More Information Needed in Marketplace Segment

CBC News Marketplace challenged the high cost of hearing aids in a program entitled “Price Tag Confidential”. The segment raised issues about the cost of the hearing aids and the lack of clarity for consumers about what they are paying for. Joanne Charlebois, Executive Director of the Canadian Association of Speech-Language Pathologists and Audiologists , found the piece simplistic and unfair. I agreed that the piece would have been better balanced if it had left itself time to explore the issues more thoroughly.

COMPLAINT

When you filed your complaint, you said you were doing so on behalf of the 6,000 members of the Canadian Association of Speech-Language Pathologists and Audiologists (CASLPA). You had many concerns about a segment on Marketplace which ran last February as part of a program entitled “Price Tag Confidential.” The premise behind “Price Tag Confidential” is that experts give insights into why goods or services are priced the way they are, exposing disparities or questioning the legitimacy of the cost. This particular episode dealt with the big disparity in price in Canada and the United States of some common consumer products, the true cost, versus the price of beauty products, and why and how companies justify the cost, and finally, the cost of hearing aids. And that was the segment you found very problematic.

The segment began with a consumer who had invested three thousand dollars in her hearing aid, but didn’t wear it. She wasn’t comfortable with the way it fit or worked, but said she would not replace it due to cost. She questioned why the device was so pricey. As in the case of many Marketplace investigations, it was prompted by viewer queries and confusion about the pricing; in this case, of hearing aids.

The expert Marketplace featured to explain the price is an American engineer, Russ Apfel. The program dubs these specialists “insiders” whose role is to deconstruct and give consumers information about the true cost of a good or service, and what is behind existing pricing. One of your concerns was the use of Mr. Apfel as the lone voice in the piece. You questioned why the program did not mention that Mr. Apfel has a company, Audiotoniq, which sells hearing aids on line, and therefore put him in a conflict of interest. At the very least you felt this violated CBC journalism policy because it omitted relevant information that would help audience members to judge the “relevance and credibility of statements.” You felt his analysis was “simplistic and one-sided” and so was also biased in its presentation.

In the broadcast, Mr. Apfel deconstructs the components in a hearing aid and estimates their worth at about $60.00. You thought that comparing the price of parts to the retail price of the hearing aid and services was “disingenuous.” Earlier program host Tom Harrington asked him why “these little parts can add up to an average of $4000 for a pair of hearing aids.” Mr. Apfel answers:

RUSS APFEL (ENGINEER):

The audiologist and audiology centres bundle the hearing aid and all of their services into a package, and they typically markup the hearing aid about three times what they paid for it from the manufacturer.

TOM HARRINGTON (HOST):

In most cases you’re not just buying a hearing aid. You’re also paying for dispensing fees and service packages. Those packages include having the device fitted properly and any follow up adjustments. It can all add up.

RUSS APFEL (ENGINEER):

There are a lot of people making a lot of money off hearing aids.

TOM HARRINGTON (HOST):

Russ Apfel says most people never use all the services they’re paying for, yet don’t even realize they’ve already coughed up the money for them.

RUSS APFEL (ENGINEER):

The industry keeps things pretty well hidden. You try to go and find hearing aid prices or do comparison of hearing aids online, you don’t get very much information.

You objected to this explanation and characterization as biased and inaccurate. You felt it left the impression that audiologists are “lining their pockets with incredibly high mark-ups on hearing-aids and including ‘hidden costs’ in their invoices.” You pointed out that many factors go into the price of a hearing aid: a lot of research and development for the device itself; and there are also services provided by the audiologists such as hearing tests, dispensing fees, fitting, programming of the device and follow-up care and service. Leaving aside the price of the hearing aid itself, you pointed out that audiologists have ongoing expenses that factor into the price of their services:

“Of course there is some profit to be made in hearing aid sales; but, as in any other business, you need to make some profit to keep your doors open. However, if you’re going to make a claim about how much profit is being made, you must look at all the costs involved – not just the physical components.

The cost of research, development and design, for instance, cannot be understated. Hearing aids are sophisticated pieces of technology – they’ve come a long way from a simple microphone, amplifier and receiver – and can be programmed for all kinds of environments. Consumers are constantly demanding better and smaller devices. They want their hearing aids to perform highly advanced calculations in order to provide comfort and clarity in all listening situations; while, at the same time, being "invisible" and using minimal battery power.

Hearing aid companies put a huge financial investment into research and design to develop the most advanced technology as well as the software required to fit hearing aids, marketing the product to professionals and ensuring that audiologists are familiar with the features and trained to use fitting software.

Manufacturers also provide product support, warranties and repairs. And, unlike other technology, as a medical device, faulty hearing aids cannot be fixed and resold; making warranties a lot more expensive to maintain.

We must remember that hearing aids are medically-regulated devices; so they are subject to government regulation and must be reviewed and licensed before they are allowed to be sold in Canada. As with all regulatory requirements getting a medical device to market is time-consuming and costly.

When the device eventually gets to an audiologist, they require computer equipment to fit the devices as well as all the equipment needed for comprehensive audiological assessments and hearing aid verification (sound booth, audiometer, real-ear measurement system, etc.)”

You also defended the practice of “bundling”, giving an all-in price to the consumer because he or she will know exactly what it will cost upfront. You said that Marketplace failed to ask your members, working audiologists, why they did so. You asked why the show researchers had not done so.

You also had concerns that your organization was misrepresented. You pointed out that your Director of Audiology and Supportive Personnel, Dr. Chantal Kealey spoke twice with CBC Marketplace researchers yet the program asserts that no one would speak on camera. You noted Dr. Kealey explained that your organization did not “have information on how audiologists invoice clients or what the cost of a hearing aid is, other than a general, cross-country average.” She did explain what is included in hearing aid prices, and the need for professional services for a successful fit.

Overall, you found the piece one-sided, overly simplistic and harmful both to the professionals you represent and to the people who may require your services.

MANAGEMENT RESPONSE

Tassie Notar, who was then the Executive Producer of Marketplace, responded to your concerns. She said that rather than deterring audience members from getting hearing aids, it would help them to make more informed choices and that the program threw “new light on a subject that is often not clear, indeed one that some feel has been deliberately obfuscated.”

She replied that in fact the program researchers had asked about the practice of bundling. She explained much more research goes into a broadcast than is apparent from the item. She said the researchers had spoken to a hearing aid dispenser in British Columbia who said that by selling services in bundled packages, consumers are not fully aware of what they are entitled to and so don’t take full advantage of the services offered.

“During the course of research, Marketplace spoke with six hearing aid dispensers in Canada and the United States and asked specifically about the reasons behind bundling. Additionally, Marketplace spoke with hearing aid associations, hearing loss associations, and hearing aid researchers in Canada and the U.S. about bundling. In fact, during a telephone interview on January 11, 2013 with CASLPA’s Director of Audiology, Dr. Chantal Kealey, Marketplace specifically asked several questions about bundling. Her response was that bundling was done as a service to the client since it is convenient for consumers to pay for everything up front. Here is partial transcript of that conversation:

Marketplace: The other thing I wanted to ask you about is the other issue I’ve heard from viewers is bundling hearing aids and services together. How common is that in Canada?

CASLPA: I don’t know how many people do that. When you bundle, it’s usually – unless I’m not understanding the exact nature of your question – but it’s usually done as a service to the client. When you go to Costco and you’re buying more stuff you’re get it for a better price and I think that’s what you mean by the bundling. I don’t know.

Marketplace: To be honest I’ve never had to buy hearing aids. Just from what I’m hearing is that a lot of viewers have said when you buy a hearing aid you’re also given a lifetime service plan that covers any follow-up visits.

CASLPA: I think it’s two-fold. I think that it’s probably - it is to the benefit of the patient I think because you’re paying that one price and you’re getting your lifetime of service. I think it’s also a way to maintain client loyalty. There’s competition out there so you want to keep your customers happy, right? I mean we are in healthcare but at the end of the day, too, the audiologist who is in private practice is also running a business. So that… I don’t know a lot about that aspect of it, so that would be my take on it.

Ms. Notar defended the focus of the piece, the actual cost of the hearing aid itself. She said the program made considerable efforts to find out what other costs might go into the price of the devices.

She said they were unable to get precise information about how much of the cost is based on research and development as well as the technology itself and that the association that represents the manufacturers did not respond to “repeated requests by Marketplace to contact them for an interview.” She mentioned that an online component of this story addresses this question from both a critical and industry standpoint.

Ms. Notar also rejected your assertion that the program had unfairly characterized your organization as uncooperative and that it appeared you had turned down an interview when you were never asked. She pointed out that your organization is never mentioned by name in the broadcast, and that you were never asked to do an interview because in the research interview stage it was apparent that you did not have the detailed information about pricing the program was seeking.

She went on to defend the use of Russ Apfel as the industry “insider” on the program.

Just to be clear, Marketplace presented Mr. Apfel as a knowledgeable industry insider who is an inventor of hearing aid technology. His role in the program was to offer his insight and expertise as a manufacturer of these devices. …As a “Price Tag Insider, he was on the program to shed some light on an aspect of hearing aid prices.

He is not selling hearing aids. Mr. Apfel’s company has developed hearing aid prototypes but, he says, has since suspended operations.”

REVIEW

The Price Tag Confidential edition of Marketplace was designed to inform consumers of the true cost of items and to explain the factors that created the high price companies charge for some products.

In the case of hearing aids, this turned out to be no simple thing. In trying to get a grip on the pricing structure and the issues involved myself, I found that there are few clear answers and few sources of clear, straightforward information. So I have some sympathy for the difficulties the programmers faced. Having said that, it is their job to present the information clearly and fairly, and it is mine to review whether they have done so or not.

The segment was pretty straightforward. The expert presented, Russ Apfel , is described as a wearer of hearing aids and someone who “pioneered a piece of technology that’s inside every one.”

It does not mention that he is the founder and CEO of a company called Audiotoniq, whose purpose is to sell hearing aids online. Ms. Notar notes that Mr. Apfel is not doing so right now, and the website appears to have not been updated since 2011, for whatever reason. But it does still say that a product launch is imminent. And in 2011, news releases went out noting the company would be taking pre-orders for its hearing-aid system for $1,949. Ms. Notar notes that the company did develop the prototypes, but has since suspended operations.

The fact that Mr. Apfel is in the business certainly makes him an “Insider” and it does not necessarily make his analysis any less credible. However, CBC journalistic policy is quite clear that it is important for audience members to know any associations that interviewees have that are relevant to the subject at hand, so that they might make up their own minds about the credibility of his or her statements:

We are open and straightforward when we present interviewees and their statements. We make every effort to disclose the identity of interviewees and to give the context and explanations necessary for the audience to judge the relevance and credibility of their statements. In exceptional cases and for serious cause, we may decide to withhold such information in whole or in part. In such cases we explain the situation to the audience without disclosing the information that must be kept secret.”

The failure to do so in this case was a breach of the policy. Even though the company is not selling product at the moment, it is relevant to know that some of Mr. Apfel’s expertise comes from attempting to bring hearing aids to market in new and different ways and that this could shape his perspective.

The piece raises some valid questions. It asks why, if the price of the components and other inputs of the hearing aids are so low, are the prices so high. Apfel says that some practitioners charge three times what they pay for it. The explanation given is that the attendant services are bundled together, and that there is not a lot of clarity around what those additional charges are for. Host Harrington says:

“In most cases you’re not just buying a hearing aid. You’re also paying for dispensing fees and service packages. Those packages include having the device fitted properly and any follow up adjustments. It can all add up.”

The validity of these issues is backed up by other research. It is perfectly reasonable to ask why based, on cost, are hearing aids so expensive. And it is also valid to ask what is the value of the services provided around it, and why is there generally a lack of clarity in what consumers are paying for. A recent article in Bloomberg Businessweek puts it another way: “Why Do Hearing Aids Cost More than Laptops?” The article goes on to quote a study done by a German regulator which provides data that shows the costs to the manufacturer (it estimates $250 to make it, $75 for research and development and $250 in marketing) and that the manufacturer then sells it to retailers for a profit of about $425. Further mark-ups occur at the retail end to cover services and make a profit. A Consumer’s Report article published in 2009 refers to mark-ups, where wholesale prices could be verified, of over 100%. A recurring theme in all discussions about hearing aids and hearing aid prices is the complexity and lack of clarity, and a lack of clear information. It is justified that Marketplace asked the hard questions, and in doing so, it is not accusing your members of lining their pockets, but seeking accountability. And it did not single out your organization, as you said. It never mentions CALSPA by name, and in reciting a litany of organizations contacted for information, it drives home the point of how difficult it is to get a clear picture of cost and fair pricing. And as your spokesperson noted, the manufacturers and their association would more appropriately speak to the cost of the device itself. Unfortunately, those organizations declined to comment. They are under no obligation to participate in a broadcast, but it made the programmers’ task all the more difficult. Ms. Notar’s explanation that your spokesperson was not invited on air is also reasonable. They were looking for someone to talk about cost and pricing.

The item posed a valid question and highlighted some of the issues for consumers who need to buy hearing aids. It did less well, with its focus on the $60 price tag for parts and labour, in providing some understanding of what some of the valid costs would be, and what the perspective of the service provider was. I agree with you that in that way it oversimplified the issues. For example, when Mr. Harrington mentions the services are bundled, and the costs can add up, nowhere is there a mention of what might be considerable reasonable, or best practice. Understanding it is hard to get clear data, there is enough information to have provided a fuller picture. This is somewhat mitigated by the supporting online material, which does provide some counterpoint to the “insider’s take.” The program also provides a link to a “Hearing Aid Tip Sheet” so that consumers can make informed choices when they buy the devices.

CBC Journalistic Policy on accuracy states:

We seek out the truth in all matters of public interest. We invest our time and our skills to learn, understand and clearly explain the facts to our audience. The production techniques we use serve to present the content in a clear and accessible manner.”

While the issue here is not strictly one of accuracy, the production technique did not contribute to clarity. The “Price Tag Confidential” format forced an oversimplification of a complex problem. It did not provide enough context to explain the perspective of service providers and manufacturers. While it certainly provided consumers with the knowledge that they should ask lots of questions, it did not provide a baseline of what would be a reasonable cost, and what services are critical. If the piece had done so, it would have been more helpful and certainly fairer. Ms. Notar mentions in her correspondence with you that they did a great deal of research to back up what was said. I know that to be true. It would have made a more complete piece, had some of that research found its way into the broadcast more overtly.

The factors that go into pricing of a hearing aid are complex, and in trying to reduce it all to its simplest terms to fit the “Price Tag” format, the segment lacked clarity and to a degree that affected its fairness.

There were violations of policy because of the failure to fully identify the expert’s affiliation, and because there was insufficient information on the broadcast to balance his perspective.