‘Hearing Review’ Survey of RIC Pricing in 2017

Marketing | March 2018 Hearing Review

By Karl E. Strom

Hearing aid pricing trends relative to practice affiliation and gross revenues.

A survey that The Hearing Review conducted in late-2017 queried dispensing professionals on the price of receiver-in-the-canal (RIC) hearing aids, and specifically looked at RIC pricing in relation to the types of businesses, practices revenues, and how these businesses were faring.

When comparing the survey responses to previous surveys, the results indicate that in the past year and a half, RIC prices have fallen by about 8%. The survey also points to a fairly wide range of average prices—from about $900 to $3,100—at US audiology and hearing instrument specialist offices in the wide range of settings surveyed. In general, the data suggests that larger practices are using their local branding, distribution, buying power, and reputation to leverage higher prices. Similarly, practices belonging to independent networks/chains, along with those owned by or affiliated with a manufacturer or network retailer, are more likely to be able to leverage their marketing power and have higher-priced RICs compared to other practice settings. Finally, as with most surveys on hearing aids, audiologists—due to their education and unique skills—tend to command a premium for hearing aids compared with hearing aid specialists (although some of this is due to lower prices offered at big box retailers which are predominantly staffed by hearing aid specialists).

Methods and Survey Respondents

An email survey¹ (via Survey Monkey) was sent to the Hearing Review email list of 13,700 hearing care professionals in early July and again in early August 2017. The survey consisted of 15 multiple choice and open-ended questions that sought to identify the profession of the respondent, practice setting/affiliation, gross revenue, pricing of RICs at three technology levels, prices of the highest and lowest priced hearing aids offered by the practice, among other questions.

The survey yielded a total of 267 responses from the United States (2.0% response rate), of which 209 were ultimately kept for analysis (ie, a sample of responses from July 13 to August 31). As shown in Figure 1, 129 respondents identified themselves as dispensing audiologists (62%) and 80 as hearing aid specialists or a similar designation (38%). This is relatively close to what might be viewed as a representational sample of the dispensing market in the editor’s view.

More than half (53.8%) of respondents who were hearing aid specialists (HAS) and three-quarters (78.3%) of the dispensing audiologists (DA) were working in either independent practices not affiliated with any group, or affiliated with an independent network, co-op, or buying group (eg, AHAA, Audigy, etc) as shown in Figure 2. The chief differences between dispensing audiologists and hearing aid specialists (HAS) in this survey was the larger number of HAS working in businesses affiliated with or owned by either a big-box retailer (17.5%) like Costco or SAM’s Club or a hearing aid manufacturer (20.0%). HAS were also more likely to work in offices affiliated with or owned by a corporate chain (eg, Miracle Ear, Beltone, etc).

About 1 in 10 audiologists (9.3%) in the survey reported working in a non-profit. Because of this, some of the RIC pricing analyses later in this article excludes this smaller group of 12 audiology NPO offices. Additionally, due to the 14 HAS big box respondents—a slightly higher proportion than in previous surveys—it is possible that this may have had the effect of reducing average prices (median prices are included in the discussion for this reason).

Figure 3 shows the differences between the professions in gross revenue, another metric analyzed in this report with respect to RIC pricing. Survey respondents worked predominantly in businesses that produced over $1 million dollars (DA 28.1%; HAS 21.3%) or $251-500,000 (DA 18.8%; HAS 32.5%) in gross revenue. The key difference between the professions in this survey is that HAS businesses had nearly twice the percentage of offices in the $251-500,000 range and several of these were associated with corporate chains and big- box dispensing offices.

The reader might ask why only the prices of RICs were surveyed. The editor believes pricing surveys conducted online can become extremely complicated for respondents—and possibly less accurate—with multiple open-ended questions about the prices of CICs, ITEs, ITCs, BTEs, and RIC/RITEs at multiple technology levels (eg, asking the survey respondent to fill in 15-20 fields). Thus, this survey limited the questions to RICs in three technology levels (economy/basic, mid-, and premium levels). Industry statistics show that RICs have become the “go-to” hearing aid for dispensing professionals.² In the third quarter of 2017, receiver-in-the-canal/ear hearing aids constituted over two-thirds (69.3%) of all hearing aids sold in the US commercial/private market (Figure 4),³ and, not surprisingly, RICs now tend to be the key style in most technology/price categories (although other devices, like CIC/IICs, can be the highest-priced hearing aid offered in some offices).

RIC Pricing 

Practice type and affiliation. Table 1 shows mid-2017 pricing for RICs for all audiology and hearing aid specialist offices responding to this survey, separated into six practice settings. It also provides data about the highest- and lowest-priced hearing devices offered by each type of practice. When looking at all dispensing audiologists’ responses (n=129), the average prices for economy, mid-level, and premium technology RICs were $1383, $2113, and $2799, respectively, with medians of $1,300, $2,100, and $3,000. For hearing aid specialists (n=80), the average prices for the three technology levels were $1286, $1,918, and $2,579, with medians of $1,200, $1,997, and $2,750. When the DA and HIS responses are combined, the overall average prices were $1,346, $2,039, and $2,715 (medians: $1,273, $2,000, and $2,900).

For DA respondents (Figure 5), those businesses affiliated with an independent network or buying group/co-op were, in general, able to command higher prices for their RICs, followed closely by those affiliated with or owned by a hearing aid manufacturer and independent practices with no affiliations. In some cases, the average prices between these groups differed by as much as $300 per unit. DA practices owned by or affiliated with a corporate chain offered the lowest prices of these groups—even lower than the non-profits (eg, universities, etc) surveyed, although the number of respondents (7) makes this data somewhat unreliable. This is also the case for the big-box pricing (which was the lowest in the survey) in which only one audiologist responded.

Among HAS respondents (Figure 6), there is a fairly consistent progression in price, increasing as we move from independent practices (and independents belonging to buying groups) to those affiliated with or owned by a manufacturer or chain retailer. It’s particularly interesting for independents to note that both HAS and DA offices affiliated with a buying group or co-op were able to command a higher price (and probably higher margins) than strictly independent offices.

In recent years, there has been much controversy and discussion regarding the availability of low-cost quality hearing aids—particularly during the PCAST⁴ and NASEM⁵ deliberations, and now with the FDA being tasked with creating a new device classification for less expensive over-the-counter (OTC) hearing aids.⁶ Figure 7 shows the median price range of the three RIC technology levels by profession (DA and HAS), as well as for the median highest- and lowest-priced hearing aids offered by all survey respondents. This data suggests it should be relatively easy for a consumer to purchase a hearing aid for around $1,000 (or $2,000 for a binaural set), although these aids may not necessarily be the ones aggressively marketed by the practice. For all respondents (DA and HAS), the median range of the highest/lowest-priced device was $999-$3,100, and with median range for the three RIC hearing aid technology levels of $1,273-$2,900 (Table 1).

For consumers looking for the lowest-cost hearing aids available, big-box retailers are an obvious solution, with an average price range of $683-$1,750, and a  median range of $500-$1,550 per aid (Table 1).

Considering these competitive pricing pressures from big box retail, the survey asked dispensers how they marketed and serviced their lowest-priced devices. Only two audiologists in the survey (<1% of survey) reported they offered either a PSAP or a hearable ($499 and $395, respectively). Three audiologists (1%) marketed their lowest-priced device as a hearing aid with no service for an average price of $1165.

About one-fifth (21%) of respondents reported marketing their lowest-priced device as a hearing aid with separate or extra charges for service (Table 2), up from 16% in the 2013 dispenser survey.⁷ However, the average prices for these hearing aids (DA $1026; HAS $953; All $996) were only marginally different (?10%) than the overall responses for the lowest-priced aids at for-profit practices found in Table 4 (DA $1,129;  HIS $902; All $1,035). In fact, the HAS respondents who marketed the device in this way actually charged more on average than those who serviced the aids in the traditional way. It should be noted, however, that those charging extra for service or additional visits tended to have higher prices in general, and it’s quite possible they represent a more sophisticated/savvy group of practice marketers.

In the 2013 HR dispenser survey (conducted December 2013),² the average “lowest priced” device cost $1,025, with a median of $995. In this survey, there was very little difference: the average lowest-priced device was $1035, with a median of $999 (Table 3). However, in the 2013 survey, only 6% of all practices offered a hearing device for less than $500. In the present survey, 12% of all offices offered a device for $500 or less, 27% for $800 or less, and 61% for $1000 or less. As with the previous discussion about hearing aid technology levels and pricing, HAS offices were more aggressive in offering a lower-priced device.

When looking at the data in Table 1 and Figures 5 and 6, an industry critic might raise an eyebrow and submit that practices owned by or affiliated with manufacturers are propping up average selling prices (ASPs). However, almost all (9 of 11) DA offices and about half (7 of 16) HAS offices in this category were large practices with revenues exceeding $750,000 (see next section for why this tends to increase prices). Also, when looking at the combined DA and HAS data, manufacturer-affiliated offices charged on average only $65, $42, and $30 (1-4%) more for each successive technology level than independent practices affiliated with buying groups/co-ops. In any event, ASPs for RICs are falling fairly fast, as demonstrated later in this article.

Gross revenues and hearing aid prices. Table 4 shows RIC pricing relative to the gross revenues of DA and HAS offices. The data excludes non-profits. What’s apparent is that, for hearing aid pricing, practice size matters. Larger practices—especially those with multiple offices with a larger breadth of services (eg, tinnitus/balance) and/or more resources in terms of marketing, physician referrals, etc⁸—may be able to leverage their advantages and offer hearing aids at higher prices (and probably better margins). Concomitantly, these practices may also have larger overhead costs in terms of office(s) and equipment expenses, payroll, marketing, debt service, etc.

Figures 8a-b show DA and HAS pricing for RIC economy, mid-level, and premium aids, separated into six gross revenue levels of practices in the survey. The figures exclude data for big box and non-profit offices. In general, the pricing for each hearing aid technology level decreases as the gross revenue of the practices gets smaller. This holds true for both DA and HAS offices, albeit with some differences.

For audiologists (Figure 8a), the difference in RIC prices between a $1MM+ practice and one with $100-$250K in gross revenues (the most common type in this survey for both DAs and HAS) is $200, $300, and $250 per aid for the premium, mid-, and economy-level technology levels, respectively. This equates to a 6% price difference in premium technology and a 14-20% price difference for the mid- and economy-levels.

For hearing aid specialists (Figure 8b), the difference in RIC prices between a $1MM+ office and one with $100-$250K in gross revenues is $450, $200, and $60 per aid for the three technology levels, respectively. This equates to a 16% price difference in the premium technology and a 4-9% price difference for the mid- and economy-levels.

Hearing aid prices were reduced significantly for those practices with gross revenues below  $250K per year (28% of survey respondents). In fact, hearing aid specialists’ businesses in the sub-$250K category dispensed RIC hearing aids at a 20-30% discount compared to the those offices with gross revenues of $251-500K.

These gross revenue pricing comparisons were less dramatic for DA practices, where the pricing differences between practices with $100-250K and $251-500K of gross revenue were less than 10%.  However, DA practices with gross revenues below $100K sold their premium and mid-level RICs at a 10-20% discount relative to DA practices that had gross revenues between $251-500K.

So, what does all this mean? While one can interpret the data in many ways, it’s apparent that larger practices, regardless of their affiliation or ownership, are able to charge considerably more for their hearing aids and services. This should be no big surprise. However, this survey also suggests there is something of a “haves” and “have nots” divide in terms of critical mass and practice gross revenue. If you consider the above information, as well as Figure 3 which shows the distribution of practices in the survey, it would appear that a “stable practice” might be defined as having around $250K+ in gross revenues—where premium and mid-level hearing aids no longer need to be offered at comparatively large discounts.

Further apparent advantages are presented for those business owners once they get to the $750K+ revenue level. When combining the DA and HAS data, dispensing businesses generating $750K or more in revenue (about one-third of survey respondents) are able to command about $100-$300 or more per unit than those practices in the $251-500K category (one-quarter of survey respondents).

On the other side of the coin, those practices doing less than $250K in gross revenues (28% of both DA and HAS offices in the survey) operate at a significant disadvantage, possibly being left to concentrate their sales in the increasingly competitive economy-level segment—the market segment that has the most rapidly falling prices…

Some conjecture about pricing trends. As noted previously, this survey queried dispensing professionals only about RIC hearing aids and the highest and lowest-priced hearing device offered by the practice. Previous HR surveys included pricing questions about all styles of hearing aids, including traditional BTE, ITE, ITC, and CIC aids, and then used Hearing Industries Association statistics³ and other responses about the utilization of the technology levels to arrive at an “average hearing aid price.” Thus, some caution is offered in presenting this section.

The Hearing Review 2016 dispenser survey⁹ (February-March 2016) reported the total weighted average prices of $1,491, $2,256, and $3,008 for economy, mid-level, and premium technology hearing aids (ie, all BTE and ITE styles). That same survey reported average prices of RIC aids at these three technology levels to be $1493, $2261, and $3013 (all within $5 or 0.3% of the overall weighted average price). Because 2016 survey respondents indicated that their technology mix was 22.2%/40.3%/37.5% for the respective technology levels, the total weighted average price of all hearing aids in 2016 was estimated at $2369—$108 more expensive than the mid-level RIC.

Figure 9 reflects the recently reported RIC prices in this survey (Table 2), as well as pricing information from HR surveys in 2013⁷ and 2016,² and combines these data with the weighted average prices for all hearing aid styles at three technology levels reported in HR and other available industry surveys (2004-2015). The data suggests that, from March 2016 to July 2017 (16 months), hearing aid prices have decreased by 8.8% in the low- and mid-level and by 9.1% in the premium technology levels. The new survey results also suggest that average prices for economy hearing aids have decreased by 19.6% since December 2013. Based the same hearing aid technology level mix as 2016,⁹ the estimated average hearing aid price in mid-2017 was $2160—$98 more expensive than the mid-level RIC and a $209 less expensive (8.8%) than the 2016 average hearing aid price.  When considering the medians, the price decrease from 2016 to 2017 was 8.2%.

As pointed out in several previous HR surveys, hearing aid pricing (when adjusted for inflation) has been relatively flat since 2004 (Figure 9). The editor is skeptical that overall hearing aid prices have decreased so dramatically in the 16 months between surveys (March 2016-July 2017). Industry market analysts have pegged average selling prices as decreasing by about 1-2% per year. Instead, a higher-than-usual representation of big box retailers may have contributed to the lower prices. Having said that, virtually all the information (including median pricing figures) in this survey point to a much more competitive environment—now and to come—for both dispensing audiologists and hearing aid specialists.

Summary

This survey, conducted in the third quarter of last year (Q3 2017), provides some interesting insights into RIC pricing and overall dispensing trends:

• RIC prices appear to be decreasing at a faster-than-usual pace, particularly in the economy segment. The average prices for RIC hearing aids in mid-2017 were $1,346, $2,039, and $2,715 (medians: $1,273, $2,000, and $2,900) for economy, mid-level, and premium hearing aids, respectively, for all respondents in this survey (Table 1). Sixteen months earlier (Q1 2016), the 2016 HR survey found RIC prices of $1,493, $2,261, and $3,013 for these RIC aids (medians: $1,500, $2,247, and $3,000)—or about a 7%-10% average (3%-15% median) price decrease.
• Low-cost hearing aids are being offered by more dispensing businesses. When excluding big box retailers and non-profits, the average price of the lowest-cost hearing device in a practice was $1,035 (median $999). The lowest priced device offered by audiologists averaged $1,129 (median: $1,000), and the lowest-priced device for a hearing aid specialist averaged $902 (median $945). Only 12% of all the practices surveyed offered a device for $500 or less, and about twice that percentage (27%) for $800 or less. However, 61% offered a low cost hearing aid for $1,000 or less. The survey suggests HAS offices are much more aggressive in offering these lower-priced options. More than one-fifth (21%) of respondents reported marketing this lowest-priced device as a hearing aid with separate/extra charges for service, up from 16% in the 2013 dispenser survey.
• Larger practices are able to market RICs at higher prices. In general, the pricing for each RIC technology level decreases as the gross revenue of the practices gets smaller relative to gross revenue. When combining the DA and HAS data, dispensing businesses generating $750K or more in revenue (about one-third of survey respondents) are able to command about $100-$300 per unit or more than those practices in the $251-500K per year category.

References

1. Hearing Review online pricing survey. Available at: https://docs.google.com/forms/d/e/1FAIpQLSdOWok6IraZGRt3y90g4EB1ljIChQF2zCCzjaIg_3soLjaZlw/viewform
2. Strom KE. The RIC as a disruptive technology. Hearing Review. 2014;21(6):6. Available at: https://hearingreview.com/2014/06/ric-disruptive-technology
3. Hearing Industries Association (HIA). HIA Statistical Reporting Program, 3rd quarter 2017. Washington, DC: HIA;October 2017.
4. Presidents Council of Advisors on Science and Technology (PCAST). Aging America & Hearing Loss: Imperative of Improved Hearing Technologies. Available at: https://obamawhitehouse.archives.gov/sites/default/files/microsites/ostp/PCAST/PCAST%20hearing%20letter%20report.pdf
5. Strom KE. Special Report: NASEM Committee looks at Regulations for OTC hearing devices. Available at: https://hearingreview.com/2017/06/nasem-committee-looks-regulations-otc-hearing-devices/

6. President Trump signs OTC Hearing Aid Legislation into law. August 19, 2017. Available at: https://hearingreview.com/2017/08/president-trump-signs-otc-hearing-aid-legislation-law/
7. Strom KE. HR 2013 dispenser survey: Dispensing in the age of internet and big box retailers. Hearing Review. 2014;21(4):22-28. Available at: https://hearingreview.com/2014/04/hr-2013-hearing-aid-dispenser-survey-dispensing-age-internet-big-box-retailers-comparison-present-past-key-business-indicators-dispensing-offices/
8. Phonak Market Research Department. 2011 Survey of US dispensing practice metrics, Part 1. Hearing Review. 2012;19(08):16-23. Available at: https://hearingreview.com/2012/08/2011-survey-of-us-dispensing-practice-metrics-part-1/
9. What Works Toolkit. Petuluma, Calif: CareCredit. April 2016.

Correspondence can be addressed to Karl Strom at: [email protected]

Citation for this article: Strom KE. Hearing Review survey of RIC pricing in 2017. Hearing Review. 2018;25(3):28-38.