Business 101 for Audiology: Business Principles and Clinical… : The Hearing Journal

Health care is one of the largest employment sectors in the United States and employs approximately 14% of the American labor force. 1 Audiologists work in a variety of different health care settings including hospitals, otolaryngology practices, universities, retail chains, and private practices. Approximately 34% of audiologists are employed in private practice settings, with 40% of them as practice owners. 2 While business acumen is crucial for private practice owners, it is valuable for audiologists who work in other settings as well. All health care practices run as a business and must generate revenue to remain successful and profitable. If a clinic fails to turn a profit, it will be unable to support the cost of the supplies, salaries, and equipment necessary to maintain and manage patient care over the long term.

Figure 1:

Calculating Gross Revenue


Fictional Private Practice-Income Statement.


Fictional Private Practice-Balance Sheet.

Business savviness for health care providers has become increasingly important over the past several years due to declining insurance reimbursements 3 and rising health care costs 4, yet formal business education in audiology is rare. There are 75 Doctor of Audiology (AuD) programs in the United States accredited by the Council on Academic Accreditation (CAA) 5, but only one dual AuD/MBA program is currently available. 6,7 In comparison, there are over 60 dual MD/MBA programs presently offered in the United States. 8 Some AuD programs include a business or practice management course as part of the required curriculum 9–11; though it is not a requirement for CAA accreditation. 12 Those considering a profession in hearing health care are most motivated by enhancing patients’ quality of life and working with technology. 13 To achieve these goals, it is important that audiologists understand how to maximize revenue while decreasing costs. This article introduces some basic business terms and relates them to hearing health care.


First and foremost, health care facilities must generate revenue to maintain operations and continue to provide patient care. Audiologists may generate revenue by adequately charging for services provided, regardless of the time and effort required. It is crucial to remember that audiologists are providing a service as well as the knowledge and expertise behind the service. Patients present to hearing health care clinics with concerns that cannot be solved without an audiologist’s expert knowledge, and if the audiologist does not charge for these services, they are not only losing revenue for the clinic but also unintentionally devaluing their clinical expertise.

Revenue generation is dependent on factors such as of cost of goods and other expenses. Gross revenue is calculated by multiplying the sale price of an item by the number of items sold and by subtracting the cost of goods sold (COGS). 14 A common example of COGS within the field of audiology is the wholesale cost of hearing aids. 15 This concept is particularly important with hearing aid sales and determining costs for services provided. For example, if 10 hearing aid units are purchased by the clinic at a wholesale price of $850 per device and sold to patients at a retail price of $2,000 per device, the gross revenue from hearing aid sales will be $11,500. (See Figure 1.)

A facility may increase gross revenue by increasing the sale price of individual units, increasing the average selling price per device, or by selling more units. 16 Because gross revenue does not take into account expenses, it cannot be used to determine if a facility is making a profit. 17 Gross revenue must be higher than total expenses to maintain profitable operations.

Expenses may be fixed or variable. Fixed costs are static and do not vary from month to month, such as rent or mortgage payments, monthly malpractice insurance, and paychecks for salaried employees. Variable costs change from month to month and include items such as utilities, commission payments, and supplies. Variable costs tend to increase as a business is more profitable while fixed costs are independent of revenue. 18 Keeping expenses low while maximizing sales will lead to higher net revenue.

Net revenue is calculated by subtracting sales, general, and administrative (SG&A) expenses such as rent or mortgage payments, utilities, and salaries from the gross revenue. 19 In short, gross refers to the total amount while net refers to the remaining amount after expenses have been accounted for. 20 An income statement, also known as a profit and loss (P&L) statement, is a summary of all revenue and expenses over a specific period. 21 See Figure 2 for an example income statement from a fictional private practice.


Businesses require a balance sheet to analyze the financial standing of the organization. The three components which comprise a balance sheet are assets, liability, and equity. 22 The balance sheet reveals the total assets of a company and how it is financed, either through liabilities (debt) or equity (retained earnings and equity from shareholders). 23 In short, the balance sheet is a summary of a company’s overall financial health 22 without detailing individual transactions.

An asset is defined as “a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.” 24 Assets can be delineated between current and non-current. Current assets are used to finance daily operations and may be quickly liquidated for cash should the business close and need to pay off debts. 25 Non-current assets include Property, Plant and Equipment (PP&E), such as buildings, land, audiometers and sound booths, and intellectual property. Non-current assets are considered illiquid because typically they cannot rapidly be sold for cash to cover daily expenses or debts. 26 Certain non-current assets, like equipment, are expected to last several years but eventually become obsolete. 27 Assets include cash on hand, inventory such as stock hearing aids that have been purchased by the clinic but have not been sold, PP&E, and accounts receivable (such as money owed by a patient for hearing aids purchased with a payment plan). 23 Accounts receivables are considered assets even though cash is owed to the business because the service or product has been delivered, therefore payment is expected. 28

Liabilities are categorized as short- or long-term and include any cash that is owed to another entity. Common short-term liabilities for hearing health care practices include invoices from hearing aid companies for devices and supplies, invoices for services rendered such as equipment calibrations, wages payable (salaries or other wages owed to employees), and interest payable. 29 Short-term liabilities are settled within a 12-month period. Long-term liabilities are accounts that will be settled in more than 12 months and include rent or mortgage payments and long-term loans, such as equipment loans. 30 Equity includes retained earnings which is the total net income earned throughout the lifetime of the business 31 as well as any money invested into the company by the owner or other investors, 32 also known as paid-in capital. Assets must equal liabilities plus equity on the balance sheet. 33 See Figure 3 for an example balance sheet from a fictional private practice.

In general, audiologists (aside from some private practice owners) will not be responsible for maintaining a balance sheet, but it may be valuable to have a basic understanding to appreciate the financial health of the organization.


Audiologists contribute to revenue and profits with their clinical productivity. A clinician’s productivity is calculated by dividing the total number of hours that a clinician spent directly caring for patients by the total number of hours that the clinician worked 34; for example, if a clinician spends 36 hours of a 40-hour work week with patients they are considered 90% productive. Whenever possible, those 36 hours should be spent billing for services to increase revenue.

Audiologists have a multitude of daily activities aside from direct patient care. Depending on the employment setting, time can be spent with administrative tasks, education, or research 34; with only direct patient care as a revenue-generating task. One way to improve clinical productivity is to ensure that the clinic is organized and working in an efficient and streamlined manner. 35 Audiologists offer several specialized services and therefore, ample space is necessary to ensure these services can be rendered efficiently in conjunction with other services. For example, if an auditory brainstem response (ABR) machine and an audiometer are stored in the same sound booth, only one piece of equipment can be used at a time due to space limitations. This not only reduces the number of patients that may be scheduled at a time due to space and equipment limitations, but also reduces provider availability, and ultimately, long wait times for the patient.

Clinical productivity is negatively impacted without the appropriate support staff, which requires the audiologist to perform non-billable administrative and clerical tasks. 34 The use of audiology assistants to perform the aforementioned tasks within clinical practice has been proven to improve clinical efficiency, boost productivity, and improve revenue generation. 36,37 The roles and responsibilities of an audiology assistant vary from state to state but may include “performing checks on hearing aids and other amplification devices, performing troubleshooting and minor repairs to hearing aids, earmolds, and other amplification devices, cleaning hearing aids and other amplification devices, and instructing patients in proper use and care of hearing aids and other amplification devices.” 38 Audiology assistants can remove non-billable appointments from an audiologist’s schedule and allow the audiologist to see more complex appointment types and practice at the top of their license while simultaneously reducing patient wait times. 39 Audiology assistants are a valuable addition to a busy practice.


Cursory business knowledge is becoming increasingly important for health care providers due to increasing costs coupled with declining reimbursement. Regardless of the work setting, audiologists are an integral part of a hearing health care practices and should retain basic business knowledge. Understanding the contribution of audiology to the financial standing of an organization may be particularly helpful when requesting new equipment, asking for a raise, or requesting to extend time allotted for appointment slots.


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