Hearing Aid Leasing: Drive Revenue in the COVID Era
Even before the COVID-19 pandemic, leasing was resurging as an alternative method to acquiring hearing devices. While it might feel like a new concept to some, Staab recalls that leasing hearing aids began as early as 1956.1 Other retailers initiated a hearing aid rental program in 1962, with one referring to his rental program as the “granddaddy of hearing aid rentals.”2 Since banks did not want any part of the hearing aid financing or leasing business, providers were required to internally fund these rental programs by purchasing the instruments and renting them to patients. While this process requires significant financial resources, it became a lucrative business to offer people with hearing loss devices for minimal cash outlay.3
According to a brochure from Delta Hearing Aid Leasing,4 an early leasing company, these programs offered:
- economical flexibility for the hearing impaired,
- small upfront cash commitment with no down payment or security deposit,
- up to 30 days of trial,
- no interest or carrying charges,
- all testing and earmolds included,
- the patient’s choice of the latest styles, and
- the rental could be extended to two to three years with the option to purchase or turn in the old device for a new one.
Although these early leasing programs were never popular, Harrison indicated that there was an 85 percent success rate for patients who adopted the program.3 By the late 1970s, leasing companies such as the St. John program had surfaced as part of the Electone Hearing Aid Company.5 In this program, dispensers were not required to purchase devices to rent them, nor did they have to assume the accounts receivable. The leasing company collected all bad accounts and absorbed the losses of patients who died during the lease.
LEASING VS. BUNDLED PRICING
The cost for patients to lease hearing aids during the 1970s was not all that different from what it is today. The monthly pricing for a two-year monaural lease, depending on the product, was $14 to $21 ($73 to $109 in 2019).2 The two-year binaural lease, though not routine at the time, was priced at $30 ($156 in 2019). While the leasing concept was interesting for dispensers, most only used it for patients who could not afford to purchase upfront. These programs were never commonplace, only accounting for about two percent of hearing aid acquisitions. Thus, the well-known bundled upfront pricing system became the standard industry method for hearing aid acquisition. It is reasonable that bundled pricing in favor of leasing occurred for two fundamental reasons:
- Technology in the 1970s was essentially the same for all manufacturers. Proprietary product differences did not exist until the eras of programmable and, later, digital processing. Therefore, new instruments every two or three years did not usually result in an increase in hearing benefit, so patients tended to replace devices only when they wore out.
- The Greatest Generation of Americans were the purchasers of hearing aids at that time. As a generation, they only purchased items that they could pay for fully in cash. These were also Great Depression survivors, and they were very hesitant to use credit cards. In fact, more common than any kind of financing or leasing was the use of layaway, a purchasing model that has largely disappeared.
LEASING IN TODAY’S MARKET
The children of the Greatest Generation, the baby boomers, are now hearing health care patients, and will be until about 2050.6 This generation is not as frugal as their parents, outspending even Generation X. They grew up in the prosperity of the 1950s and ’60s and spend their money on computers, smartphones, cable TV, Netflix, Amazon Prime, timeshare property, and other new devices and concepts. Furthermore, they often lease their cars and many other products that make life easier—not to own them, but to make use of them.
Baby boomers with hearing impairment are more apt to pay for the use of products such as hearing aids for the following reasons:
- Changing technology. Hearing instrument technology advances about every 18 months and offers very significant changes every three years. To baby boomers, keeping up with technology is something they understand based on their use of computers, smartphones, and other products. Since hearing instruments also have a high technology life cycle like that of these other products, it makes sense to take advantage of technological innovations through a short-term lease instead of a long-term purchase.
- Usable life of hearing aids. The average life of a hearing device may be between five and seven years. As with other high-tech products, components wear out, follow-up visits are required to ensure benefit, and repairs are necessary, often after the warranty expires. Leasing offers patients the opportunity to upgrade their technology every three years and, during the lease, follow-up visits are included. The devices are always under warranty, resulting in a high-quality, low-stress hearing care experience.
- High cost of hearing health care. The high initial cost of sophisticated hearing aids compared with their average usable life expectancy positions hearing devices as an ideal lease product. Like automobile leasing, phone and equipment leases, or subscriptions to various programs, hearing aid leases provide the lowest possible payment for consumers who wish to use a product while maintaining the flexibility to change and/or upgrade in the future. Leasing is particularly beneficial to those with progressing hearing impairment or for those who normally plan to replace their devices within a three- to five-year period.
- Attractive design of leasing programs. Depending on the leasing company, patients may acquire hearing aids with no down payment or initial cash outlay and only an affordable monthly payment for a three-year period. At the end of the lease, patients may turn in the hearing aids, lease new upgraded devices, or purchase their current hearing aids for a predetermined amount.
- Leasing reduces the frustrations over today’s highly competitive market. A patient who purchases hearing instruments from an audiology practice once will not necessarily come back for the next purchase. In fact, data from the Ear Service Corporation shows that 55 percent of patients will shop around if they do not have a warranty and lose their devices and need to replace them.7 Thornhill and Martin caution that for baby boomers, who are often not loyal to brands or specific hearing health care providers, leasing offers a method to ensure that the patient will return to the clinic at the end of the lease to consider their options.8
- Financial uncertainty related to COVID-19 and market fluctuations. Many target hearing aid users may be on a fixed income or have a good deal of their net worth tied up in real estate, the stock market, or other assets that are experiencing uncertainty or massive swings in value during this unprecedented time around the globe. Some patients may be hesitant to part with cash up front at a time like this, but committing to a relatively small monthly payment of $100-175 per month might feel more palatable. The shelter-in-place has had many lasting impacts on people of all ages, but undoubtedly it’s caused some of those with hearing loss to realize that communication with loved ones is paramount and that they need to take the first step towards improving their hearing.
Offering modern payment options such as hearing aid leasing can differentiate a private practice and allows more consumers to get the best technology for their hearing care needs.
ABOUT THE AUTHOR: Dr. Traynor is a Private Practice Consultant with Pivot Hearing, the leading private practice consulting firm. Pivot Hearing works with change-oriented hearing care practice owners to help them make great decisions, convert those decisions to action, and achieve the sustainable success they desire. Dr. Traynor is also an adjunct professor of audiology at the University of Arkansas for Medical Sciences, Little Rock, AR and an audiology consultant. He is also a member of the board of directors of the American Tinnitus Association, and a co-author of Strategic Practice Management, 3rd Edition.