October 16, 2014

Why Does a Hearing Aid Cost Six Times More Than an iPad?

hearing aids prices

This guest post on hearing aid costs was contributed by Ed Belcher*, who put together this eye-opening, neat piece of analysis.

Did you ever wonder why a hearing aid costs up to 6x more than an iPad? Peeling the onion on the cost structure of both devices reveals an eye-opening comparison into the dynamics of either industry. It can provide us with pointers on where the future price and cost tags could (and should) shift.

Hearing Aid Costs vs iPad Costs

Let’s assume a high-end hearing aid costs $1000 to the audiologist when he/she buys it from the manufacturer and consequently gets sold for $3000 to the consumer. Now if you dissect the $1000, based on a study by the German Competition Regulator, the following total cost breakdown emerges:

blog_hearing-aids-cost-audicus

Now, let’s take a closer look at the iPad: a recent study at the University of California, Irvine took a closer look at the cost structure of a regular iPad and came up with the following segmentation:

blog_iPad-cost-audicus-hearing-aids

Bear with us, as we plot these numbers on a chart:

hearing aids prices

The manufacturing and distribution hearing aid costs are upside-down in comparison to the manufacturing and distribution costs of an iPad.

The iPad is subject to hard, unfettered competition. Its manufacturer profit, marketing, R&D and dispensing costs combined take up 45% of the retail price.  The production cost takes the balance (55%) of the retail price.

Most hearing aids are made by the Big-6 consortium which shares patents and does business in a mutually beneficial way. The prices of hearing aids sold by dispensing businesses are around 3x their wholesale cost. In that case, the production cost of a hearing aid comprises only 8% of its bundled price.  The remaining 92% is made up mostly of dispensing fees, administration salaries, and profits.

Granted, the market structure is different for both products. For instance, the sheer sales volumes of iPads far surpass those of hearing aids: Apple sold 3 million iPads in the first 72 hours of its recent launch. By contrast, 3 million units are what the entire hearing aids industry sells in one year. This sales volume allows for different economies of scale, especially when it comes to retail.

Furthermore there is a more involved service component attached to hearing aid dispensing (however not as much as what is traditionally claimed). Hearing aid dispensing, based on personal experiences when shopping in varied businesses for hearing aids, took 1 hour for the exam and discussion of HA options; 1 hour for fitting and training; and up to 2 hours for up to four 30-minute adjustments/training, a total of 4 hours of contact time. Assuming $100 per hour, consultation should yield a total of $400 in dispensing service fees.

In any case, the comparison is still startling and should raise questions on whether the industry and hearing aid costs are really operating at its most favorable level for the consumer. Let’s look at the next piece of analysis.

Hearing Aid Costs With an iPad Cost Structure

The aforementioned hearing aid that a dispenser buys for $1000 costs about $250 to make, as we saw with the previous example. So we start with the $250 production cost.

If the iPad-structure were followed based on the $250 production cost (i.e. 55% of the total) then:

  • The final retail price for one hearing aid would be $250 / 0.55 = $455
  • If the specialist sells two aids for $455 each and adds $400 for four hours of service, a pair of high-end hearing aids would have a price of $1,310

Let’s pause here and put this figure into perspective: $1,310 is equivalent to 22% of the traditional $6000 for the same pair!

What does this calculation imply on the audiologist revenues per customer? The $455 retail price includes a 15% markup (same as the iPad) of $68.25/aid. The total proceeds to the dispenser is 2*$68.25 + $400 = $537 for each customer served.

The questions that remain are thus:

  1. Can industry prosper and sell aids for $387 (0.85*$455)?  After all, they have sold millions of aids to the VA with prices decreasing from $375 to $333/aid from 2004 to 2011 respectively, according to Lucille Beck, Director of Audiology, VA, and The Hill
  1. Can a specialist prosper with a 15% commission for aids sold and with a $100/hour rate for services (normally 4 hours) during and after the sale of the aids (i.e. $537 of proceeds per customer)?

Tell us what you think; we would love to hear your opinion!

______________________________________________
* Ph.D. EE, Career researcher (retired) in underwater acoustics at the University of Washington

Sources: German Competition Regulator, The Economist, MSN Money, Lucille Beck, Director of Audiology, VA, The Hill

by Patrick Freuler

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Comments

audicus said

Really interesting.

R. said

Thank you to Ed Belcher for this neat analysis. For patients turning to the Internet for a low-cost hearing loss treatment, this article is undoubtedly comforting. However, controversial source data aside, there is a basic problem with Belcher's analysis that patients should be aware of in order to make an informed decision.

Belcher makes an apples-to-oranges comparison when he conflates the merchandising operations of an Apple Store with the operations of an audiology or hearing instrument dispenser's office. In his figures, Belcher refers to these operations as "Retail."
Let's realistically compare the process of purchasing a hearing aid versus an iPad.
Anyone who has purchased hearing aids in a clinic understands that a competent provider takes a complete patient history, performs otoscopic and audiometric evaluation, and makes a customized recommendation for a device based on individual loss and lifestyle needs. He or she may then take an ear impression, and on delivery of the devices programs them using a custom prescription and patient feedback during a fitting process. Anyone who has purchased an iPad from an Apple Store knows that the sales associate listens to the customer's needs, makes a recommendation for a product, and swipes a credit card.
But the hearing healthcare experience does not stop when the devices are purchased. Competent providers deliver followup care in the weeks immediately following delivery, to adjust fitting on the basis of patients' real-life experience. They regularly clean and check devices to keep them in good repair and retest patients' hearing annually to stay abreast of any fitting changes that may be necessary. They counsel patients on the best use of their devices as part of a complete auditory rehabilitative program, including communication strategies and education on taking full advantage of available technology.
Therefore, to equate the operations of a hearing health clinic and an Apple Store, and refer to both as "retail," is disingenuous. Belcher's aim is not to inform patients about the great deals to be had from online hearing retailers. Rather, he hopes to lead patients away from quality, individualized hearing healthcare available from competent providers.

Mae Swanbeck said

Great Article. Having worked in NYC Advertising for a number of years I can truthfully say if people willingly pay high prices for hearing aids, high prices will continue to be charged. It is obscene. Only when folks stop paying through the proverbial, will the price drop. You just have to get the word out that you don’t have to support highway robbery. Individual dispensors as well as HMO’s are equally at fault.
Thank you.

Mike Amtsberg said

Awesome post. Not only would hearing aids sell but the increase in sales would be exponential. What is the number one reason for NOT getting hearing aids? I’m not an expert but I’m going to go with cost.

Harold Mindlin said

Patrick:

Great blog, excellent information. We at Audiotoniq, Inc. support you in your efforts to bring this very important issue to the forefront!

RAMON said

Great article and with professionl documentation. I have purchased a couple of hearing aids when my wife and were working, One lasted 4 years. The ones I have now are beyond repairs and both sets were $5,000. Now I am in neeed of hearing aids but do not have the resources to pay those kind of prices.
I moved to another states and tried to get audiologist to adjust the hearing aids and most refused, because I had not purchased from them. I found a couple of audiologist later on and they charged me $100, which I was gladly wiling to pay, Except both were not trained by the company that made my hearing aids, so they never ot them right.
I ran unto a friend who used to work for a major hearing aid company and he told me the similar information that you stated and I was in schock.
Recently I posted in a hearing aid blog about what my friend told me of what is the actual cost of hearing aids and it seems people don’t believed it.
There is such a thing as profit, I can understand that, but when you have a business that have the market corner and in a sense have people that are in need of medical devices hostage to the outrageous prices, in my opinion , It is not free market or making a decent profit, it is as they said in the vernacular " highway robbery, or out of control greed".

What I like to hear is what can consumers do to get these companies to be more compassionate and ethical in their pricing of hearing aids, you quoted 28 million people that need these medical devices that they can’t afford. People will continue to sacrifice and buy hearing aids even with high prices, because they have no choice, without them, your whole life is affected.

Audicus said

Thanks for all the input everyone!

@Ramon: thanks for the comment! the traditional channels come with a lot of face time and servicing that ultimately finds its way into a bundled, final hearing aid price. This variant might work for a lot of people… but there has to be more choice for those that can’t afford it.

@Mike: price is most certainly the #1 reason, followed by stigma and aesthetics. Currently there is still a lot of inertia for people to shop around and become informed about there being more affordable alternatives available… which is why you won’t see an immediate increase in volume because of a price drop. The minute there is more price transparency, prices will be impacted.

@Harold: thanks! we’re very much looking forward to your launch!

@Mae: great comment, lets get the word out and let people know that there are viable alternatives out there.

Scott said

I am an audiologist (wearing body armour so the inevitable rock throwing won’t cause permanent damage) and would like to make one comment related to barriers to hearing aid use. We still don’t understand why people will not accept hearing aids. Price, stigma, appearance are relevant but there are other unknowns. The Better Hearing Institute did a survey several years ago and asked hearing impaired people who were not hearing aid users this one question: If you could have hearing aids for free that were invisible and that would solve your hearing problems, would you wear them? 62% said yes but a full 38% said No!! With this scenario we address cost (free), we address cosmetic concerns (hidden), and we assure benefit – and yet 35% still didn’t want hearing aids. Why? What is the X factor that we still don’t understand? I don’t know but it points to the problem being more complex than we currently understand. That said, 62% penetration is much better than the 20% we’re at right now.

Ben said

I am one of the many who suffers from severe hearing loss but cannot afford the ridiculous high price of decent hearing aids. I am only 33 and have suffered hearing problems since primary school. I have previously undertaken free trials only to learn I cannot afford the actual purchase (being over $5000 for the pair). Now, this sucks in ways that the hearing aid companies may not realise. The main concern for me is the extreme difficulty I have in the workplace. I was (until a few years ago) an award winning chef, with bucket loads of potential and intelligence, and for years have been extremely passionate about beginning a career in counselling and psychology. To begin my career, in 2006 I began a double degree in social work and human services only to learn I couldn’t understand my lecturers! I left the course out of frustration and instead joined a concreting crew so I could be in a job surrounded by loud blokes who never use big words which makes them easy to understand. As far as I can see, this country is missing out on many people with passion and potential due to its unhealthy love affair with capitalising on peoples unfortunate circumstances. Shame on you, audiology
“companies”!! And don’t get me started on dentistry…

Esteban said

Excellent article/post. Let me add a couple points:

1. One critical difference in your analysis that you didn’t go into is the level of training/licensing/education in the “retail” end of the hearing aid business. Because hearing aids are classified as medical devices, the persons allowed to distribute hearing aids has been carefully controlled by state licensing boards, which are controlled by current practitioners. This creates limited number of outlets for the distribution of hearing aids “safely” to the public.
2. The creation of the AuD degree for audiologists was a move to raise the level of professionalism in the dispensing of hearing aids as well as improve the professional standing of audiologists among other health care providers by making it a “doctoring” degree. At the same time it increased the income expectation of those audiologists.
3. Your “retail” section of analysis ignores the business operating costs of the audiologists and hearing aid dispensers. The advertising/marketing costs you show are for those of the manufacturer only. The retailer must also advertise and the costs are a significant portion of the retail cost of the product. Further you are ignoring the rent, administrative costs and other operating expenses of the retail practitioner which have to come out of their “retail” portion. It is not all “profit.”

Simply lowering the price of hearing aids will not create more demand as Scott explains. Retailers would be the ones who would have to bear the risk of reducing their margins in order to generate the “expected” revenue and the market is littered with the bones of businesses who thought that they could accomplish the necessary volume/price tradeoff only to find that the market didn’t reward them sufficiently for their dramatic price reductions.

There may be some movement in the future to sell hearing aids more “directly” to consumers or with minimal professional involvement, like United Health Cares abortive attempt earlier this year, but you can count on the established interests of audiologists and hearing aid dispensers to oppose any threats to their “license” to sell hearing aids.

Rita said

Price is our biggest barrier. I’ve put off for years dealing with my hearing loss because our insurance doesn’t cover any part of hearing aids. Now my 15yr old daughter needs them due to a genetic disorder (not from listening to loud music!) and we’re afraid we won’t be able to get them for her due to the prices! Price is definately a barrier!!!!

Carol Povey said

I am now on my second set of top brand hearing aids. Neither has been
satisfactory in delivering the quality of sound that the extreme cost should provide. I’m sick of Mickey Mouse voices, whistling, plus beeps of battery failure. I,m sick of these expensive devices falling of my smaller than a man’s ears. I’m sick of having to put my glasses on to install batteries. I’ve lost two aids forever because they do disconnect from your ears without notice and with insurance you still get dinged with deductions. My current audiologist has charged me $200 for initial installation and brief follow up and I am getting muffled sound in one ear.
I can’t believe, in this scientific age , that hearing aids can be made better
and for less and with better, convenient design, especially for women.
I think if aids were more efficient, better designs, and less costly more of us need of them would rush to the market place. My experience leads me to feel hearings are a scam. Now that I am far into retirement I can’t afford this expensive help and will soon be isolated from normal activities in my community. In the next world, I’ll learn lip reading early in life so I’ll be ready for weary ears.

JOHN said

HEARING AIDS ONE BIG RIPOFF.IHAVE A CELL PHONE I CAN
TALK TO MY GRANDSON IN NEPAL IT COST 60 BUCKS
MY HEARING AIDS COST 3500 CANT HEAR ACCROSS THE ROOM WHY NO REAON

RAJA RAHULA MD said

I AM 69 Y/O. I HAD MY STAPEDIUS REPLCED AT NY EYE&EAR INFIRMARY 35 YRS AGO . I KNOW MY HEARING IS LESS ON MY LEFT SIDE, I CAN STILL FUNCTION WELL , AT
TIMES MY COLLEAGUES AND OFFICE EMPLOYEES TELL ME THAT I WILL HEAR WHAT I WANT TO HEAR AND OTHERTIMES I IGNORE THEM. BUT I KNOW I DO HAVE SLIGHT LOSS OF HEARING. I COME TO HOBOKEN ALMOST EVERY DAY AND I WAS HAPPY TO SEE YOUR ADDRESS IS IN HOBOKEN. I WILL LIKE TO TRY YOUR CIC UNIT, BUT I HAVE TO BUILD UP THE COURAGE TO DO IT.
WHAT I READ ALL ABOUT HEARING AIDS IS VERY WELL WRITTEN AT YOUR WEB SITE.
YOU ARE DOING A GREAT SERVICE TO YOUR CLIENTS.
I WISH THAT ALL THE PEOPLE WITH HEARING LOSS SHOULD COME TO KNOW ABOUT YOUR SERVICE.
I WSH YOU THE BEST,
RAJA RAHULA MD

John L said

Interesting, amusing, part good point part not.
Let me say a couple of things
First, I am a qualified hearing aid audiologist so I do want earn more than an iPad retail geek. But more importantly you quote for a $250 hearing aid and then call it top end which is not correct. A low end hearing aid would cost that. A top end aid, to me is £600-£700 approx, plus vat. Convert that to dollars then redo your sums. Oh and I reckon over 5-10 years it’s an hour a year at least with each client. I’m interested to know how your revised sums look.
To those who are disappointed with your hearing aids please remember… Your hearing is damaged and a hearing aid is not curing the problem so can only work as well as the ear responds. In the uk we give a money back guarantee so no one has to buy an aid they are not happy with.

Josemas said

I am a senior of 71 years of age with hearing loss for the last 30 years or so. My income hinders me from buying hearing aids because the price is considered by me as one of the biggest rip-offs together with gas prices, glasses, dentists…
My hearing is getting worst to the point of having to abandon my only past time of singing in a choir.
If I had my way…

John Nobile said

Cost is not he number one reason people do not purchase hearing aids.
It ranks as number seven.

One person commented it is because of greed that prices are so high.

You need to walk in my shoes for a year and then you might understand how foolish that
statement is.

With operating expenses of $8,000.00 per month, not including my income of $30,000.00 per year, i need to sell 12 units per month to keep the doors open. All last summer i sold 3 or 4 units per month. Just got a tax bill from my county for $800.00

No longer sure i will servive in this business. I have been here in business in this area for over 25 years. Still working and trying to earn a living at 72 years old.

Maybe i should give up, join Obama’s followers and go on welfare, and food stamps.

I am far from getting rich selling hearing aids, and i am tired of working.

Like i said…… try doing the job for a year, then tell me how greedy i am.

Aulelero said

I see the point of this article but as some other have said here, it doesn’t show the full picture. It looks like middleman is just a greedy guy for charging those prices.

I live in Europe but i’m guessing this isn’t going to be much different.

- I have to pay a rent (workplace not living place)
- I have to pay for water
- I have to pay for light
- I have to pay for security
- I have to pay an insurance
- I have to pay my employees
- I have to pay my own advertising and marketing (And the marketing & advertising cost of the manufacturer based on this article, why do i buy it for 1000 and not 250 which is the production cost then?)
- I have paid all my equipment to properly do audiometries
- And for the rest of the comfortable place i want you to visit so you will stay
- I have paid my studies to be an audiologist
- And i need to keep myself in constant formation of new tech, discoveries, articles, etc…
- I’m investing time with the customer before and after the deal
- I have to pay taxes for working, for having a worplace, for being an audiologist, etc etc etc
- I´m sure i forget something

So there you have my costs after i bought that hearing aid for 1000. Indeed the middleman is costly but it’s also there to get your problems fixed (at a cost or not) and much more accesible.

Dagmar B said

Thank you very much for sharing. It is great for people to know and understand the breakdown of why a hearing aid costs so much. I think that this will help people be more understanding when buying a hearing aid. It is a great investment and will be worth the money. – Hearing Aids Colorado

Dave said

I find the price to be a total rip-off. First of all why incorporate the cost of research into the market price? Research is the cost of doing business. Suck it up. I can buy a head set with noise suppression and automatic gain control for less than $100. A sophisticated notebook computer costs me a lot less than a cheap hearing aid. I have worked in electronics since the days of vaccuume tubes and making mini parts is not expensive these days so don’t say small size is the big cost.They have cameras the size of pin heads these days for $100. Hearing aids are a rip because theyare controled by the market. They have a market with no competition and customers with no other choice. If you can’t make a profit then you boost sales, boosting sales is done by reducing prices and getting rid of your three BMW’s.

Dlylis said

Is it just me or do others find it hysterical that people are typing in all caps on a hearing aid forum.
I am aghast that audiologists are defending the price of hearing aids by the small number they sell. Does it occur to anyone that they sell a small number because they are so expensive? Apparently no one discusses market dynamics in audiology school.
My mother is 95 and needs new hearing aids. She can hear OK but not as well as she could with new hearing aids. This has been going on for a few years now. She knows that new ones are a minimum $4000 and her attitude is that she hangs around with old people and they have nothing interesting to say anyway.
The point is that she would have replaced them twice in the last four years if she was not being gouged, but she says no, don’t waste the money.

Geo Vandelaras said

The comments here are diverse and interesting. However, my experience having gone to Sam’s club is that the top and hearing instrument, Which cost $4000 for hair with four year warranty, is a good deal compared what you can get that and audiologists that his having to work in a high Overhead office.

I came away thinking it was pretty ridiculous to purchase a device that was no more expensive to produce than a flip cell phone. Even with Sam’s providing the overhead support for the audiologist and the advantage of in-store advertising to people walking by, the price was still way too high for the product.

It will take more than Sam’s and Costco to break the current model of overpriced hearing devices. A device that is manufactured outside of the current cartel would be free to provide technology that is driven by demand and not the needs of those controlling the market a monopoly.

Because there is a huge market that is not being exploited, I believe there is little doubt that there will be a dramatic change in the way that hearing instruments are produced distributed et cetera. One example would be the Bluetooth capable hearing instrument that could be completely operated and calibrated by an application that would run on your iPhone iPad or other smart device. There was nothing that the audiologist at the Sam’s Club where I had my appointment did that could not be done by using an application, iPad, and Bluetooth conection… To calibrate and adjust the instrument. The remaining support issues would not require an audiologist trained technician.

The bottom line, I expect that the whole model for selling hearing nstruments will change dramatically in the coming years. Obviously people that need hearing instraments are mostly in there 50s and up. As the younger generation’s approach the time when they may need an assist, they will not accept the ridiculous price structure that is currently in place due to industry and regulatory structures defining all aids as medical devices. Self programmable devices need not fall under the category of medical instruments.

With all the above said, there is still no need for audiologists to be left out of the circuit so to speak. The insurance industry’s legitimate role of covering specialized professional audiology services would enhance those professions by restructuring the compensation model away from the reliance upon the sale of hearing devices.

Ed Belcher said

Many comments from dispensers argue that hearing aids are expensive because of their cost to dispense. In my blog

http://hearingaidsunveiled.blogspot.com/

third entry down, dated Oct 2, 2012, and titled “Dispensing – Profit versus Quantity and Efficiency,” I consider the expenses of dispensing. I present a hypothetical retail franchise that does very well for its employees and owners as well as provides excellent service and premium products to its customers at prices between 25% and 50% currently charged by private practices.

mike said

Hi,
I am a Musician.I can purchase the very best Brand amplifier and a hand made exquisite guitar for less than the price of two of these hearing aids.The guitar and amp. will last a lifetime with a little tlc.I can prove this as I have two that I purchased in 1962 and they still work perfectly and are now valued at 40000 dollars,I kid you not.
Hearing aids are a total rip off.They should be priced at just a couple of hundred Bucks/Euro/Stg.I need aids big time but not enough to pay these silly prices.
These people will keep selling these aids at these prices as long as people are foolish enough to buy them.
We are being ripped off .Hearing aids should only be dispensed by qualified health workers
who’s best interests are the health of the patient.

Elaine said

Online purchase of hearing aids? I need to replace my first set of hearing aids. I love your blog and the great information. I understand that one can purchase them online. Any help, cautions, experience?

John said

I purchased my first pair of hearing aids several months ago. Upon analyzing the bill, I found it to be the biggest rip-off I’ve ever experienced. The dispensing fee is outright robbery and this fee was not explained up-front.

The procedure of buying hearing aids is not like buying shoes, or other things which you can try before you buy, due to the fact that you can’t just try them on off the shelf. Shopping around is difficult as the various features and terminology describing different brands becomes confusing as they all seem to have different terms for similar features which makes them more difficult to compare. Collusion seems evident given the hearing aid cost and the dispensing fee rip-off.

Someone should open a chain of stores selling hearing aids using the structure in the article and advertise the cost analysis. I’d go there – who wouldn’t?

As for adjusting hearing aids, surely there is a program which could be installed on a PC to allow the user to tune the aids him/herself. ???

mike thornton said

Okay, I live in Germany. I bought a pair of aids 8 years ago for 3000 euros the pair. You suggest that the audiologist got 2000 euros. Or 250 euros per year. For that I got about 3 hours’ worth of initial advice and initial fine-tuning, plus a free cleaning service as often as I need it, usually about once every nine months. And two hearing checks since. No one else can do these things. I find it cheap at the price. My ENT doctor charges 60 euros just to syringe my ears, and that’s pure routine. That’s a rip-off for you — a quarter of what the audiologists gets, for a five-minute procedure.

Everett said

The Number one reason for these ridiculous prices can be laid at the feet of our fine, best, money can buy politicians, that have declared these are medical devices. Now WHO did these corrupt politicians do this for, US their Constituents or for the Oligarchy they work for? CORRUPT Government intrusion is OUR number one problem in this country. I despise all of them, they care for only one thing from us little people, that is a VOTE.

John Clark said

This works for some who try it. Of course not for wearing ALL the time, but still useful: there is an iPhone app called iHear. Turns your iPhone into a hearing aid with your ear buds or any headphones on your ears. Cost???? 3 bucks! Works for my father in law. A few people wearing these and the price will start going down. Probably a programmable app in the future.

Rick O'Neill said

Great Blog! Thank you! It has blow me away for years how hearing aids can be so costly. Like Mike, I am also a musician and also dabble in Electronics. Let me sum up the components.. A molded ear piece, 1 or 2 microphones, a speaker (audio driver), a level control (volume), and an OP Amp pc Chip. Also some are fitted with a pushbutton switch for changing settings and now some with Bluetooth capabilities. The basic electronic components might cost to the manufacturer of the device $5 – $15. The molded earpiece is probably most expensive because of the plastic extrusion machine used. Even at that a pair of molded ear plugs are $40 retail. Pretty simple electronics folks. Maybe 20 years ago these items might have cost a few hundred bucks but in the day of pocket pen digital camera and flash drives that hold more information than a $3000 computer did 20 years ago only costs a mere $10-$15 for 16 Gb. So where do they get off charging so much for the device.. I can see the audiologist charging what a doctor would for their in office time like and other doctor would but if you went to your GP with a broken finger and needed a $5 splint you sure as heck would not have to pay $500 for it.. That is my example of the markup we are paying for hearing devices.
And for the professionals here trying to justify what you charge for the hearing device…. well you should be ashamed. Your services are appreciated and you deserve to make a living from your services… Not rip off people in need so they can hear again.. Ashamed.. It will only be a matter of time that someone will step in and put a stop to this smoke and mirrors snake oil business.

Caitlin Rock, Au.D. said

@ Rick O’Neill “the basic electronic components might cost to the manufacturer of the device $5 – $15. The molded earpiece is probably most expensive because of the plastic extrusion machine used. Even at that a pair of molded ear plugs are $40 retail. Pretty simple electronics folks.”

Rick you may be familiar with a standard amplifier but hearing aids these days contain powerful computer chips. The computer chip is what increases the prices of the unit – not the microphones or the receiver, those costs you are correct about. These computer chips that the hearing instruments contain are literally capable of performing up to a million calculations per second to analyze the environment and increase the signal to noise ratio (SNR) in order to give the hearing impaired individual a better chance at hearing conversation – they use a non-linear system to apply gain. The chip looks at soft, average, and loud speech and applies the prescribed gain or volume at the individual frequencies based on the hearing impaired person’s hearing loss.

As for professionals feeling ashamed of what we charge – most audiologist bundle their costs. So your follow up visits and any in house maintenance for the device are “free” as are the extra supplies needed to keep the devices running. We have a front office staff to pay, equipment that needs calibrating once a year (quite expensive to keep up), rent, utilities, ect… All of this is rolled into the example of 2000.00 markup. It’s not dishonest – nothing is free. As for myself, to be more transparent about the costs involved with the device I have unbundled the pricing so that you can see what you are paying for. I can’t necessarily speak for all professionals but I think that most Audiologists are in this career because we realize hearing is a vital part of communication and we want to help individuals and hearing aids are the way that we can do that.

Hope it all works out for the best!

Caitlin Rock, Au.D.
Doctor of Audiology

Gary said

I would suggest that the X factor that is not understood is that the amplified sound produced by hearing aids is in the first instance not very pleasant, so unless an immediate benefit is realised by the wearer they are very likely to reject them.

So what can be done? focus on methods to achieve an immediate benefit upon the first fitting.

Gary

>Scott wrote:

>August 21, 2012

>I am an audiologist (wearing body armour so the inevitable rock throwing won’t cause >permanent damage) and would like to make one comment related to barriers to hearing >aid use. We still don’t understand why people will not accept hearing aids. Price, stigma, >appearance are relevant but there are other unknowns. The Better Hearing Institute did a >survey several years ago and asked hearing impaired people who were not hearing aid >users this one question: If you could have hearing aids for free that were invisible and that >would solve your hearing problems, would you wear them? 62% said yes but a full 38% >said No!! With this scenario we address cost (free), we address cosmetic concerns >(hidden), and we assure benefit – and yet 35% still didn’t want hearing aids. Why? What >is the X factor that we still don’t understand? I don’t know but it points to the problem >being more complex than we currently understand. That said, 62% penetration is much >better than the 20% we’re at right now.

Ramon said

Patrick thank you for a eye opener article exposing the ripoff and monopoly of the hearing Aids industry. If you google H.A. you wil hear countless sites where people are sharing the same frustrations that are found in this blog. I’m 63 and served in artillery during the Vietnam era conflict, later in the 80’s I served in the reserves for many years. I do not qualify for VA hearing aids because I’m over their income guidelines, but still, I’m too poor to afford hearing aids. I’m on medical disabilty and have medicare plus my empoyer Insurance and neither cover H.A. or even the exam. If they are medical devices, why the insurance or medicare does not pay for them is frustrating.
I’m on my third pair, first one from miracle ear, another from Costco and the third a gift from my niece who used to work for a hearing aids manufacturer, she bought them at dispenser cost of around $250. each. They are now beyond repairs and I need a new pair but can’t afford them.
I call on dispensers that are visionaries and willing to take a risk and do things outside the box. I read dozens of books of such people, including the founder of wallmart, and others. Sell the aids from a vending truck if you have to, offer excellent service, start with 0 staff and by word of mouth you will have so many customers that you would not need advertizement.
I read an article from the NY times and it listed a hearind aids dispenser who also repairs hearing aids, working in the back room of a shoe store. Several people have asked for his information so they could go to him, so far the author has not responded, the point is, word of mouth is the best advertizement.
I also would like to ask, what can we, as people who have a disability but cannot afford a device that can help us do to resolve this preventable tragedy?

Ann Conway said

I have worn hearing aids for 20 years and am also a sociologist trained in research. I have specialized in the medical arena and also have worked in public health prevention and education for years. I have NEVER heard the issue of hearing loss come up in public health and obviously this impairment can affect the health care encounter and many other issues. Part of this is federal and state health policy, which siloes issues of aging and disability and public health into different sectors and funding streams.

Has anyone done qualitative and quantitative research on why people don’t wear hearing aids or even if they care if they’re invisible? I don’t really get the latter issue, as it does not seem to apply to vision loss. Is it somehow the “deaf and dumb” label?

I don’t buy that there’s some inherent flaw or willfulness in people not wearing hearing aids. I went to four different ENTs(affiliated with elite teaching hospitals) in the years after I was diagnosed. Not one of them nor their affiliated audiologists gave me any education at all on wearing aids, what to expect, how to cope, etc. The first audiologist sighed and said,“Oh, you’re so young.” Big help.

As far I’m concerned, the biggest psychosocial issue around hearing loss is powerlessness because of ignorance, lack of education and stigma. Virtually everything I have earned I have learned on my own. You can’t even find info on coping at the bookstore! I firmly believe if people don’t wear them that is because they have not been given sufficient education about the brain, adjustment, options, etc. I wore mine because I had to in order to work and I was told that the brain would forget to hear if I didn’t wear them.
If people had sufficient understanding of hearing aids, were given them at a reasonable price and had “buddies” to coach them thru as we have for so many chronic diseases, we would be in great shape. I think it’s an absolute disgrace how much they cost and how little education there is.

Kyle said

As this is my profession let me break down some number for those in disbelief at the cost of hearing aids. My cost on a top of the line hearing aid is $1,400. I sell that hearing aid for $3,400. With our brand you will receive free service for the lifetime of the hearing aid at any dealer throughout the United States. For my patients I see them once every three months at min. to clean their ears, clean the aids, reprogram the aids ect. Out of the mark up we have we run right at $300 Gross Profit. That number fluctuates depending on the number of units dispensed that month. More often than not it is much lower than that due to high advertising costs these days. To say that anyone is getting rich from dispensing hearing aids is not the case. The manufactures are the ones making the big money in this industry. Those in private practice dispensing do not make the money people think we do. I’m in no way defending the price of a hearing aid but simple facts are that we have to sell them for these prices to keep our doors open. For those who can’t afford there are programs in place by these local practices that can get you the help you need for little to no cost at all. You will never know about these programs if you never go and talk to them.

Rick O'Neill said

@ Caitlin Rock, Au.D… Thank you for the reply. I am familiar with what you are describing as the powerful computer chips within the hearing devices. Their RAM capabilities for external programming from a computer to customize their EQ, Compression ratio and other parameters. Still in this day and age the total production cost per aid can’t (in reality) exceed $200.

If the Audiologist were to NOT bundle aid cost with their in office fees and return checkup fees I believe people with hearing loss might not be as gun shy of getting help. Also maybe health insurance providers may also look at this differently and cover the office visits.

If you were to see the advertised price of a VW Jetta as $42,000. including all service and repair for X years as opposed to $21,500 and a choice of where to take it for service what would you choose? I know what I would choose.

Believe me, I have choked down the cost of wearing hearing aids and I admire my audiologist for the care I get in their office. Fortunately I am able to afford the service and devices. I also know many who can’t. It is time to draw a line in the sand and call a spade a spade.

Brian said

I own two hearing clinics. We started in April of 2012 and through personal sacrifice and continued investment, we opened our second clinic in August of 2013. Our price to consumers are on the lower side of the industry average, but are not far off from the example that you mentioned in your article. What does seem to be severely off is acquisitioncost of “premium” Iinstrumentation. Our volume is considered high at 60 units per month between the two clinics, and our cost of acquisition for top of the line equipment is still about $2200 for a pair. Our first year in business, my take home pay was $23,000. In year two, I have improved that to almost $50,000. I am very proud of the way that we do business and the help that we provide to people in need. The only people on this board who should be ashamed of themselves are the ones voicing such a strong opinion on a matter that they are not qualified to chime in on.

KJ said

i feel like a sucker and probably is….. i purchased a top of the line pair of hearing aids at Beltone at a whopping $6,200. anyone interesting in buying ?

Rick O'Neill said

Brian, If your offices are paying $2200 a pair (at your cost) for devices then I would have to say the manufacturers are sticking it to the Audiologists. Thank you for doing your best to keep costs down for your patients.

James A said

I have been practicing for more than 19 years. Mostly private practice. I can assure you the profits are not what many people think they are. I wish we could sell them for less. I survive on referrals and some advertising but cost are high. If we sell them for less I might as well close the doors. Our average ASP is $1,800 per unit. That is as low as I can go. I’m trying to fit people with high end technology but can not sell it for less.

AudioDr said

I have been practicing audiology for 27 years. I have 9 years invested in my college education, 7 of which were devoted to audiology. Audiology is the lowest paid doctoring profession. Believe me you can make just as much money coming out of school with a 2 year technical degree as you can in audiology with a lot less debt than our new grads are incurring today. That said you can be " fit" by a hearing aid dispenser with a high school diploma, 3 month apprenticeship program and passage of a correspondence course type test. For all of you that want to buy your hearing aids by mail that is available (run risk of under amplication or damaging over amplification). For all of you bargain hunters you can go to your big box store where you buy your bulk toilet paper and be “fitted” most likely by a dispenser (non professional).They may even be a former stocker, baker, cashier who the store put on a fast track to becoming a hearing aid dispenser by their big box employee. They aren’t exactly going into the field to help people hear but will be lured into the field by the 50 to 60 K they can make vs. the 15 to 20 they are making previously. For the rest of you who may care that they are getting a professional hearing evaluation, a hearing aid that is prescriptive based, a referral to a medical professional for potentially life altering/threatening conditions, and professionally trained counseling skills to get you through the transition of wearing hearing aids…….see an audiologist. (American Academy of Audiology and American Speech Language Hearing Association are good resources for the consumer). Ask your audiologist if you are getting a bundled vs. unbundled price. It is a fair question. I know most people feel my professional time is valuable. I gladly pay my physician, chiropractor, dentist, optometrist for their time and they have contributed immensely to my life. I hope you will feel the same when you see an audiologist.

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Sam said

Yep, the iPad to hearing aid comparison is pretty terrible. Now if I had thousands of other products and hundreds of customers a day like a Best Buy, I would take that 15% retail profit. The only product sold in my office are hearing aids. That is what I focus on solely is hearing. In your chart you shows costs for the manufacturers but represent everything as straight up profit for the retail side.

Am I working out of my car here with no employees, no customer acquisition costs, no equipment costs, no utilities, and on and on?

If the percentages were comparable to the iPad and we had a 15% markup, that would mean we make $6,000 over the cost to purchase the instruments in an average month. My monthly expenses are roughly $50,000 to keep the doors open. When it is all said and done……I make about 10%-15% in reality. If $4,000 per set of aids went straight into my pocket with none of it taken out, I would be retired by now and I have only been an owner for 6 months.

Henry said

I agree the hearing aid companies are making the money but the audiologist make good money too, not as high a % as the companies that manufacture the HA. The cost to manufacture is low maybe $100.00 The companies are ripping us off. Something should be done about this. That is why medicare doesn’t cover these items.

Justin said

What so many people have failed to mention is how the technology has changed with each generation of products. 20 years ago, the number of people who found success with hearing aids of the time period was staggeringly small. In the neighborhood of 20-30%. Customers properly fit with current model, premium technology are experiencing success rates upwards of 80-90%. Why do you think that is? It is because the technology has improved immensely, even within the last 3-5 years. Those improvements aren’t just the size of the devices, but the level of clarity and speech understanding. Devices are also more durable than ever thanks to hydrophobic coatings that prevent corrosion and degradation. Comparing a hearing aid to an ipad is ludicrous. An ipad is not typically used constantly for 10+ hours per day, as hearing aids are. An ipad is not used in a 98.6 degree, humid environment that is constantly shaking and moving, as hearing aids are. And ipads do not require any real training to learn how to customize. My 3 year old figured it out in a few hours. But a 3 year old cannot begin to understand how to program a hearing aid. In addition, size DOES matter. Lets see how well all of those electronics inside the ipad work if we miniaturize them down to fit inside a hearing aid. Imagine paper-thin ipads…. Don’t you think the price might go up a little bit? In addition, as pointed out above, the article doesn’t take into account how many customers each day walk into my office needing hearing aids and refusing to buy them, AT ANY PRICE. Just for my own personal information, I have offered customers $6000+ hearing aids for $500, and the customer will still insist they cannot afford them. If that is truly the case, then why did they even come into my office and take up my time? They must have known they could not afford anything before they walked in the door. But never the less, I still have to pay my receptionist, my office manager, my marketing coordinator, my IT support, etc….

Robert said

Interesting to read how we compare similar high-tech products in different user markets. In which I believe is not fair to the consumer. The basic principals of business are positively correlated in each industry, even cost structure. The basic principal/benefit to supply and demand is to build quantity to lower your cost, even is you are building an ipad. Whenever you mass produce anything, ipad, hearing instruments or widgets you are going to have your cost to scale in your production. Therefore I believe the philosophy in comparing an ipad and hearing aids is somewhat flawed. Remember, Apple avoided producing a self funded dividend so it would not have to move capital to US from Europe and incur a 38% corporate tax hike on that capital. So, Apple borrowed the money at a 1.5% rate and paid their investors. My point is Apple has a larger margin on its product then what is being assessed.

Therefore correcting the model stated above with the difference in cost the two products are financially similar in nature. If you were to put in front of a person with hearing loss an ipad and a set of hearing aids which would the individual choose? My guess would be the ipad, because you can always turn the volume up on the ipad and compensate for the hearing loss. And, the ipad is cooler then hearing aids.

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Roy Brown said

It is a crime that hearing aid manufacturers/dispensers can charge (rob) needful clients when their costs do not merit the selling price of hearing aids. As you have compared to iPad and the same is true of smart phones.
What can be done about this? I am on my 3rd set and have spent enough to buy a car.

Maureen said

I don't know how many of the comments made here are from the hearing industry itself. To make a claim just don't buy hearing aids. It will bring the cost down. If you suffer from severe hearing loss like I do you might as well not get out of bed every morning. You won't hear the doorbell ring. You might not hear the phone ring. And when you do answer it you won't be able to hear the person talking clearly....or at all. The TV has to be turned up loud. With captions which is annoying to someone else living with you. My first pair I bought about 10 years ago. I managed to hang unto them for 9 years. With many repairs at about $150 each. They had cost me $4500. The same place has been trying to sell me a new pair for over $5000 which I truly needed because of newer technology. I finally had to buy a new one when there was no more hope for the old one. It turned out I am deaf in my right ear. So only needed the left. I went to Costco and bought one for about $1300 a year ago. So far happy with it.
Costco’s prices are less than half than the industry standard, despite the fact that its hearing aids are produced by the same major companies, including Rexton (a brand made by Siemens) and GN ReSound. Its in-house brand of aids, Kirkland Signature, is also built by Siemens. And unlike many private hearing aid dispensers, Costco employees don’t work on commission.

Bud said

Are Audiologists putting themselves in the same class as Football, hockey baseball and all overpaid atheletes then that's why hearing aids are costing so much. Sell at a lower cost and sell more. 6,000 dollars per set is only for these atheletes. Average people cannot afford them. In other words I have to be a baseball player with that salary to be able to afford them

Paradise Hearing said

This is a really interesting article. It is definitely something worth looking more in to. Thank you for bringing this to light.

rico567 said

There exists quite a mix of opinion in this thread. On the one hand, I agree with the person who said that as long as there are enough people willing to go into a traditional hearing aid store and shell out US$3-5,000 for a pair, the business will continue to operate just the way it does now.
But that's not the whole story. For the past ten years, I've been wearing a pair of Rexton Targa 2P hearing aids that I got from a strictly Internet reseller (which shall remain nameless) for $675 apiece, plus the support required to make the ear castings for the custom earmolds, and support ever since for tubes, batteries, etc.
Now I need a new pair of hearing aids, but it's the same old story in the traditional industry :just pay us $50 a month forever, and here you are. No go. Since I'm a veteran, think I'll go the VA route this time.....or if I don't qualify, maybe to Costco or back to the place where I bought these. I am part of that percentage that refuses to pay the kind of money (whatever the reason!) that traditional hearing aid stores charge.

Tim Rosenquist said

The iPad is a product people can relate to cost wise, but perhaps a better channel comparison would be vision/eyeglass related. The cost of my last pair of glasses was similar to my Audicus hearing aid. (I am fortunate I only need an aid for one ear, it would be great if a pair of aids cost similar to high end glasses, easy to equate) There are optometrists and eye wear shops in most large malls apparently doing well business wise. How different is the vision care product and business model from hearing care?
I understand that lenses and frames are low tech devices compared to hearing aids, but I suspect today the manufacturing and R & D cost are similar. Time for a change?
I suspect a service provider like Audicus could dramatically change the existing business model by piggybacking on a vision care centre and offering "would you like a free hearing evaluation with your eye checkup?" Has this been tried recently? I know I wasn't aware of my poor vision until I was tested and experienced what was good. I suspect most people simply do not know what is good hearing as they do not have the simple opportunity to experience it.
The only people who can justify the current end user cost of hearing aids are the people selling them and the users who absolutely need them.

Gwen said

Very interesting article. As I have watched smart phones, I pads, etc. develop I have often wondered why a better, cheaper hearing aid is or has not been developed for market.

Mark said

Great article and astute comments. People are not fools -- greed is always obvious. The extortion is troubling; and I'm not sure I understand Scott, the audiologist's quandary. The smaller percentage of people, "but a full 38% said No!!", who wouldn't buy, have their reasons. It's your job to find out why; but 62% is not a bad market share.

Ian Brittain said

Hi It gets even worse in the UK
We pay in £ Sterling what you pay in $ Dollars. ie we pay twice the over inflated extortionate price.

Then if we try to beat the system and buy from the USA, the British government charges us 40% in import tax and duty.?

Rob said

The easy solution to high costs would be to have audiologists reasonably charge for their services but not sell hearing aids. They should charge appropriately for the services they provide but the hearing aids could be sold by companies such as Best Buy. Unfortunately, there are many examples of health professionals who retail products at very high markups. I would rather deal with someone who isn't interested in retailing products but instead is providing their very best services in an unbiased way.

As for the cost of hearing aids. It is easy to go online and do a search of electronic components (assembled) and you can see that prices are a tiny fraction of the retail, often less than 10%. I have a Siemens bluetooth hearing aid transceiver that I paid $400 but found it on aliexpress.com for $35. If the retail market were to be opened up you would find the retail costs of hearing aids drop off a cliff.

My daughter needed a CPAP machine which the local pro wanted $2500 but we found it on line for $600. Same machine. Google is your friend...

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