Sound Bytes

The unloved hearing aid has evolved into a tiny computer in your ear, able to respond to its environment without human fiddling. And the inventors of the device are betting that aging baby boomers will give it a ringing endorsement -- with their wallets.

LEONARD ZEHR
Biotechnology Reporter
Thursday, January 21, 1999

Toronto -- This is not your father's hearing aid.

Just as Oldsmobiles have been transformed into sleek sedans, hearing aids are becoming lightning-fast computers with their own central processing units, random access and read-only memories, and independent operating systems.

In the next few months, GN Danavox Inc. of Minnetonka, Minn., will roll out the first software-based digital hearing aid -- the Danalogic -- that goes beyond processing sound to automatically anticipating user needs.

Aimed at baby boomers, the device can recognize sound levels and adjust the amplification so that soft sounds are comfortable and loud sounds don't become louder.

"This is the wave of the future," says Steve Forget, president and chief executive officer of Montreal-based Helix Hearing Care of America Corp., one of the first dispensing chains that will distribute the new Danalogic. "It will change the way our industry does business."

Currently, manufacturers install their own features in hearing aids. As a result, users can manually adjust several sound processing functions, but new features can't be added to the hard-wired circuitry.

In April, 1996, the first digital hearing aids hit the market. Instead of converting sound waves into an electric current to be amplified, digital aids transform them into binary numbers that dramatically heighten auditory quality and allow people to hear better in a noisy environment.

"Moving from [standard] analog hearing aids to digital is the same leap forward as listening to a cassette and then a compact disc," says Suzanne Clark. In mid-1997, when Helix began acquiring clinics in the United States, she and her husband, John, were the first Americans to sell their own practice to them. She is now a vice-president of Helix in charge of corporate development in the U.S. Midwest.

In the future, industry observers say, the hardware component of the hearing aid -- microphone, receiver, amplifier and digital chip -- will be manufactured as a standard piece of equipment. Moreover, companies will spring up that make only software applications that can be downloaded.

"This industry is going the way of the computer industry, where one set of companies makes the computer box and a different set of companies develops software programs that run computers," says David Smriga, director of marketing for Danavox.

Hearing aid software, which consists of complex algorithms, or mathematical formulas, fine-tunes itself to a patient's specific hearing loss, listening and working environment, and personal listening preferences.

But such wizardry comes with a price. Mr. Smriga figures the Danalogic will sell for $2,000 (U.S.) to $2,500, compared with about $500 to $1,000 for conventional analog hearing aids. (Danavox, which has been in the hearing-aid business for 50 years, and Audiologic Inc. of Boulder, Colo., together spent nine years and about $25-million to develop the Danalogic hearing aid.)

Technical advances such as digitization and miniaturization are likely to erase the social stigma often associated with wearing a hearing aid and open the market to burgeoning numbers of baby boomers, who would otherwise be loath to use the device.

"I wouldn't sell a $2,000 hearing aid to somebody in a senior's home who only has a couple of years to live, but a 35-year-old stockbroker is another matter," says Dan Dubé, who sold his four Ottawa clinics -- the biggest independently owned practice in Canada -- to Helix in 1997 and is now part of the company's corporate development team.

Baby boomers have plenty of leisure time and plan to stay active longer than any generation before them, says Mr. Forget, who is 34 years old and launched a predecessor to Helix 13 years ago.

"If they have a hearing problem, they'll demand treatment sooner and not wait until they're in their seventies or eighties before being pushed to seek help at a clinic. They're better educated and their financial resources are better than their parents."

For every 100 North Americans with a hearing problem, only 21 are wearing hearing aids because of the commonly held perception that the devices are bulky contraptions for seniors, Mr. Forget says.

"When people become familiar with how small and sophisticated hearing aids are, we expect market penetration to increase dramatically," he adds.

The Danalogic, which can process 313 million operations a second -- more than twice the speed of the most powerful digital hearing aids now on the market -- comes with four software applications. Mr. Smriga says his package is the only one that automatically eliminates feedback.

The microprocessor in the hearing aid drives 14 separate compression bands, compared with an industry standard of four. This makes it possible to divide sound waves into more slices, increasing the flexibility of the software to greatly reduce noise and amplify soft sounds so that they are audible. It does this without adding a similar amount of amplification to loud sounds.

"That lets you conduct a normal conversation at your desk at work and, if the phone rings, it won't blow your head off," he adds.

Another software package offers digital directional amplification of sounds that are directly in front of the user. It does this by minimizing sounds off to the side, an important feature in a crowded restaurant, for example.

Mr. Smriga says Danavox has another 12 to 18 software applications in development. "The advantage is that as new software becomes available, it can be downloaded to the chip and outdated software deleted. The patient doesn't have to buy a new hearing aid."

Hearing aids come in three main styles: behind the ear, usually the most powerful, for people with mild to profound hearing loss; in the ear, for mild to severe hearing loss; and completely in the ear canal, for mild to moderate hearing loss. About 10 per cent of the population has severe to profound hearing loss, meaning they are unable to hear a truck driving on the road, Mr. Forget says.

Two models -- in the ear and completely in the canal -- represent about 80 per cent of the $2-billion hearing aid market in North America, with behind-the-ear making up the other 20 per cent.

The dispensing of hearing aids, like the underlying technology, is also entering a period of unprecedented change as the industry consolidates and chains of clinics start to form.

The rise of the chains promises to improve services, as audiologists hand over paperwork to administrative units and gain time to spend with patients.

Right now, there are about 11,000 audiology clinics in North America and 70 per cent of owners run just one or two outlets.

Only four companies -- Helix; Hearx Ltd. of West Palm Beach, Fla.; Sonus Corp. of Portland, Ore.; and closely held Newport Audiology Centers of Laguna Niguel, Calif. -- currently own more than 50 clinics each.

"Consolidation is inevitable in this business, much the way the funeral services, optical and pharmaceutical industries have consolidated," Mr. Forget predicts. He figures that at least 30 per cent of the clinics, or some 3,300, will be absorbed by the chains -- even some new ones that could spring up in the next five years.

"Our corporate objective is to be a leader in the industry consolidation and to be the most profitable," he adds.

Helix appears to have a leg up on its three publicly traded competitors because it is the only one making money. The company expects to report a profit for fiscal 1998, ended last November, of $600,000 (Canadian) to $800,000 on revenue of around $14-million, representing a 75 per cent year-over-year increase.

Helix has 85 clinics in its chain, of which 45 are in Quebec, where it has a 30-per-cent market share. Eight clinics are in Ontario and the remaining 32 are in the U.S. Midwest and Northeast.

"We put America in our corporate name because that's where we are going with most of our expansion," Mr. Forget says.

The Ontario and U.S. expansion has occurred since 1996. The company plans to acquire 30 additional clinics this year and a further 43 next year, for a total of 158.

Many clinic owners who decide to sell to the company continue to run the business in exchange for shares and cash.

Mr. Forget says survival for "mom-and-pop" clinics depends on joining forces with a chain. "A typical clinic buys about 300 hearing aids a year. We buy 19,000. Our discounts from manufacturers can be 30- to 40-per-cent better than a single clinic."

Moreover, a typical clinic does around $300,000 in business a year, he says, not enough to justify buying advertising time or developing management software to run a clinic. "We try to eliminate office paperwork so our audiologists can spend their time seeing patients."

HEARING ENHANCEMENTS

Small, sophisticated hearing aids are due to hit the market in the next few months. Essentially a miniature computer in the ear, this more powerful type of hearing aid contains both hardware and software, allowing the device to anticipate the needs of its wearer. One of the first, the Danalogic from GN Davavox Inc., has four software applications:

Noise management: By breaking down sound waves into 14 compression bands, the microprocessor separates incoming signals into speech and noise patterns, and eliminates noise without affecting speech. In normal four-band systems, sound hasn't been divided into enough bands, or slices, so some speech is compromised during noise reduction, especially in the high-requency "f," "t," "th" and "k" zones.

Wide dynamic range compression: The 14-band system also allows the hearing aid to sense incoming soft sounds, amplifying them to audible levels without adding a similar amount of amplification to loud sounds. In conventional hearing aids, volume controls must be manually reset when noisy situations replace normal conversation.

Digital directional amplification: The Danalogic's two microphones locate sound sources within a 360-degree arc around a patient's head and sounds 15 degrees off-centre are reduced. As a user's head moves around a crowded room or restaurant, for example, only sounds in front of the hearing aid come through loud and clear.

Feedback management: When microphone feedback, or whistling, is detected, the hearing aid sends out a "counter-phase" signal to eliminate feedback before it starts, a unique feature of the Danalogic.

Because the Danalogic is entirely software-based, new applications can be added or substituted for outdated ones without changing the hearing aid's hardware.

A HEARING AID HISTORY

The earliest effort to aid hearing was a cupped hand to direct more sound into the ear.

The ear trumpet, invented between 1650 and 1700, is a long horn with a small open end placed in the ear and a large open end. Sound waves entering the large end are condensed, increasing the sound pressure on the ear.

Electronic hearing aids were developed following the invention of the telephone by Alexander Graham Bell in 1876. Bulky electronic hearing aids consisted of a microphone, a vacuum tube, a battery, an earphone and volume and tone controls.

The invention of the transistor in 1948 replaced the vacuum tube and greatly reduced the battery size required for a hearing aid. Electronic circuitry led to further reductions.

Between the mid-1940s and mid-1980s, hearings aids did little more than amplify sound. Essentially, these analog systems used a microphone to turn incoming sound waves into an electric current so they can be amplified. A speaker then transforms the electric current into sound in the ear canal.

In 1985, hearing aids, still using an analog system, began to use hard-wired information. Improved volume controls for loud and soft sounds and for high and low frequencies were also developed.

In 1996, the first entirely digital hearing aid came on the scene. Instead of turning sound waves into electric currents, they are converted into binary numbers, processed by a speaker and transformed into sound. The difference in sound quality between analog and digital is similar to the difference between an audio cassette and a compact disc.

In 1999, GN Danavox Inc. of Minnetonka, Minn., prepares to launch the first hearing aid, consisting of a miniature computer with hardware and software packages.

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Source: Encyclopedia Americana and staff

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