2. Construct a 2-by-2 contingency table to determine the total number of people who fail the diagnostic test, which represents the target market for hearing aid sales.

Instructions

Timberline Health, an integrated delivery system serving residents in five counties in eastern Washington, is considering new opportunities to increase community awareness of the organization's outpatient health services. As the new business development manager of hearing health services, Jack Andrews is responsible for evaluating the feasibility of marketing activities for the hearing service line and must allocate resources to promotional activities that forecast positive return on investment. One option under consideration is to sponsor the health and wellness pavilion at the Spokane County Fair. Research from comparable markets has shown.

that wellness fairs are not only effective at educating communities about potential risk factors for health problems, including hearing loss, but also increasing consumer awareness of new or existing health services provided by local health organizations. These activities are essential to Timberline Health's mission within the community.

Since little is known about the hearing status of residents in the market area, Jack enlists the services of his organization's epidemiologist, Dr. Ruth Litchfield, to help him evaluate the potential return on investment for this marketing campaign. Dr. Litchfield incorporates several factors into her analysis. She reviews public health data on hearing loss, occupational and age distribution data for local residents, as well as a query of Timberline Health's patient databases. Based on this research, she estimates the prevalence of hearing loss in the five-county service area at 18 percent, slightly higher than the national average (NIH, 2010). Jack receives information from the fair's sales and marketing department to help in his calculations. Specifically, sponsorship consists of an investment of $50,000 for the design and production of promotional materials and rental of pavilion space for the duration of the twelve-day fair. Data from the previous three years shows on average 250,000 people attend the fair of which 1% (2500) visit the wellness pavilion and participate in health screening services.

If Timberline Health is to offer mobile hearing screening, the organization must invest in new portable audiology equipment. Jack receives a quotation from his supplier and estimates the total investment in new audiometers and audiometric booths at $16,000. Timberline Health will use existing diagnostic equipment to test people who have failed the initial screening (i.e. test positive for hearing loss), so it is unnecessary to invest in additional equipment for the hearing centers. Vendor specifications for the screening and diagnostic equipment are indicated in Table 1.

Table 1

Vendor equipment specifications

Equipment

Sensitivity

Specificity

Portable audiology equipment for free screening

90%

96%

Clinic-based audiology equipment for follow-up diagnostic testing

99%

99%

Furthermore, Jack calculates that he must provide coverage for three 6-hour shifts per day and each shift must have three audiologists to meet demand for screening tests. He anticipates hiring nine people to provide coverage for the duration of the fair. The hourly rate for audiologists is $37.50.

People who fail the initial screening at the fair are referred to an audiologist for a diagnostic test. Jack assumes in his calculations that all people who are referred for diagnostic testing follow up with an audiologist in one of Timberline Health's hearing centers. Initial screening tests at the fair are free; however, Timberline Health charges $57.00 for a diagnostic hearing test, which costs the organization $24.00. Using past sales data and industry metrics, Jack forecasts that of the total number of people diagnosed with hearing loss at hearing centers only 20% will purchase hearing aids (NIH, 2010). He reviews sales and margin data from the prior year to identify the product mix for his calculations as indicated in Table 2.

Table 2

Sales and margin data

Hearing Aids

Unit Price

2015 Sales

Margin

Low-end

$1,000

$400,000

25%

Mid-range

$2,500

$1,250,000

45%

High-end

$4,000

$400,000

60%

Reference