According to most stakeholders involved in the treatment of sleep disorders, the burgeoning sector shows no signs of slowing. In fact, annual growth estimates of the market for products used to treat sleep-disordered breathing range from 15 to 25 percent. Even at the lower rate, that makes it a very attractive proposition for providers.
“Growth potential in the sleep apnea market is huge. We are less than 20 percent penetrated into a market of more than 20 million Americans with obstructive sleep apnea,” states Michael Farrell, vice president of marketing for ResMed, Poway, Calif. “When you include the millions of patients who suffer from complex sleep apnea and other types of central sleep apnea as well as other sleep-disordered breathing [diseases] such as nocturnal hypoventilation, flow limitation and snoring, the opportunities are vast, and the number of Americans suffering quickly approaches 40 million.”
But the business does not come without challenges.
“It's an alternative revenue source that fits well if you're a respiratory specialty company,” says Don White, CEO of Associated Healthcare Systems in Amherst, N.Y. “But it's not a panacea to your revenue problems, because like all businesses, it's complex, and it requires clinical oversight and training of your staff for billing and customer service skills.”
White, whose HME company has a database of 9,000 SDB patients, adds that providers must understand the disease process, the clinical aspects and the co-morbidities. “You also have to know how to market it, how to sell it and how to train your staff to ask the right questions,” he says.
Maura Weis, marketing manager of sleep therapy devices for Murrysville, Pa.-based Respironics, emphasizes the need for a complete evaluation of operational resources and the local market before initiating or expandng a specialty sleep program.
“If HME providers are looking for new opportunities and are considering sleep, they should say ‘Okay, let me make that vested interest and do it the right way,' which means understanding the market dynamics, looking at investing appropriate types of resources — which certainly include human assets — and then looking at the way they can best position themselves in the market to be successful,” she explains.
Provider and RRT Alan Cross, president of C&C Homecare in Bradenton, Fla., acknowledges that focusing on SDB is attractive but adds another word of caution. “The sleep industry offers companies a new source of revenue, but they have to be smart about how they get into the program,” he warns.
In particular, Cross advises providers to consider their investment in equipment carefully. “You have to select quality products, and there are a number of them out there that meet certain standards. Each one has some new twist. So inventory management becomes critical because there are so many different interfaces, for example, and you can't have them all.”
And, as with many other product lines, the reimbursement atmosphere is challenging.
“Current allowables have not kept up with the advancements in new technology,” points out Wayne Knewasser, vice president of public relations and government affairs for Premier Home Care, Lexington, Ky. He notes that new features and benefits are available but, of course, at a higher equipment cost. It takes a while for insurers to be “receptive” to new features even though they improve patient acceptance and compliance, he explains.
Also, because much of the SDB patient population is covered by managed care companies, reimbursement can be even more of a tangle, adds White. “When you become focused on being a managed care provider, you're certainly making your life a lot more complex because it's not easy to understand the rules; the rules are different for every single insurance carrier, the fees are all different and, many times, the fees are non-negotiable.”
White also points out that managed care payers focus on compliance, which, while it continues to be a tricky aspect of sleep therapy, is the basis for long-term positive clinical outcomes for patients — and consistent profitability for providers.
GETTING AND RETAINING REFERRALS
In a market that is so competitive, garnering consistent referrals from sleep labs and other referral sources is another tough aspect of running a successful sleep business. Keeping them may even be more challenging.
Ann McGregor, vice president of sleep for Elyria, Ohio-based Invacare Corp., advises providers to focus on communication with referral sources. “It is important that the communication involve what the provider is up against in terms of reimbursement and how much time it takes to get the patient to be compliant,” she says.
Educating referral sources, physicians and sleep labs on their services “in addition to creating and generating specific programs to meet the needs of those referral sources independently will aid HME providers in increasing in the number of referrals they receive,” adds Tom Pontzius, president of Nationwide Respiratory, a VGM company based in Waterloo, Iowa.
As well, says Respironics' Weis, providers who want to become a credible resource about SDB and its related disease states should create a dialog with these specialists that can drive awareness and differentiate their services. “Physicians don't just want to be told about a product that can help, they want to understand the clinical evidence associated with it,” she explains.
“Providers should take a few of the clinical research studies, understand them and become an expert on the topic. Then, they can have a meaningful conversation with a physician in the language they understand.”
According to ResMed's Farrell, for example, the emerging area of complex sleep apnea was discussed in detail at two major educational meetings this year, Chest 2006 and Sleep 2006. “Complex sleep apnea can be described as a combination of obstructive sleep apnea and central sleep apnea, where the central apneas are masked by obstructive apneas until positive airway pressure is introduced, at which time the complex sleep apnea reveals itself,” he explains.
“If you talk with experienced sleep physicians and sleep technologists, there is nothing really new about complex sleep apnea as a respiratory phenomenon — they have seen it on their polysomnographic montages for years.”
But, he continues, “one key change is that CMS has formally recognized complex sleep apnea and has established guidelines for qualification at the sleep lab, and has also provided a pathway to home care reimbursement under the E0471 code.”
IT'S ALL ABOUT COMPLIANCE
Educating patients about their devices and ensuring proper fit should result in fewer compliance issues for providers, says Pontzius. “Utilizing newer technology can increase productivity in their business in addition to increasing compliance with the patients,” he says.
McGregor adds that manufacturers are increasing their efforts to create technology that makes compliance monitoring easier and more effective. Direct monitoring can give a provider the opportunity to intervene early, especially in the first two months of therapy, which are critical.
Giving patients responsibility for compliance also can be effective. Stressing compliance monitoring can increase their commitment to the therapy, says Kelly Riley, director of Lubbock, Texas-based The Med Group's national respiratory network.
“There is a saying out there that people often will do what you inspect, not what you expect,” she says. “If patients know you're going to be watching them and you're going to be calling them or monitoring them — through whatever device you're using — it will put that extra little note in the back of their mind that somebody is watching them and somebody cares.”
MAKING THE MOST OF MARKETING
Although the main goal of compliance is to achieve the maximum clinical benefit for patients, it is also a cornerstone of providers' marketing plans.
Marketing sleep therapy programs is a multi-faceted task. Providers must target both the variety of referring physician groups and consumer groups, including current and prospective patients.
Riley advises thinking in terms of disease management and using that strategy for both targets. In addition to primary care physicians, cardiologists, neurologists and pulmonologists, which are the typical referral sources, she says providers should also target psychiatrists and bariatric surgeons.
She adds that she has seen providers experience success by approaching consumer groups, such as Rotary Clubs and Kiwanis groups. “Go out to the local groups that are looking for speakers and talk about obstructive sleep apnea,” she says.
“We are seeing some opportunity in terms of marketing and creating a dialog and better awareness about sleep disorders with the patients themselves,” confirms Weis. “More and more, we are hearing that patients are involved in the decisions about their therapy and that patients are their own advocate.”
DIAGNOSING THE DIAGNOSTIC MARKET
Home care companies that are interested in pursuing the diagnostic side of sleep must also examine their ability to compete — and how referral sources will respond.
“It is a good opportunity for well-established companies that have a history with providing sleep therapy products, that are well-funded and well-financed and that have been financially stable for a significant period of time,” advises Clay Stribling, a health care attorney with Brown & Fortunato, Amarillo, Texas.
However, he continues, “I don't think this is a great market to go into as a start-up or for companies that have a brief experience in this industry. Not only do you have to know this industry but you also have to know your market, physicians, hospitals and other health care providers in the marketplace. If you don't know that very well, this could be a real minefield politically for you.”
Associated Health Care operated its own sleep lab for five years but sold it in 2000, says White. “One of the things you have to be aware of is cross-ownership. If you own a sleep diagnostic center, then as an HME company, you can't provide treatment for Medicare and Medicaid patients. Some of the private insurances also carry the same provisions.”
For those who are not interested in investing in a sleep lab, there is another alternative, informs Med Group's Riley. Various manufacturers offer screening tools that enable referral sources to identify at-risk patients more quickly and schedule them for an in-facility sleep study. She notes that the use of these at-home devices creates an opportunity for providing referral sources with the data they need to fully care for their patients.
WORTH THE COMMITMENT
The experts agree that a sleep therapy program is a choice worth considering — if you have done your homework and are committed to its success.
But in one last note, White cautions that a market survey to understand how local sleep labs are affiliated is a must. “It could be a disastrous decision to launch into buying equipment and training staff … only find out that the diagnostics in your marketplace are all done by hospital-based companies that have hospital-based home care companies,” he says. “You can have the best mousetrap in the world and still not catch the mice.”
“[Sleep is a] business, just like everything else. It is a referral business — not a retail business — and it's based on clinician-to-clinician referrals.”
“There is a lot of opportunity for home care providers to move into sleep or even to strengthen their sleep position in their market,”concludes Weis.
“I strongly suggest that [providers] look at it from a strategic standpoint: What can I do, what do I need to invest in and how do I plan this? Then, they should create a plan that focuses on the long term versus … one that instead focuses on getting the quickest return.”
An Eye on Supplies
A sleep supply replacement program can help ensure better compliance, continuing revenue
Supply replacement programs are essential to building and maintaining a profitable sleep therapy program. Clinically, they are vital to long-term positive patient outcomes: If a mask or tubing is leaking or has become uncomfortable, patients will naturally be less inclined to continue therapy or it will become less effective. Likewise, the revenue generated from supplies can increase providers' profits and compensate for limited reimbursement.
Better and cleaner equipment creates positive results for patients, says Ann McGregor, Invacare Corp.'s vice president of sleep. She adds that consistent contact with patients provides HME companies an opportunity to interact with them regarding compliance and their interest in new technology.
Yet providers are often hesitant to explore financial opportunities that exist in areas such as sleep.
“Therapists sometimes don't see themselves as salespeople — they don't want to mess with the money end of it, meaning they are afraid to focus on mask and appliance change-out,” explains Kelly Riley, director of The Med Group's national respiratory network. “However, we as an industry have got to do things that both increase patient outcomes and enhance our ability to survive under these horribly constant changes in reimbursement. There are opportunities out there that are right in front of us, like consistent, appropriate appliance change-out.”
She adds that some people change their masks “like clockwork” but never change their tubing. “Over time, tubing will become brittle and will develop minimal leaks,” Riley explains. “Medicare pays for tubing to be changed out every six months.”
Respironics' Maura Weis, marketing manager of sleep therapy devices, says an HME provider's current customer base is an excellent resource to tap for additional revenue generated by re-supply and new devices. “When patients recognize there is new technology available, they respond very powerfully to the ability to look into getting a new device if their insurance covers it,” she says.
“It is just a matter of having some really basic outreach to the existing patient population and informing them and creating awareness about the new technology or the new opportunities that are covered. Obviously, if the home care provider can provide that service, it can make the patient's treatment plan better, more comfortable and more updated.”
Having adequate staff to remind patients when they are due for approved supplies is essential. For some companies, such an effort could require additional staffing, but Weis says it is a smart investment. If providers cannot implement a supply replacement program with their current level of resources, she explains, “they need to see this as a business investment and plan to bring in resources dedicated to getting [the program] going and making it successful.”
According to Don White, CEO of Associated Healthcare Systems, if providers do a good job of monitoring the patient and reminding them of their options, they should be able to maintain the long-term business that is associated with sleep therapy. “A customer that you have gained tends to stay with you until you give him reason to go away from you, which may be price or service,” he says. “As long as you're not giving them a compelling reason to go somewhere else, they're going to stay with you.”
Associated uses a patient newsletter and mailings to keep sleep patients informed. “We have been doing this for 20 years, so we have a fairly decent mailing list of people who are compliant with the therapy. It feeds our supply business for CPAP supplies — masks, tubing, and filters.”
Michael Farrell, vice president of marketing for ResMed, adds that the process needs to be one that is well-thought out and well-planned. “One thing that many home care businesses have learned from experience is that simply hiring an individual to call up patients on an ongoing basis to ask if they would like another mask, filter and tubing is not the panacea here,” he says. “The astute home care provider needs systems not only to automate and simplify the process but also to maintain the highest levels of quality and patient care at each step.”
To be successful, McGregor suggests using a computer program that will track when a patient is due for a new mask or tubing. Then, the patient can be contacted on a regular basis to see how they are doing and if they need replacement supplies. While the policy should not be abused, she says, “reimbursement allows patients to get new cushions on a regular basis. They can get masks sometimes quarterly and, at the very least, twice a year.”
Riley adds that the enhanced compliance gained from using properly working supplies is a plus for the industry. “For our survivability, we've got to look at these opportunities,” she says. “From an ethical point of view, I don't think any of us want to be gaining dollars that are not appropriate dollars, but these are very appropriate and necessary dollars.”
She adds that low compliance rates are not in anyone's best interest. “It is no wonder Medicare and [other] payers believe we are a commodity when a very low percent of patients are changing out their appliances like they're supposed to be,” she says. “If we get our hands around this and manage it from a disease management-focused, clinically sound and clinically based arena, the money will follow.”
