Online hearing aid company makes a loud and clear disruption

Like many of the city's emerging health-tech entrepreneurs, Patrick Freuler, founder and chief executive of the hearing aid company Audicus, went into business after being confronted with prices and inefficiencies that seemed out of step with today's technology-driven, consumer-oriented world.

While working as an associate at Bain Capital in London from 2007 to 2009, Freuler was tasked with looking for hearing aid companies for the private-equity fund to invest in. What he found was a tiny sound-filtration and amplification device that could be manufactured for as little as $100 but was being priced at more than $2,000. For Freuler's aging family members in Europe, the process of making multiple visits to an audiology clinic to be fitted with a hearing aid was inconvenient. But in the U.S., where insurance coverage for hearing aids is still spotty, he saw a much bigger opportunity for disruption.

The solution, he decided, was to create a direct-to-consumer model that cut out the middleman—in this case, the audiology clinician. Audicus, based in Chelsea, is part of a wave of companies capitalizing on the shift toward what Freuler calls DIY diagnostics. Anyone with a mobile phone can track their blood-glucose levels, take a vision exam or even attempt to self-diagnose a skin condition. Why not take a hearing test?

Audicus offers an exam on its website that Freuler says provides enough information for the company's in-house audiologists to customize each hearing aid to the customer's needs. But it wasn't as easy to develop as it might sound.

The company had to reverse-engineer the "Sputnick-era" technology of an audiologist's soundproof booth, Freuler said. At first Audicus sent customers carefully calibrated noise-canceling headsets and subjected them to a lengthy exam that tested their reactions to different tones over and over. Then it analyzed the data to identify a handful of hearing-loss profiles that most people fit into.

"Based on that, we were able to build a predictive algorithm that allows you to do a shorter test with whatever equipment you have at home and identify which of those profile clusters you belong to," he said. Customers can order a hearing aid on Audicus' website. One model is priced at $599 per ear. Another, equipped with Bluetooth, costs $799.

Even for an aging clientele, Freuler said, the process is easy. "You can do everything from home with a few clicks of a button."

Audicus so far has raised $5.8 million from investors including TIA Ventures, based in New York, and Howzat Partners, based in London. Now six years old, the company is on track to bring in as much as $10 million in revenue this year. And following the passage last year of federal legislation that will make it easier for consumers to buy a hearing aid over the counter without a medical evaluation, Audicus is looking to follow in the footsteps of eyewear company Warby Parker and give its online business a brick-and-mortar presence.

Increasing access

Freuler said he is in talks with pharmacies about the prospect of collaborating. "At some point you should be able to go into a pharmacy, do an Audicus hearing test on a tablet or kiosk right there, and pick up the appropriate hearing aid off the shelf," he said.

But not everyone shares Freuler's vision.

"We always want hearing health care to be accessible to consumers," said audiologist Salvatore Gruttadauria, past president of the New York State Speech-Language-Hearing Association. "However, with a model like that, you're going to miss a lot of diseases and disorders that, No. 1, could possibly be treated and, No. 2, could have some serious medical consequences."

Most people experience hearing loss because they're getting older, but there are a range of conditions associated with it that could benefit from an evaluation by a professional, Gruttadauria said, including an infection, fluid behind the eardrum, noise exposure and a tumor.

Plus, he noted, part of the reason hearing aids are becoming more expensive is that the technology is becoming more advanced. In the near future, he added, they will join other mobile devices in their ability to gather medical information that would be useful to a patient's clinician.

Traditional Medicare doesn't pay for hearing aids, but coverage is evolving. Some Medicare Advantage plans and commercial health plans now offer at least partial coverage to offset the cost, as does Medicaid. Audicus, though, does not work directly with insurers. Rather, a spokeswoman said, "We provide all the info your insurance company would need, such as codes and ID numbers, if they cover out-of-network hearing aids."

Freuler said the company ultimately increases access to hearing care. "What a lot of audiologists miss," he said, "is that there are millions of people out there who don't even go to an audiologist because it's so expensive and cumbersome."