A long time Hearing Aid Client(Customer) visited my office yesterday, and among other things, asked me a question, that perhaps hundreds of Clients have asked me, especially in the last 10 years, and that is: Why are Hearing Aids so Expensive?
He said that for what hearing aids are now costing, he could buy the most expensive computer, even 3 computers, for the price of 2 hearing aids.
He is basing his arguement on the fact that those selling hearing aids are charging $5,000 to $8,000 per pair.
I have been informed that the profit margin that BEST BUY makes, has been squeezed to 7%.
That means to me, that a computer that sells for $1,000 yields a gross profit to BEST BUY of $70....thats dollars.
Profit is measured by Revenue per square foot in the Retail Industry, so the only reason I can think of, as to why BEST BUY continues to sell computers is because that product generates a lot of traffic, and BEST BUY makes a tremendous profit on computer accessories, which they do.
Besides, how could the biggest name in Electronic Sales, not sell computers?
Besides, if you get a 52 times turn (ROI) on the computer business, those 7% dollars generate a lot of revenue.
In my opinion, the reason Hearing Aids cost so much, is because there is no real competition in the Hearing Aid Industry, and I mean at every level, and as a result Everyone involved, from Manufacturers to Retail Hearing Aid Dispensers, including Medical Doctors and Audiologists, charges as much as they can for Hearing Aids, as long as those paying for them are willing to buy the Hearing Aids.
If 20% of the total of Hearing Aids manufactured are bought by the VA, and 20% are purchased by Government Agencies for Welfare Recipients, and 20% are paid for by former Employers through 3rd Party Pay Providers, such as Insurance Companies or HMOs, and there is no cost resistance from any of the above, because they don't know the difference, or any better, as they say, and they don't really care because its not their money, then the remaining 40%, the Buying Public, that pays out of their own pocket, is also willing to pay the outlandish prices, and there is no real viable competitive alternatives, then the Industry chugs along, selling about the same number of Hearing Aids each year, Worldwide, but at continually increasing costs, then the Profits keep increasing.
If a Television Show, such as 60 Minutes, were to ever expose the Hearing Aid Industry for the Cash Cow it is, the Market would change within a year, and perhaps over night.
COSTCO makes a higher Gross Profit, and more importantly, Net Profit, on the Sale of Hearing Aids then any other Product they sell.
SEARS covers their Butt with exploitation charges, because they work on a commission since MIRACLE-EAR CENTERS are a CONCESSION, meaning that they lease the Space to MIRACLE-EAR, and the Employees do not work for SEARS.
Even so, Hearing Aids provide the Highest Margin of Profit sold in a SEARS Store.
CVS also works on a sales commission.
So called DIGITAL HEARING AIDS cost the Dealers (Customers of the Hearing Aid Manufacturers) from about $200 to $1,000 dollars, and anywhere in between.
There are almost as many different models within the BRAND as there are in the Automotive Industry.
Hearing Aids cost $200, $300,$400,$500,$600,$700.$800,$900,
and $1,000 DOLLARS.
The Buying Public, the Consumer, has not idea of what Model of Hearing Aid they are buying.
As the saying goes, A Pig In A Poke.
They can be charged whatever the Dispenser feels comfortable charging.
The Consumer can be paying $3,000 each for an aid that costs the Dealer $200 Dollars. How would they know?
In a Free Market, Sellors can charge Buyers, whatever they want and can get away with.
It is up to the Consumer, the Buyer, to influence Pricing.
In my Opinion, if the Market (the Consumers) simply refused to pay more than $1,000 Dollars for a Hearing Aid, which would provide $800 Dollars per aid Profit to the Dealer, or 80% Gross Margin, then the Price would drop to $1,000 Dollars, and the Manufacturers and Dealers would then compete to provide the Best Product for the $200 Dollar Cost.
If the other Buyers, that constitute 60% of the Purchasing of Hearing Aids, as previously described, refuse to pay more than $200 or $1,000 Dollars per Hearing Aid, depending on their level, then the Prices would drop.
An iPod,iPhone,or any cell phone, is a lot more complicated, and costs more than any Hearing Aid to Manufacture.
It is true, there is no Dispenser involved, that spends an average of 4 hours per year on instructions and adjustments, on those Products, but if they could get away with it, and make anywhere near the Profit that is made in the Sale of a Hearing Aid, then they would.
It has been my experience, and observations, over the past 50 years, that anytime any Product or Service is so overpriced as Hearing Aids currently are, that a White Knight appears on the scene and destroys the exploitive business practice.
Comparing cell phone manufacturing costs to hearing aid manufacturing costs is simply not valid. The two operate on completely different economies of scale.
Worldwide hearing aid market - 7.5 million aids per year.
Worldwide cell phone market - 1.8 BILLION phones per year.
You would have to sell 7.5 million hearing aids every year for 126 years before you would equal 1 year of cell phone sales.
Cell phones probably do contain more technology than hearing aids - but when you produce them by the billions your cost of manufacturer goes through the floor.
And, don't kid yourself, you're paying for the cell phone every month you pay for $35 cellular service bill. The profit isn't the phone, it's the service.
firstly, welfare does not does not provide hearing aids to adults, and neither do most insurance companies. The VA is the largest distibuter of hearing aids in the USA (when they can afford it). So it is more than 40% that purchases hearing aids privatly. Not having insurace coverage on hearing aids is probably a good thing in most cases. The way insurance companies work is take all the profit margin away from the provider and only cover the least costly option. Take for instance Hear USA insurace for Wellcare in GA provide hearing aids but they are single channel ,single memory (essentially an analog HA with no adjustment). You dont have the option to pick a better hearing aid with directional microphones for noise or automatic programs, you tale the crappy one or buy it your self.
Best buy can sell computers at no essentially no profit margin becuase they sell thousands of them every day, and the sales people have no training.
A typical dispensing audiologist may sell 2 or 6 hearing aids in a day if they are really doing well. With that they must pay rent pay employees, pay overhead, pay insurance, pay for CEU's, pay for certification, pay for liscencing, pay for shipping, letterhead, electricity, equipment which costs $50,000-$100,000 to equip a small office etc.
You may think you know enough about hearing loss, and digitial circuits, compression, attack and release times, appropriate gain, etc...
but the average 70 year old consumer does not.
Hearing aids are costly, but what is more improtant, being able to hear or having your cell phone, or cable TV?
Another intersting point is that a Hearing Aid Dealer or Hearign Instument Specialist typically charges more for hearing aids than Audiologists do. A Hearing aid Dealer or HIS requies no college education, but an audiologist must now have a docterate degree!
How come a HIS can justify charging the same price when part of what you are paying for is expertise?
in the UK hearing aids are provided to the people at little or no charge (but they must wait up to 6 years and must have fullsize behind the ear hearing aids and are still analog.
Most audiologists do not charge $3000 for a $200 hearing aid, and models of hearign aids must be disclosed to the patient, they are free to look at the level of technology they are thinking about.
You are paying for expertise and service. A hearing aid is not a cell phone, TV or PC. You can go to Radio Shack and by a portable amplifier for 20 bucks- but that still is not a hearing aid. You get what you pay for. Be sure to shop around and know the credentials of your seller.
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