BUISNESS PLAN FOR A FULL SERVICE DEPARTMENT OF

AUDIOLOGY
EXECUTUIVE SUMMARY
About 17 percent of adults in the United States, 36 million, report some degree of
hearing loss. At age 65, one out of three people has a hearing loss and 60 percent of the
people with hearing loss are either in the work force or in an educational setting. While
people in the workplace with the mildest hearing losses show little or no drop in income
compared to their normal hearing peers, as the hearing loss increases, so does the
reduction in the compensation. About 2 3 of every 1,000 children are heard of hearing
or deaf and it is estimated that 30 school children per 1,000 have of hearing loss.
(National Information Center on Deafness and Other Communication Disorders.
National Institutes of Health, Council of Aging - June 2010, and the MarkeTrak VIII: 25Year Trends in the Hearing Health Market November 2009)
The profession of Audiology had its origins in the 1920s when audiometers were
first designed for measuring hearing. Interest in this profession surged in the 1940s
when soldiers returned from World War II with noise induced hearing loss due to near-by
gunfire or to prolonged and unprotected exposure to machinery noise. Others had
psychogenic (non-organic) hearing loss as a result of severe emotional and mental stress.
The Veterans Administration took a lead role in providing hearing testing and
rehabilitation through hearing aids, auditory training, and speechreading (lipreading)
programs. Since the 1940s and 1950s, the study of hearing, hearing loss, and audiologic
rehabilitation, has expanded and now is a vital healthcare profession.
New tests of hearing have been developed including evaluations of functions of
the outer ear, middle ear, cochlea, acoustic nerve, and related brain areas. Techniques
1

using physiologic measurements that were in the research stages 20-30 years ago are now
routine. Modern technology and computerization have dramatically influenced hearing
aids. Hearing aids have changed from "boxes" in shirt pockets and "cords" to the ear to
highly sophisticated "completely-in-the-ear canal" aids. Virtually any kind of hearing loss
can be improved by a hearing aid. Cochlear implants are increasingly common and
successful.
Today, audiologists and the practice of Audiology have widespread visibility.
Audiology has a presence in public schools, health care centers, private practices, nursing
homes, community agencies, the military, hospitals, colleges and universities, hearing aid
dispensing centers, hearing and speech centers. They test hearing and listening ability;
they fit hearing aids and assistive listening devices; they provide training and
rehabilitation programs for individuals with hearing and listening disorders; they
participate on health care and educational teams to plan and provide the most appropriate
services.
I received a PhD from the University of Michigan in 1977, and have been trained
as a clinical Audiologist and hearing scientist and have been employed in the following
settings 1) a University Audiology professor, 2) hearing scientist and a specialist in inner
ear anatomy, 3) Clinical Audiologist employed by Otolaryngologists, 4) Audiologist
employed by hearing aid professionals and 5) my own audiological practice.
1.1 Objectives
Establishing its own Audiology Department.

Setting aside three rooms for a) audiological testing, counseling and

rehabilitation, b) OAE, ABR and VNG/ENG testing and c) multipurpose

space for storage, repairing hearing aids and for the preparation of hearing
aids for delivery.

The following services should be provided, a) Diagnostic audiological

testing; b) Otoacoustic Emissions (OAE) testing, c) Neurological (ABR)
testing, d) balance testing (ENG/VNG), e) Interoperative monitoring, f)
and a full scale rehabilitation clinic which would include counseling,
training, the dispensing of hearing instruments and cerumen management.

Staffing would include an audiologist, audiometric technician, neurologist,

psychologist, social worker, receptionist, a community outreach person
and medical biller.

A relationship with an Otolaryngologist is critical to provide medical

clearances and the removal of impacted cerumen to support the diagnostic
and rehabilitation program.

Medicare will pay for the audiological testing, as seen by the sample
Medicare Audiology Superbill, while private insurances, including but not
limited to Blue Cross Blue Shield of Michigan, will contribute toward
reimbursement for rehabilitative treatment.

1.2 Mission
The primary goals of the Audiology program are medical and rehabilitative
management of the patients. As such, all of its patients should receive, as part of the
treatment plan, diagnostic audiological testing, which may include both ABR and
VNG/ENG testing. The hearing rehabilitation clinic would also reach out to greater
population surrounding the three clinics.

For instance, in Clinton Township, as of the 2010 census, Clinton Township,

which is 28 square miles. Had a total population of 96,796 and is Michigans most
populous township. The median income for a household in the township was $50,067,
and the median income for a family was $61,497. Males had a median income of $48,818
versus $29,847 for females. The per capita income for the township was $25,758. About
4.2% of families and 5.8% of the population were below the poverty line, including
7.4% of those under age 18 and 6.8% of those age 65 or over. There were 40,299
households out of which 28.1% had children under the age of 18 living with them, 48.7%
were maried couples living together, 10.9% had a female householder with no husband
present, and 36.6% were non-families. 30.8% of all households were made up of
individuals and 10.8% had someone living alone who was 65 years of age or older. The
average household size was 2.35 and the average family size was 2.98.
In the township the population was spread out with 22.4% under the age of 18,
9.1% from 18 to 24, 30.9% from 25 to 44, 23.4% from 45 to 64, and 14.3% who were 65
years of age or older. The median age was 37 years. For every 100 females there were
92.4 males. For every 100 females age 18 and over, there were 88.5 males.
(http://en.wikipedia.org/wiki/Clinton_Township,_Macomb_County,_Michigan)
1.2 Source of Funding - Internal.
Michigan Audiology Associates would capitalize the Audiology Department. The
financial needs would include purchasing a) audiometric booth(s), b) audiological
diagnostic equipment including an audiometer, impedance audiometer, Otoacoustic
Emissions testing system c) neurological (ABR) testing equipment. d) Vestibular testing
such as ENG or VNG equipment, laptop to support rehabilitation clinic, and assorted

miscellaneous expenses to support a hearing aid dispensing clinic, such as vacuum

suction to clean hearing aids, Dremel drill to make hearing aid shell adjustments, hearing
aid supplies, hearing aid inventory, otoscope, video-otoscope. and equipment for cerumen
management.
1.3 Source of Funding External
It is assumed that the essential population served by Michigan Neurology
Associates is for patients who are receiving Medicare. As can be seen by the Audiology
Medicare Superbill, Medicare will provide the payment for much. if not all, of the
audiological testing. Those not insured by Medicare, the Medicare Audiology Superbill,
can be used as a guideline to establish the price structure for those privately paying for
audiological testing and rehabilitation.
The rehabilitation clinic could generate enough funds through the dispensing of
hearing aids to support the continuing financial needs of the Audiology Department.
Historically, hearing aid clinics have used the following marketing techniques a) open
houses were there is a special promotion over a limited time frame, b) telemarketing, c)
newspaper advertising, radio and TV advertising, and direct mail. With the developing
Internet technology, marketing has included the social media such as Face book. Of
course, the best marketing technique is referrals from other professionals and present
patients.
1.4 Cash Flow Analyses

It is assumed that since the primary population of patients of the Michigan

Neurology Associations is those who receive Medicare. Therefore, the sample Medicare
Audiology Superbill will predict the cash flow for all audiological services based upon
the concept of medical necessity. Therefore, it is expected that every Medicare patient
seen will quality under the concept of medical necessity for all of the audiological
services. (See 2012 Medicare Fee Schedule for Audiologists Non-Facility Fee and
Medicare Audiology Superbill)
Typical audiological testing and Medicare Non-facility fees for each Medicare
patient would include:
a)

Audiometry Air & Bone

$36.08

b)

Speech Audiometry Complete

$34.04

c)

Acoustic Immittance Testing

$32.00
TOTAL =

$102.12

The total time typically required performing these basic audiological testing is no
more than 45 minutes. Assuming there is a full day of work, the average number of
patients seen would be 8-10 depending on the scheduling. As seen from the Audiology
Superbill there are many audiological tests that can be performed. These tests would
include the ENG test battery, ABR testing and Otoacoustic Emissions testing. Michigan
Neurology Associates already bills for the ABR testing and ENG test battery and already
has calculated Medicare payments. The testing for ENG/VNG, ABR and OAE should

not take more than one hour forty-five minutes assuming no patient or equipment
problems
The primary profit center for the Audiology Department is hearing aid dispensing
and rehabilitation. The costs of operating this division of the department would include
the purchase of an otoscope, videotoscope, laptop, suction for cleaning hearing aid,
Dremel drill for hearing aid repairs and special equipment for cerumen management
(optional). Hearing aid dispensing services, as now practiced, provides hearing tests and
rehabilitative hearing aid adjustments for patients at no cost. Hearing aid wearers also
need batteries, hearing aid drying devices, assisted hearing devices, and earplugs that also
can be marketed. Medicare would cover the audiometric tests that support hearing aid
dispensing.
There is a very close relationship between the operation of a hearing aid
dispensing clinic and hearing aid manufacturers in that the manufactures provide close
support and training to an Audiologist to operate and program their hearing instruments.
This also would include free seminars.
Hearing instruments sell at a reasonably high cost as compared to the providing
of medical services. This fact has caused much consternation in light of the fact that a
hearing instrument is not a cure for a hearing loss. It would be important to include a
more comprehensive rehabilitation program for patients to help each patient and their
family to cope with a hearing loss and the use of hearing instruments. There are some
programs available nationally. This area requires additional research and it must be
determined if a more complex program is cost effective, or even necessary for every
patient.

A substantial profit can be made when dispensing hearing aids. Typically the cost
of hearing instruments should be no greater than 30-40 percent of retail cost. Therefore,
if a hearing instrument is marketed for $2,000 the cost of the instrument to the
Audiologist should be no greater than $500 - $600. Of course, cost structure depends on
the needs of the patient and the degree of sophistication of the hearing instrument in
attacking specific communicative problems.
Also, more than 80% of all patients who need hearing aids suffer from
permanent sensorineural (8th nerve) bilateral hearing loss. It is very common for both
ears to have similar hearing losses. Research has shown that wearing two hearing
instruments are very important because of the ability to communicate is enhanced.
Especially in a noise and other communicative environments (etc family gatherings,
church, TV). Two hearing instruments are recommended because many times, with a
binaural hearing loss, one instrument causes more problems in that one ear is now
significantly better than the non-treated ear causing communicative inbalances in sound
directionality and a breakdown in speech comprehension.
Hearing instrument dispensing requires a constant source of patients because not
every patient over 60-65 years of age would benefit form a hearing aid and those that do
benefit do not purchase hearing instruments for a variety of reasons including but not
limited to denial, vanity, cost and the basic inability to make decisions. It is also critical
that family members and/or friends accompany the person who may need a hearing
aidwhen this persons hearing is tested. There are many reasons for this that goes beyond
emotional support. For instance, a spouse may essentially insist that the other spouse
needs hearing instruments. Therefore, the counseling process in the purchase of hearing

instruments can be as long as one hour to one and a half hours which would many times
include the basic audiological testing of pure tones and speech.
Hearing instrument returns are problematic but nationally there should be no more
than 10-15% return rate. The return rate is many times related to buyers remorse.
There is much hand holding in managing a successful hearing instrument practice but a
successful proactive would be an important profit center for Michigan Neurology
Associates.
In order to have a successful practice an effective referral system must be
developed which would require physician staff involvement prescribing hearing
instruments to their own patients. The best referrals, of course, are from successful
treatment of patients of Michigan Neurology Associates.
Because of the intense need for qualified patients that would benefit from hearing
instruments, at least 15-20 patients per week, at ages above 65 years must be tested.
Then of that amount at least one- third of the patients, weekly, should be a qualified
hearing aid candidate. The conservative monthly gross for a start-up practice should be
over $20,000 a month. This, of course, depends upon the amount of time that can be
committed to this part of the Audiology Department.