Hearing aid pricing scams

Steve Hoffman steve at accessone.com
Tue Sep 2 08:35:24 EST 1997


 HMO's Hearing-Aid Deal Sounds Better Than It Is

 Wall Street Journal 8/27/97


 Thousands of South Florida retirees, promised a huge discount on
hearing aids by their HMO, have actually been paying nearly the
full retail price, and in some cases even more.

 Since June 1996, Humana Medical Plan of Miramar, the state's
largest Medicare health-maintenance organization, has offered a
$700 discount on hearing aids to its Medicare members in South
Florida under a contract with 80 independent hearing centers.
Local price comparisons, however, show that the prices to which
the discount is applied are sometimes hundreds of dollars higher
than the average retail prices of the same hearing aids.

 Prices and other information provided by employees of the
hearing-center network show that Humana members, after taking the
$700 discount, pay within $100 of the average retail price on 10
of 18 models offered at most South Florida hearing centers. On
four other models, Humana members' savings range from $150 to
$300. On the remaining four models, Humana members enjoy roughly
the full discount offered.

 In some instances, Humana members don't benefit at all. Take the
Starkey Mini-Canal model, which Humana priced at $1,495. After
the discount, a Humana member pays $795 for one unit. Here's the
rub: The same model is priced at $795 at area stores -- before
any discount.

 And in the case of two other models offered through Humana's
plan, the discounted price is roughly $100 more than the basic
retail price in other stores. (Price checks on other Medicare
HMOs in Florida didn't reveal similar differences in pricing.)

 Humana officials say they weren't aware of the pricing anomalies
under their so-called Gold Plus Plan in South Florida because
they hadn't received any complaints. Based on an investigation
prompted by a reporter's questions, officials at parent Humana
Inc. in Louisville, Ky., say they found no pattern of
overcharging and concluded that their members are receiving a
benefit from the discount. They acknowledge that some of the
prices Humana members paid were above average retail prices but
that others were the same or lower.

 "We feel comfortable with the value we are receiving and our
members are receiving," says Humana spokesman Bill Weronka.
"Admittedly, I may be able to go out and get a better price. But
we knew pricing would be variable. In our contract, we're taking
out that variation."

 Humana officials say their main goal in contracting with a
network of providers was to establish a set price list to give
members more certainty about the cost of a hearing aid. Under
prior systems, Humana members would receive varying prices
depending on where they went. "Right now the prices seem to be in
line with what we agreed to," Mr. Weronka says. "Maybe we need to
re-examine it. I don't know."

 Richard Skelly, founder and chairman of Hallandale-based
Affiliated Hearing Professionals of Florida, the hearing-center
network that contracted with Humana in South Florida, didn't
return phone calls. But in an earlier interview, he described his
provider network as the "good guys" in an industry known for
scams on seniors. Mr. Skelly, who also is president and ethics
committee chairman of the Florida Society of Hearing Healthcare
Professionals, denied that phony discounts were being offered
through his network. "No one in retail could touch our prices,"
he added. Mr. Skelly runs three hearing-aid centers in South
Florida that are part of the Humana network.

 Meanwhile, officials with the federal Health Care Financing
Administration, which closely monitors how Medicare HMOs market
their benefits, say they plan to investigate the matter.

 "If customers have been [duped] by their providers, we expect
Humana to make it right," says Norm Dodds, HCFA's team leader in
Atlanta who tracks Humana's Florida operations. "If that doesn't
happen, we would get into stronger enforcement actions."

 Consumer and patient advocates say they are surprised that
Humana would allow such price discrepancies to persist for more
than a year. It's particularly distressing, they say, because
Medicare recipients who enroll in an HMO typically turn to
managed care because they are living on a tight budget. They also
are among the most vulnerable consumers due to their age and
possible hearing loss.

 "I think it's appalling," says Steve Murchie, South Florida
program director for the Florida Consumer Action Network. He says
his office hasn't received any complaints about Humana's hearing-
aid prices. He isn't surprised, he adds, since patients tend to
trust their health-care provider and frequently expect their
medical bills to be high. "These seniors are probably thinking,
'My doctor told me to go there. I should be able to trust them,'
" Mr. Murchie says.

 AHP's network stretches across South Florida, from Sarasota and
Fort Myers on the Gulf coast to all points south of Melbourne on
the east coast. But its Humana business -- its only major HMO
contract -- is concentrated in Broward, Dade and Palm Beach
counties, which together account for 40% of Humana's Medicare
membership.

 HMOs value Medicare recipients for their generous reimbursements
from the federal government. To lure Medicare members, they often
offer discounts on eyeglasses, dentures, hearing aids and other
extras not covered by Medicare.

 Thanks in part to heavy use of advertising, telemarketing and
community meetings, Humana has come to dominate Florida's
Medicare HMO market, with 235,352 members statewide, or 38.5% of
the market. The state's second-largest Medicare HMO trails with a
13% share.

 Under the contract between Humana and AHP, the HMO pays AHP a
fixed monthly amount for every Medicare member enrolled in the
area, and AHP then distributes the money among its providers.
Humana's payments are intended to help the hearing centers cover
the free hearing tests the company offers and its hearing-aid
discounts.

 An AHP provider in Palm Beach says Humana's payments to hearing-
aid dealers are far less than what other HMOs with which he deals
pay. He says AHP accepts the terms because of the volume of
business generated by Humana's market dominance and because, in
the end, Humana's price list is inflated, which means Humana's
members unknowingly end up reducing the cost of the discount to
hearing centers. The upshot, he says, is that Humana gains by
getting to provide a benefit for which it pays little.

 The Palm Beach provider says he can't afford to drop out of the
network because the HMO brings in so many patients. "You're
either in or you're out," he says. "And in today's world, with so
many HMO members, if you're out, you're out of business."

 The situation has led some hearing centers to keep two separate
price lists for the same products -- one for regular customers
and a higher-priced version for Humana members, according to a
Broward County hearing-aid specialist who treated Humana patients
for nearly a year. She says that she saw up to 20 Humana members
each week, most in their 70s or 80s, and that she was expressly
told by her boss never to share the other price list with Humana
customers.

 Humana officials say it's difficult to compare provider payments
because they are based on complicated formulas involving
membership and market area. Further, they say they have no
control over what prices their providers offer to customers
outside the HMO. Says Mr. Weronka: "The Humana price list is the
only one we're concerned about."



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