessment. An example for a basic hearing evaluation is shown in Figure 3.

Figure 3. A time analysis for the components of a basic hearing test. Numbers represent average amount of time for each component of the test.
Procedures for a basic hearing evaluation Minutes
Basic medical and hearing questionnaire/case history/otoscopy 7
Pure tone air and bone threshold audiometry 8
Basic speech testing – SRT and word recognition testing in quiet 9
Admittance testing (tymps & reflexes) 3
Review of hearing test results with patient 5
Total Time 32
Step 2. A time analysis for each type of procedure conducted in an audiology clinic can be completed within a week in most cases. Simply make note of the time it takes to complete each step using a watch or clock and record the number of minutes per procedure with a handful of adult patients. This process will culminate in a chart, like the one shown in Figure 4.

Figure 4 is a suggested way of organizing the procedures you use in your practice for the assessment and treatment of hearing loss when recommending hearing aids, auditory training, and other interventions. The estimate of professional time needs to be defined for all of the professional services provided by audiologists in a practice. In addition, you also need to define the time required for services provided by audiology assistants and staff, if they are involved in direct patient care. These services also add value to the patient’s hearing care; therefore, the cost for delivery of that service needs to be determined. (Note: the pricing of the audiology assistant’s time also needs to be calculated. The example of the audiology assistants time calculation is not provided in this article, but the process would be identical.)
Figure 4. A summary of basic audiologic services for various appointment types for one practice.


Step 3. The next step in the time and cost analysis is to determine the dollar value of audiology professional time in the practice. To establish the time value of audiology services, you will need to conduct a cost and revenue review. You must first determine your practice revenue requirements and then calculate that value down to the minute. This is called value per minute (VPM) of your practice.

The two factors needed to determine value per minute (VPM) are:
  1. Gross profit requirements, (GPR)
  2. Available productive hours, (APH)
Let’s examine these three components separately.
  1. The gross profit requirements (GPR) is the revenue value that covers all operating expenses and a targeted profit for the clinic activities.  

    This number can be found on a Profit & Loss (P&L) statement:

    GPR = total revenue (TR) minus cost of goods sold (COGS) + desired profit (DP)

    GPR = TR-COGS+DP

    Let’s work through an example that assumes a TR of $1,000,000.00, a COGS of $4500,000.00 and a DP of $150,000.00

    GPR is $400,000.00 ($1,000,000.00 - $450,000.00+$150,000.00)

    There are other ways to determine GPR if you’re in a practice that generates more revenue from testing than dispensing hearing aids, but you can contact the authors for details.
  2. The available productive hours, (APH) describes the total number of hours that are “available” to deliver audiology services.

    This example of Available Productive Hours (APH) is based upon the assumptions below for one full-time audiologist: (52 weeks) minus (Vacation weeks, paid holidays (i.e. Christmas, July 4th, etc.), professional education days, sick days)
    Example: 3 weeks of vacation, 2 weeks of paid holidays, 2 weeks of professional education, 1 week of sick days

    Average productive weeks: 52 (-3 -2 -2 -1) = 44 weeks

    Average productive days per year = 44 x 5 (days each week) = 220 days

    Available productive hours per year = 220 x 6 = 1320 hours (assumes 6 productive hours per working day)

    Note: Assume for this example that the audiologist has 6 billable (productive) hours per day (productive means time with patient). It is assumed that during an 8-hour day, a professional needs about 2 hours of non-patient time to write reports, as well as complete other administrative and personal activities.
  3. The Value Per Minute VPM: This is the target number that is used to determine prices for assorted services audiologists provide.

    The equation that determines VPM looks like this:

    Value Per Minute = Gross Profit Requirement / Available Productive Hours/60 minutes
    VPM = GRP/APH/60

    (GPR = $400,000.00/ APH = 1,320/60 minutes per hour)

    VPM is $5.05
    In our example we can now factor in the VPM of $5.05 and see the revenue needed, ($2,323.00) in the sale of two hearing aids to achieve the profit goals of the practice. (Note: The cost of the hearing aids must be added to this number.)

    Now the VPM, which was derived from the practice’s P & L statement, can be used to determine pricing for appointments of various lengths.
    15-minute appointment = $5.05 x15 = $75.75

    30-minute appointment = $5.05 x 30 = $151.50

    60-minute appointment = $5.05 x 60 = $303.00
    The VPM of $5.05 used in this particular example is considered a blended rate, which means any authorized professional who provides direct patient care, such as an audiology assistant needs to be generating an average of $5.05 per minute. Given than many non-audiologists are contributing in other ways to the practice with other administrative activities, it is likely the assistant is spending less clinical time with patients relative to audiologists.

    In a clinic employing both audiologists and audiology assistants, the differences in compensation between the audiologist and the audiology assistant are reflected in the gross profit requirements of the practice. Thus, the VPM of the audiologist and the audiology assistant should be calculated separately. Calculating these differences is beyond the scope of this article.

    Another revealing dimension of the VPM calculation is that it pinpoints inefficiencies in how time is spent with patients in a practice. For example, an hourly rate of $303/hour could be too high and out of alignment with the fees competitors in your market are charging. By reducing the time it takes to complete some tests or procedures (without sacrificing quality of care or outcomes) the hourly rate could be reduced.

    In the example shown here, if the practice knows it needs to charge approximately $75 for each 15-minute segment of time, it can price each clinical procedure or component of service properly. The calculation for this is shown in Figure 5, where a VPM of $5.05 is applied.

    Figure 5. The Value Per Minute (VPM) for an assortment of clinical procedures and tests.


    There are several reasons this 3-step approach to measuring VPM is helpful for a practice.
    1. It clarifies the value of audiology services. First, it demonstrates to all the stakeholders of a practice the value of professional audiology time in the practice, particularly the value of services that have customarily been bundled with the delivery of a product. Second, it can be used with patients to show the value of the service for any hearing aid purchase. For example, there is tremendous value in the entire staff as well as patients knowing the average hearing aid fitting requires four hours of professional service time over the first year of use. In the model shown here that equates to about $1200 in value, which is a significant amount of the total cost of hearing aids. The $1200 worth of professional service value is in alignment with industry analysis as outlined in Figure 6 (Bernstein, 2017).
    2. Knowing your VPM makes it easier to establish pricing for additional audiology care beyond the price of the hearing aid. If a practice decides to offer counseling services to individuals who purchased hearing aids on-line or tinnitus management services, the VPM can be used to set prices for appointment time. Simply apply the VPM in 15-minute segments to the services you offer.
    3. No one had a crystal ball to predict the future, but we can be relatively confident new opportunities will be created that allow audiologists to charge a fee for services not part of a product purchase. By establishing your VPM now, the value of audiology care is visible to all.
    Figure 6. The breakdown of costs for a professionally fitted hearing aid. Modified from Bernstein, 2017


    Making a change in pricing strategies is difficult and scary. The question that must be answered by the practice is, can you afford to maintain the current bundled business model and remain competitive? By measuring the value of audiology services in your practice, you can make an informed decision on pricing strategies, based on the profit needs of your practice and the services valued by consumers. Whether you choose to continue to use the bundled model or move to unbundled pricing, or to use some hybrid of the two, you need to take the time now to gather information about your options. Understanding the value of your audiology services, using the VPM strategy outlined in this article, will help you find the best direction for your practice. Even if you choose to maintain a bundled pricing model in your clinic, there are valid reasons for measuring VPM. After all knowledge of your VPM is a powerful tool to spur growth and improve efficiency.    
    Tad Zelski, MBA, is owner of Amplification Consultants, Inc., a practice development advisor, marketing director for clEAR, Inc. and Auditory Brain Training. He has 46 years of experience in the hearing aid industry plus 28 years as a rep for Widex USA. He was also owner of Atlanta Hearing service from 1972 to 1989. Tad can be contacted at tadzelski@gmail.com.

    Brian Taylor, AuD, is director of clinical audiology for the Fuel Medical Group and the editor of Audiology Practices. Brian is editor of the forthcoming Thieme Press textbook, Audiology Practice Management.
    References
    Ariely, D. (2008) Predictably Irrational: The Hidden Forces That Shape Our Decisions. HarperCollins Publishers. New York.

    Bernstein Report (2017) Hearing Aids: Would OTC be a catastrophe for the U.S. market? Or just an accelerator of current trends? Published 7-27-17.

    Bernstein Report (2018) Hearing Aids: Cover your ears - What are the implications of expanding U.S. insurance coverage for hearing aids? Published 1-16-18.

    Coverstone, J. (2012) 20Q: Fee-for-Service in an Audiology Practice. Audiology Online. Accessed 2-13-18

    Lewis, M. (2018) Audiology Unbundled: Wake Forest Baptist Health restructured their audiology clinic to establish an unbundled services model. The ASHA Leader. 23, 22-23.

    Sjoblad, S. (2015) Ten Years Strong: An Unbundling Success Story. Audiology Online. Accessed 2-13-18.