Tuesday, January 8, 2013

Some Answers to Hearing Aid Costs

Why are hearing aids so expensive?

Not because of the cost to make them
Premium hearing aids cost around $250 to make (materials, labor, machinery maintenance, etc.). 

Not because of manufacturer selling price
Veterans Affairs buys over 500,000 aids each year for less than $350 each.  Does anyone else buy that many aids in a year?  Costco has 420 hearing aid centers with 320 of them in the United States. The Woodinville, WA center sells between 60 and 100 aids each month. Assuming this is a typical range, all centers sell between 300,000 and 500,000 aids per year worldwide, similar to the VA in volume.  Depending on how well Costco can negotiate, it probably buys their best hearing aids between $350 and $500 each. Those aids are sold for $ 1,300 each.

How much do private practices pay for their aids?  Typically private practices buy from “Buyer’s Groups”.  The Group negotiates prices from manufacturers based on volume sold in that group and resells premium aids to private practices for less than $1000 each.  Typically private practices sell premium aids for more than $3000 each.

Not because of time spent fitting the aids 
According to MarkeTrak VIII, a database formed by the Better Hearing Institute, the average number of patient visits to get hearing aids adjusted properly is 2.74. Add another 2 hours for hearing exam and consultation and we have less than 5 hours total. 

Because the market bears the price under medical duress
Hearing aids cost so much because 20% of the hearing impaired cannot function without them.  How much is it worth to hear, or for your child or parent to hear?  When forced to make this decision, aids are purchased even when prices are very high.  Because there is such a high markup, private practices do not need to sell very many in a year to make good money.  A small practice can sell very few aids per month with a $4000 markup per pair.  Practices push up the prices to make up for few sales. That is one reason why the average price of aids more than tripled in the last 20 years and will continue to increase as long as the market bears the price.  And it is not just a one-time cost.  Hearing aids last an average of 5 years. Practices depend on repeat customers.

Articles that follow in this blog discuss hearing aid issues in more detail:

New Avenues Break the Cost Barrier, an article I wrote concerning buying hearing aids on the web:
Dispenser Sampler
An overview of various retail options for purchasing hearing aids along with their associated price and quality

Dispensing – Profit versus Quantity and Efficiency
A discussion of a hypothetical retail outlet that does very well for its employees and owners while at the same time provides excellent service and quality products to its customers at prices between 25% and 50% currently charged by private practice

Why do Hearing Aids Cost Six times more than an iPad?
The article compares the elements of manufacturing and retail costs of an iPad and Hearing Aid.   The Coauthor Patrick Freuler makes the article more readable by graphics and better organization.