Hearing Aid Reimbursement: A Discussion of Influencing Factors

Abstract

Reimbursement for hearing aids in the present time has become as complicated, if not more so, than any other area of health care. For many years, hearing aids were a noncovered item where insurance was concerned. The predominant model of bundling costs into a single dollar amount was copied decades ago from hearing instrument specialists. However, insurance companies and federal agencies are increasingly covering the cost of the diagnostic hearing evaluation and at least some of the costs associated with hearing aid purchases. One operational question is whether the bundled charge model is still appropriate, or should audiologists follow more closely the example of optometry whereby professional services are charged separately from the cost of goods sold? The models that have evolved constitute a broad mixture of bundling, partial bundling (i.e., partial unbundling), and complete unbundling. There exists no uniformity for which charge method is best. But, with greater frequency, insurance requirements are forcing a movement toward partial or complete unbundling of associated costs. Regardless of which charge model is adopted, calculation of the cost of service delivery for each audiology practice is an essential business component to justify charges and make educated decisions regarding participation in various insurance, cooperative, or network plans.

From the historical perspective, the commercialization of hearing aid sales began in earnest in the 1950s. Dispensers were individuals who completed a manufacturer's training course to become what was known as “hearing aid dealers.” Franchises or exclusive distribution models from companies like Acousticon, Zenith, and Beltone were very common. ¹ Hearing aid selection was performed on the basis of pure-tone threshold, speech threshold (i.e., spondee words), and monosyllabic speech testing. The speech items were presented via a vinyl disk on a record turntable. Hearing aid customers purchased the instruments via cash or contract payments. To speed cash flow, the contracts were commonly sold to banks who took a percentage of the charge and paid the hearing aid dealers immediately.

Legacy franchise brands, Acousticon and Zenith, faded from the dominant presence they once had, and brands like Miracle Ear and Beltone continue to this day. Nonfranchised hearing aid dealers signed contracts with individual hearing aid manufacturers or wholesale distribution companies to represent a variety of brands. ¹ As the distribution system changed, payment methods also changed starting in the mid-1970s. In addition to contracts that were sold to local banks, forms of payment broadened to include credit cards (today often with reward points for cobranded companies), health-oriented lines of credit, and, more recently, HMO and commercial health insurance company coverage of hearing aids and accessories.

Today, a myriad of coverage qualifiers, payment rules, and billing requirements exist in a cacophony of state and corporate regulations. Governmental coverage of hearing aids comes almost exclusively from three sources: the VA system, state Medicaid programs, or the Children's Health Insurance Program (CHIP). Eligibility for each of these programs varies by age, background (e.g., military or government service), and degree of hearing loss. This article will focus primarily on the following areas: Medicaid programs (adults and children), insurance/HMO coverage, audiology-related organizational options, and referral groups.

One of the areas explored by MarkeTrak 10 (MT10) is the cost of ownership and the relationship to third-party payments. In this article, we will review the types of reimbursement for hearing aids to provide a backdrop for the data from MT10 on both hearing aid and personal sound amplification product (PSAP) purchases.

Medicare and Medicaid service provider eligibility. Medicare is forbidden by law to pay for hearing aids (Section 1862 (a)(7) Social Security Act). ² Having said that, Medicare still plays a significant role in hearing health care. The diagnostic audiological evaluation is potentially reimbursable by Medicare when certain conditions are met (see below). Eligibility for payment by Medicare is available only when the services are provided by a qualified audiologist (not an audiology assistant or technician).

The federal Centers for Medicare and Medicaid Services (CMS) highlights eligibility criteria for qualified audiologists to participate in both Medicare and Medicaid programs. The qualifications of audiologists are legislative and found in section 1861(ll)(4)(B) of the Social Security Act (see 42 CFR 440.110 (c)). ³

The Act provides that a qualified audiologist is an individual with a master's or doctoral degree in audiology. Therefore, a Doctor of Audiology (AuD) 4th year student with a provisional license from a state does not qualify unless he or she also holds a master's or doctoral degree in audiology. In addition, a qualified audiologist is an individual who:

• Is licensed as an audiologist by the state in which the individual furnishes such services, or

• In the case of an individual who furnishes services in a state which does not license audiologists has:

  • Successfully completed 350 clock hours of supervised clinical practicum (or is in the process of accumulating such supervised clinical experience), and

  • Performed not less than 9 months of supervised full-time audiology services after obtaining a master's or doctoral degree in audiology or a related field, and

  • Successfully completed a national examination in audiology approved by the Secretary.

Medicare is not authorized to pay for audiological services when performed by audiological aides, assistants, technicians, or others who do not meet the qualifications listed earlier. Medicaid federal regulations are silent on the use of audiology assistants.

Under the Medicare regulations, audiological services are classified under the specified benefit of “Other Diagnostic Tests.” That is, under Medicare, audiologists are recognized for diagnostic testing only and cannot be paid for management, treatment, or intervention services. Furthermore, federal law forbids Medicare from paying for hearing aids and hearing aid–related services (Section 1862 (a)(7) Social Security Act). ² Medicare will pay for the diagnostic audiological evaluation if it falls under the heading of medical necessity (e.g., undiagnosed hearing loss, change in hearing status, and onset of new symptoms) even if the end result is the recommendation for hearing aids. However, Medicare will not pay for the hearing evaluation if the sole purpose is for the selection and programming of a hearing aid. Very often, Medicare gap supplements also do not cover hearing aids following the principle lead of Medicare.

( Editor's note : Currently (2020) joint legislation from the American Academy of Audiology, Academy of Doctors of Audiology, and the American Speech-Language-Hearing Association has been introduced that would grant audiologists “practitioner” status which would allow Medicare billing by audiologists for hearing-related treatment and services, not only diagnostics; H.R. 4056 and S. 2446, Medicare Audiologist Access and Services Act of 2019. In addition, H.R. 4618–The Medicare Hearing Aid Act of 2019 which was introduced in November 2019 includes language to grant audiologists practitioner status. This bill was added into HR 3 “The Lower Drug Prices Now Act” which passed the House of Representatives in December 2019. This is the first bill to pass the House of Representatives that includes coverage of hearing aids and related services for individuals with severe to profound hearing loss.)

In contrast to Medicare Part B, Part C Medicare Advantage (MA) programs do have the option of providing additional, or extended, benefits not allowed under regular Medicare (Medicare Manual 100–16, Section 30.2). ⁴ These include routine hearing tests (in contrast to nonroutine hearing tests for Medicare Part B) and fitting/evaluation for hearing aids. Repair of hearing aids also is allowed under the extended benefits, but replacement batteries are not eligible under this program. Not all Medicare Advantage programs cover routine hearing tests and hearing aids. Coverage of this extended benefit is typically posted on the MA's Web site and in their information packet. The availability of dispensing outlets and/or selection of hearing aids is sometimes limited as is the level of technology available to the individual. Each MA program is allowed to set its own parameters of what is covered and what is available to subscribers. The audiologist will need to contact the Medicare-eligible patient's MA to determine if there is coverage and to what extent.

Medicaid coverage for adults. According to a survey conducted by Arnold et al, at the University of South Florida, 28 states authorize Medicaid coverage of hearing aids for adults. ⁵ Medicaid is a combined federal/state program whereby the possible benefits for adults are outlined in federal regulation, but each state legislature has the option of whether to adopt some or all of these possible benefits. Patient eligibility for coverage of hearing aid benefits varies from state to state. Several states require a minimum average level of hearing loss ranging from mild (≥ 26 dB) to moderate (≥ 41 dB). Other states require that the individual need hearing aids for gainful employment. Replacement of the hearing aids also varies ranging from 1 year to 3 years. Of interest to audiologists, reimbursement for hearing aids and related services is commonly much less than for other types of insurance coverage. Florida's effective reimbursement is a pass-through system whereby the audiologist obtains the hearing aid from the manufacturer for a price of $228, and Medicaid reimbursement for the hearing aid is $228 (Agency for Health Care Administration, 2019). ⁶ Reimbursement for Indiana is $590 (Indiana Medicaid, 2019) ⁷ and for Illinois it is $376 (Illinois Medicaid, 2019). ⁸ In our search for information on dispensing fees, publicly available information was difficult to obtain. But, for illustration's sake, Florida pays a one-time fee of $115 per hearing aid for dispensing, programming, and all follow-up services, excluding repairs. Minnesota's payment rate for dispensing is $182 (Minnesota Department of Human Services, 2019 ⁹ ), and Illinois' binaural dispensing fee is $340. Because the low reimbursement tends not to cover the cost of service delivery, it may be quite difficult to find audiologists who accept Medicaid, despite the availability of the benefit to adults.

Medicaid coverage for children. It is often stated that the only thing state Medicaid programs have in common is that they have nothing in common. The only exception to this premise falls under the heading of EPSDT (Early and Periodic Screening, Diagnosis, and Treatment; Section 1905(r) of the Social Security Act). ¹⁰ EPSDT covers children from birth through 20 years of age and essentially states that if a child is diagnosed with a developmental or medical problem, Medicaid is required to cover the medically necessary diagnostic services, treatment (e.g., therapy), equipment, supplies, and other measures described in the Social Security Act to reduce or ameliorate detrimental effects of the child's health and development. As such, the availability of a hearing aid benefit for children younger than 21 years should not be an issue. But, depending on the state, requirements or limitations of benefits may be very similar to those listed for adults. That is, requirements may exist for minimum levels of hearing loss, varying time durations of hearing aid replacement, and requirements redefining medical necessity (e.g., enrollment and attendance in school). In addition, each state may specify additional requirements that determine eligibility for the hearing aid benefit (e.g., basic qualification to receive a hearing aid, monaural vs. binaural hearing aids). Some states require that the child is enrolled in school or a post-high school training program. If the child is of majority age and employed, regulations may authorize the need for a hearing aid to maintain employment.

Among the general requirements that can make the covered child ineligible for hearing aid services through Medicaid is the duplication of the service rendered by another provider. This may come about in either of two ways. For example, if the child is or has been dual eligible by commercial insurance and received a hearing aid through that venue, Medicaid is not supposed to also dispense hearing aids. The other possibility is that the child received hearing aids from one Medicaid provider and then proceeded to a second provider requesting the same service. This would not be an appropriate mechanism for obtaining a pair of back-up devices.

There is one additional factor that can limit the ability to dispense hearing aids to Medicaid-eligible patients: audiology services located in a hospital facility. Audiologists must be aware that Medicaid has separate handbooks, essentially administrative rules of operation, for different professional disciplines and health care settings. Audiology services, and especially hearing aid dispensing, are generally not recognized as being authorized for a hospital-based clinic having a place of service (POS) designation of in-patient hospital (POS-21). This also will be dependent on how hearing aids are defined in a particular state Medicaid system (e.g., supplies and medical devices). In the case of hearing aid services, the hospital may need to create a carve-out for outpatient clinic space equivalent to a private office (POS-11) to be reimbursed for hearing aid–related services, whether for child or adult. It is not unusual for hospitals to periodically create such carve-outs. But the financial accountability (e.g., salaries, equipment costs, allocation of support personnel, and space), administrative reporting requirements, and financial account designation may be different from other audiology and physician services that would be reported as POS-21. Hospital administration would need to be consulted on the appropriate ways to establish a POS-11 if or when required by Medicaid for hearing aid services.

To control costs, states increasingly are authorizing the services of utilization managers or subcontracted systems of providers. Under the first category, some states' Managed Medical Assistance (MMA) contractors have, in turn, contracted with a single corporate entity to provide all hearing services in that state. That corporate entity has the option to subcontract with local community-based providers for specialized services (e.g., pediatric audiology) but provides the majority of services to the MMA subscribers. When MMAs contract with a single corporate entity that employs audiologists, that corporate entity becomes both the utilization management reviewer for hearing services and provider of a system of providers. Typically, the audiology services firm's contract is not directly with Medicaid but rather with each respective MMA contractor. This is an important point because it removes the audiology service firm from direct Medicaid oversight in that state. However, the MMA is still under Medicaid oversight and will be the entity accountable to the state if noncompliance with Medicaid regulations is encountered.

Another model that is similar in some respects focuses on a corporate entity that does not have its own group of audiologists in-house but recruits audiologists to form a provider network that, in turn, is presented to an MMA. This model has not yet affected audiology to the same extent as it has for speech-language pathology, occupational therapy, and physical therapy services. Under this model, the professionals who agree to be part of this provider network are offered a prospective payment—that is, payment-in-full for all services rendered to an individual patient. The corporation serves as a combination of utilization management reviewer and corporate system of providers similar to the earlier description. The primary difference is that the corporation receives contract payments from the respective MMAs and pays each contracting audiologist a predetermined amount that covers all hearing-related services provided to each Medicaid-eligible patient. For both models, patients who are eligible for hearing services must meet the same criteria as listed under Medicaid eligibility rules for that state.

The one exception to what has been listed thus far focuses on osseointegrated implants. Osseointegrated hearing devices typically do not fall into the same category as standard hearing aids and are often considered durable medical equipment (DME) in many states. This holds true for both the semi-implantable devices with the mastoid bone-screw and the soft-band devices for children younger than 5 years. Authorization to order the surgically implantable version of the osseointegrated device is obtained by the hospital for the surgical portion and for the device. The programming and fitting authorization is obtained by the audiologist's office. Both the hospital portion and the audiologist's services authorization are typically obtained directly with the MMA and not through a utilization management review entity. A potential problem involving reimbursement for programming, orientation, and dispensing is the absence of a code specific to osseointegrated device dispensing. As a potential workaround, there have been attempts in Florida to use the monaural hearing aid dispensing code (Level II HCPCS code V5090) for the osseointegrated device.

Commercial insurance/HMO coverage. Similar to Medicaid in a state-by-state comparison, the only thing in common on the part of commercial insurers and HMOs is that they have nothing in common. A total of 23 states have a legislative mandate for insurance coverage of hearing aids. ¹¹ The requirements, as well as the benefits, vary significantly from state to state. Maximum eligibility age ranges from 18 years in Georgia and 24 years in Delaware through adulthood. Benefit coverage specifies annual replacement hearing aid eligibility every 36 to 48 months in several states. And dollar coverage ranges from $1,000 to $3,000 per hearing aid per ear to a maximum total benefit of $4,000 (Oregon).

In states not having a legislated mandate, many, if not most, insurance contracts do not contain a hearing aid benefit. But insurance coverage contracts vary from subscriber to subscriber even within an individual insurer/HMO. Examples from our own clinical experience include the following: some contracts have a hearing aid benefit for children from birth to 12 months but no hearing aid benefit for children older than 12 months. For one of our patients, the insurer offered a $1,500 coverage payment per hearing aid with replacement benefits after 3 years. Another insurer offers $2,500 per hearing aid coverage with replacement every 3 years. In contrast, Blue Cross/Blue Shield of Minnesota ¹² has established large volume purchase contracts with select hearing aid manufacturers and will reimburse audiologists based on an established price for type (e.g., BTE and ITE) and classification (e.g., CROS/BICROS) of each hearing aid unit. Minnesota Blue Cross Blue Shield also considers hearing aids to be DME which would place them in the same category as wheelchairs and other mobility aids. Because of the variation in contracts within an insurance company/HMO and variation between companies, coverage precertification must occur for each patient with insurance benefits.

A recent survey ¹³ found that the average price per hearing aid for adult users was $2,191 when there was insurance coverage for at least a part of the cost. Overall, the average out-of-pocket expense is $1,222 with insurance paying $871 ( Fig. 1 ). These numbers differ from the amounts cited earlier due, in part, to the inclusion of a broad mix of third-party payers including Medicaid (for adults), military and VA benefits, and Medicare Advantage contributions. The military/VA is one of the most often cited third-party payers for hearing aids followed by Medicare advantage and HMOs.

Figure 1.

Price per hearing aid with and without third party assistance.

Of those surveyed, 52% said that all or part of the hearing aid cost was covered by a third-party payer with the military/VA having the highest percentage ( Fig. 2 ). In general, the rate of third-party payment has been steadily increasing since 1989 and reached 52% in MT10 (including the VA; Fig. 3 ).

Figure 2.

Third party payment assistance sources.

Figure 3.

Percent hearing aid owners who received third party payment assistance from 1989 through 2018.

The examples cited in the preceding paragraphs constitute some form of direct payment or reimbursement to the audiologist for the professional services, the hearing aid(s), and earmolds. There is another model of hearing aid coverage of which audiologists must be aware: the contracted provider network. In this model, each audiologist must be contracted with a corporation that functions as a provider network. Two variations of this model include a corporation with multiple offices within a state or region and independent practices that contract with a corporation to provide services, upon referral, through the auspices of that corporation. In the first variation, all state-wide or regional offices carry the name of the corporation, and all audiologists and support staff are employees of that corporation. The corporate entity, in turn, contracts with respective health care companies (insurers or HMOs) and may receive a capitation rate (X number of dollars per patient per month) to cover services provided to subscribers to that insurer/HMO. The audiologists in each office also are encouraged to provide services to customers apart from any relationship with a contracted health care entity. In fact, varying portions of their salaries may be based on commission to encourage increased sales to walk-ins and physician referrals.

With the contracted provider network, each audiology practice remains independent and merely contracts with the corporate entity to receive referrals linked to a health care insurer. The audiologist must be aware that brand selection, pricing, and reimbursement are fixed and limited in some cases. There also may be some practice restrictions in how evaluations are performed, tests that are to be included, etc.

Another model exists that is a hybrid of the two variations described earlier. Under this model, the audiologist or audiology practice contacts with a national firm that offers administrative and hearing aid purchasing options. Under the administrative aspect, the corporation can provide assistance with marketing, financial monitoring and forecasting, human resource expertise, assistance with billing and coding, and operations and business development. There may be an option for group purchasing of hearing aids from manufacturers under a bulk purchasing pricing agreement. This hybrid model requires a membership subscription but attempts to save money for the practice in the form of reduced fixed overhead costs. The national firm also uses its resources to increase income for each member practice via practice growth strategies. The audiologist does not necessarily face the same restrictions as they would with the contracted provider network and typically has the freedom to go outside of the buying group to purchase from other manufacturers. Sales and reimbursement are not linked to any particular insurer or HMO, and proceeds come directly into the practice.

Yet another model involves independent audiology practices coming together to form a cooperative (co-op). A defined financial investment is required of each practice for the purchase of stock in the co-op. Each practice has a vote to elect a Board of Directors from among the member practices. The Board's mission is to ensure that members have access to consultation on increasing efficiency of the practice, access to marketing and media outlets, and administrative support for staff training, to name a few benefits. As with many different types of co-ops, the members share in the overhead expenses associated with the services listed earlier. But the overall cost is typically less than if the independent practice covered all expenses by itself. Another benefit of an audiology co-op is greater negotiating influence to obtain purchasing discounts on merchandise for sale. Apart from the initial stock investment and shared expenses, hearing aid and related service profits appear to go into each respective practice.

And lastly, there is the simple hearing aid purchasing co-op. In this case, independent practices band together to establish volume purchase discounts from the various hearing aid manufacturers, with the goal of saving money on the wholesale purchase, to increase profitability and competitiveness based on the price perspective. In this case, there is no central administrative organization and no benefits beyond the ability to bulk purchase hearing instruments at a discount.

Hearing aid repairs and ongoing service. The discussion thus far has focused on reimbursement aspects for sales of new hearing aids. Of great interest to any audiology practice is the reimbursement for repairs and new earmolds. Medicaid hearing services typically has a fixed price for both hearing aid repairs and earmolds. Several of the large manufacturers will price their out-of-warranty repairs according to the Medicaid price list for that state. To qualify for the Medicaid price, the audiologist must ensure that the patient's Medicaid number is attached to any repair form. The reimbursement from Medicaid often becomes a pass-through, with a dollar-for-dollar payment to the audiologist, based on the allowed cost of the repair. No profit is made; but with regard to invoice pricing, no money is lost. However, that does not take into consideration the fixed office overhead costs of examining the hearing aid for repair, packaging and mailing, and the time to check-in the repaired hearing aid and reprogram the device. Some insurers have a similar arrangement (see Blue Cross/Blue Shield of Minnesota) to that of Medicaid. Again, non-Medicaid reimbursement for repairs, earmolds, hearing aid checks, and related services varies tremendously. Some companies require prior authorization, but precertification is an absolute must to ensure knowledge of coverage details.

Balance billing for hearing services. It is noteworthy that the diagnostic hearing test can be broken out as a separate coverage item to be reimbursed as a procedure apart from any hearing aid services. This breakout item will depend on medical necessity requirements of the insurer. Balanced billing for hearing aids following insurance payment is often a possibility for commercial insurers/HMOs, but there are exceptions. The audiology practice must have a copy of the contract between the practice and the HMO/insurer/provider network to know whether balanced billing will be allowed and under what circumstances. The actual contract, once finalized, is not always shared with the audiology practice. In that case, a representative of the practice should contact provider relations for that insurer/HMO to request a copy of the executed contract. The contract should stipulate the scope of services that the practice is eligible to provide and also billing policies (e.g., 30-day submission limit and restricted code selection).

In addition to a copy of the executed contract, it is helpful for the practice to obtain the text of the benefit coverage policy for hearing aids. This can often be found on the Web site for the insurer or HMO. Typically, there will be a link for providers. On the Providers page, there will be several options including View Policies and Guidelines (or a comparable title). Clicking on that link will bring up a menu of various topics including osseointegrated implants, cochlear implants, and hearing aids. Clicking on the desired topic often will give background information, justification for coverage, eligibility limitations, CPT and Level II HCPCS codes that the company will recognize, and ICD-10 diagnosis codes that are recognized by the company's computer system. If topic Hearing Aids is not listed, the audiology practice will need to call the insurer to learn whether a hearing aid benefit exists.

Bundling versus unbundling. Cost transparency in health care has been a topic of intense discussion in recent years. The focus of discussion has been extremely broad with emphasis on hospitals and physician practices. But hearing health care has not escaped unscathed. Two federally sponsored committees—the President's Council of Advisors on Science and Technology (PCAST) (2015) ¹⁴ and the National Academies of Sciences, Engineering, and Medicine (NASEM) (2016) ¹⁵ —have both looked at the barriers to accessing the full range of hearing health care services with an emphasis on hearing aids. Both pointed out that bundling the price of the evaluation, instrument, fitting and programming, and after-care has created a perception of unaffordable access. Indeed, the MT10 (2019) survey found that the average price of a hearing aid is $2,166, and the median price is $2,000 with a range of $500 to $3,000+ ( Fig. 4 ). This pricing includes the devices and ongoing services. A factor leading to the perception of unaffordability is the lack of delineation of professional services versus the cost of the hearing aid device. As a result, many people believe that the bundled price is the price of the hearing aid only.

Figure 4.

Total price per hearing aid reported by current owners (left graph). Average total price by age of the hearing aid reported by current owners (right graph).

The concept of bundling prices into a single sales price has been around since the early days of hearing aid franchises and hearing aid dealers. Nonaudiology dispensers could not be paid for the diagnostic audiogram, and hearing aids were limited in adjustment capability. At most, programming consisted of rotating potentiometers (pots) on the back of the hearing instrument to change the maximum power output (MPO) and frequency response. The major portion of the dispensing process was the counseling on how to get the most out of hearing aids and what to expect. Audiologists did not enter the hearing aid dispensing scene until the 1970s with gradual increases in dispensing practices into the 1980s. By then, bundling costs into a single price was essentially the standard method of charging. And with hearing instrument specialists as the main competitors to audiologists, the implicit desire was to copy the pricing structure to be competitive in a similar manner. Consequently, the practice of bundling became even more firmly grounded in both dispensing communities.

A little more than 10 years ago, several events took place that began to challenge the concept of bundling. Starting in 2008, there was the requirement for audiologists to have their own NPI numbers. With physician referrals, audiologists could be paid directly by Medicare for performing diagnostic hearing evaluations, even if the outcome recommendation was a hearing aid (Medicare Manual 100–02, Chapter 15). ¹⁶ Of course, in the eyes of Medicare Part B, there had to be a justifiable reason to perform the hearing evaluation (e.g., undiagnosed hearing loss, change in hearing status, onset of tinnitus, and imbalance). And the purpose of the audiometric testing was to supplement the physician's examination with additional diagnostic information. But if the hearing loss was not amenable to medical treatment, a hearing aid could be recommended with the diagnostic service covered for payment. The impact of this event was to separate the diagnostic evaluation from the cost of the hearing aid. The “free hearing test” could now be broken out as a separate, reimbursable audiological professional service charge for a significant percentage of older adults. Many insurers and HMOs followed suit and began recognizing audiologists as members of their payer panels for diagnostic testing. The MT10 survey reported that among the 12% of the hearing aid owners who indicated that at least some services were charged separately, 46% saw a separate charge for the diagnostic audiological evaluation ( Fig. 5 ).

Figure 5.

Percent of hearing aid purchasers who experienced some type of charge unbundling.

And with respect to the Food and Drug Administration (FDA)-required (or waived) medical evaluation, both the PCAST and NASEM review committees recommended abolishing that requirement due to the rarity of auditory system disorders requiring medical attention. The FDA is not currently requiring medical clearance for hearing aid purchase at the recommendation of PCAST and NASEM.

With more insurance companies covering hearing aids, requirements for unbundling by some insurers have forced the issue to the forefront. Case in point : the audiogram is covered via insurance payment for the professional services rendered; the insurer states a requirement to use Level II HCPCS (Health Care Procedure Coding System) codes for hearing aids (monaural or binaural code), earmold(s), and dispensing fees. Medicaid in several states has adopted this billing itemization for tracking and reimbursement purposes. And some insurers are requiring a copy of the individual hearing aid invoice for either a pass-through payment or a percentage mark-up as determined by the insurer. The realized result of itemization, in some cases, has been a reduction in total reimbursement for the insurance-covered services. In the MT10 survey, 32% of the hearing aid owners who reported paying for services, indicated that all their services were charged separately. Twenty-eight percent reported that they were charged separately when the number of aftercare visits exceeded the number included in the purchase, thus carving out some of or all of the aftercare services for self-pay status rather than insurance reimbursement.

State legislative regulations increasingly are lending themselves to unbundling via the 30 (or 45)-day trial. If the patient returns the hearing aid, some states require complete credit refund for the instrument and other states require a percentage refund. Depending on the regulatory wording, the refund may imply inclusion of all costs associated with the hearing aid or some percentage of what the individual paid. Also, the dispensing fee, as a professional fee, may be included in the refund requirement for some states, but not mentioned in others. The diagnostic audiogram is most often a separate payment issue that is left out of the refund equation unless it was a “free hearing test” and, therefore, bundled as part of the price of the hearing aid. A bundled contract/sales price may complicate the issue of how much to refund because of the inability to separate the value of the professional services from the device cost.

In consideration of the PCAST (2015) ¹⁴ and National Academies of Science, Engineering, and Medicine (2016) ¹⁵ criticisms, unbundling helps promote transparency to allow the patient to identify and value separately the price of the hearing aid and accessories versus the costs associated with professional services. There are a variety of ways to unbundle, if the audiologist is called upon or desires to do so. One way is the itemization of the hearing aid, earmold, programming and dispensing fee, and follow-up visits—which can then be packaged according to the needs and desires of the patient (e.g., three visits for $X; six visits for $X). Another option would be to break out the price of the hearing aid and earmold and offer a professional fee with a description of what it includes. These are two examples of many ways to unbundle. But the major point is that unbundling helps the consumer understand how the hardware and the professional services contribute to the total cost associated with a hearing aid. Depending on the extent of the itemization, the patient can make an educated decision regarding the services most needed and most appropriate for that person's needs.

Despite the perceived benefits of unbundling, there are occasions where it is not appropriate to unbundle. Those occasions are heavily influenced by insurance requirements, geographic locations, state or local regulations, or contract requirements. If the decision is made to unbundle when possible and bundle when required, the calculation for the total cost of the hearing aid, accessories, and related services should be comparable for comparable services.

Pricing strategies for unbundling. There is no single guideline or formula to direct pricing levels. The only basic requirement is the ability to justify your pricing strategy based on the cost of service delivery if called upon to do so. Apart from this discussion on hearing aids, an absolute necessity for a successful audiological practice is that the organization know, on a per procedure or per hour basis, how much it costs to provide services. ¹⁷ This basic cost will vary from one practice to another and from one geographic location to another. It will be influenced by many factors such as lease/mortgage payments, insurance costs, equipment depreciation and replacement, utilities, professional and occupational licenses, administrative equipment, software, office supplies, and disposable supplies. Additional costs may include fire inspection fees, other civic fees, continuing education costs, costs associated with vacation and sick leave, and advertising. These costs should be annualized and then divided by 2,080 (i.e., 40-hour work-week for a 52-week year) to obtain the breakeven costs per hour. Another way to calculate the breakeven point would be to estimate, on average, how many minutes are required to perform various tasks associated with professional duties and calculate a per minute amount for each procedural element. The percent mark-up for profit and cash reserve will be added on to the hourly or procedural costs to derive a total cost of providing services.

Instrumentation-related costs will include the basic component costs (e.g., hearing aid wholesale price, earmold impression material, earmold finished product wholesale cost, battery package wholesale cost) plus an established mark-up for administrative overhead. This calculation focuses on the time-based costs associated with ordering and receiving the earmolds, hearing aids, and supplies. Generally, this runs between 3 and 8% of the wholesale cost. Calculation of the administrative overhead for this category includes administrative support salaries, mailing costs, associated disposable supplies, and the cost per minute for programming (or reprogramming) the hearing aid. The first three items should be annualized and totaled. The next cost item (programming the hearing aid) is based on the overall practice expense calculation of the per minute cost to deliver services and should be multiplied by the number of new and repaired hearing aids per year (anticipated) and added to the annualized support salaries, mailing, and disposable supply costs. This total is then compared with the total overhead cost per year to derive the percentage associated with administrative overhead. That percentage is the justifiable basis of markup on each retail item.

In addition to providing a basis for hearing aid–related charges, knowing the cost of service delivery is useful for informed decision making of whether to sign a contract with a network or an insurance company. If the reimbursement is substantially below the cost of service delivery, the audiologist must think long and hard about the benefits versus liabilities of being part of that network or that insurer's payer panel. While it may give the practice increased market share, too much market share at a negative reimbursement level is bad economics for sustaining an ongoing business.

Mail-order and over-the-counter hearing aids. Looking to the future, there are two issues that may force the need for unbundling and emphasize the importance of knowing the per unit time costs: mail-order hearing aids and OTC hearing aids/PSAPs. Anyone can now order almost anything through the Internet, and it seems that hearing aids are now included. ¹⁸ Ordering a brand-name hearing aid through the Internet often requires a professional to perform an audiogram. Once the audiogram is done, however, that may be the end of the relationship with the local audiologist. The consumer sends the audiogram to an online retailer, the hearing aid is selected and preprogrammed, and the consumer receives the unit in the mail. A variation of this is the consumer sending an audiogram to the online retailer, purchasing the hearing aid unprogrammed, and then taking the hearing aid to an audiologist for programming and counseling. The audiologist then receives payment from the manufacturer for the services provided. A third option is the consumer receiving the hearing aid and programming software, and the consumer completes his/her own programming of the device. Unless the individual has significant experience in programming hearing aids, this option often is beyond the reach of many individuals.

Direct-to-consumer (DTC) hearing aids can be purchased without an audiogram or any contact with an audiologist. These units are generically programmed for a mild or moderate hearing loss. The consumer listens to the sample instruments, in a manner similar to trying reading glasses, and selects the one that sounds best. Although hearing aids and PSAPs are two distinct entities, some online retailers are advertising the same device as both a PSAP and a hearing aid (usually in separate advertisements).

It may not be beyond reality that the hearing aid/PSAP recipient seeks the assistance of a local audiologist to tweak the program and provide counseling on how to maximize utility of the instrument. Knowing the cost per unit time will help justify charges associated with counseling and possible programming for PSAPs and OTC hearing aids. In MT10, when asked how much those who purchased PSAPs suspect they would have benefited from having professional guidance, 38% replied “a great deal,” 28% replied moderately, and only 3% replied “not at all” ( Fig. 6 ).

Figure 6.

Survey among PSAP owners of degree of anticipated benefit if they had gone to a Hearing Care Professional.

A “hearing evaluation” is also now available over the phone or through a computer, which some hearing aid suppliers may use to select and preprogram hearing aids. These hearing aids will tend to be those generically programmed for mild to moderate hearing losses. If that does not match the consumer's hearing loss or the level of service is not up to expectation, the local audiologist may enter the situation with the primary goal of dealing first with patient dissatisfaction or lack of benefit, and then working with the individual to provide better hearing function.

Concluding thoughts. Much has changed since hearing aids were first sold 60+ years ago. State and federal regulations, the complexity of hearing aid capabilities, knowledge about the physiological causes and effects of hearing loss, the influence of cochlear and auditory central nervous system function on hearing aid programming, and corporate regulations of governmental and commercial payers interact in a way to make reimbursement a challenge. Fixed overhead cost of administrative support is an essential element of any practice whether the administrative support comes from an administrative assistant or extra time on the part of the practice owner. The cost of that fixed overhead must be taken into account for any instrument- or accessory-related price mark-up, ensuring that even the hidden costs are held in account. And the issue of bundling versus unbundling has come to the forefront because of insurance reimbursement for some services but not for others. Together, these factors have completely changed the way that audiology is practiced whether in a private office, hospital, university clinic, or nonprofit agency. A detailed portfolio on each payer is now a practice necessity to submit a clean claim for reimbursement, to have knowledge of which services are covered and which codes to use, and to know which costs will fall to the patient. Not only is each commercial payer unique, each state is different with regard to nuances of Medicaid coverage of hearing aids for children and adults. Establishing a reference library for each payer and including state and federal regulations has become an essential administrative tool. The three primary factors—insurance, mail-order or Internet purchase of hearing aids, and over-the-counter hearing aids—may force many practices to consider unbundling charges to separate professional services from the cost of goods sold. But to unbundle successfully, it will be imperative to know the cost of service delivery to inform appropriate, business-related decision making.