If you didn't know it already, it's time to wake up and smell the coffee. The sleep apnea market is the bright spot on the home respiratory scene, a solid niche market for home medical equipment providers.
While other sectors of HME are battered and bruised from constant reimbursement cuts and tightening red tape, the sleep market is hale and hearty. And it appears it will stay that way for some time to come. Take a look at the statistics:
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Research and consulting firm Frost & Sullivan reports that there are already more than 2,800 sleep labs in the nation and more continue to open.
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According to Wachovia Securities, the 90 sleep labs that responded to its first quarter 2006 survey on the industry reported an average 21 percent increase in beds over the past 12 months.
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The same survey said respondents expect a 31 percent growth rate over the next 12 months.
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Most manufacturers working in the area project 20 percent-plus growth in the obstructive sleep apnea market through 2007.
Beyond that, industry observers say, the potential market is huge.
“According to the National Heart, Lung and Blood Institute, it is estimated that more than 12 million Americans have OSA, many of whom remain undiagnosed,” says Nicole Wilson, product manager for Pleasanton, Calif.-based Puritan Bennett.
Overall, 40 million Americans suffer from some type of sleep disorder, notes Jacquelyn McClure, RRT, director, National Respiratory Network, government relations, for Lubbock, Texas-based The Med Group.
“And we're less than 20 percent penetrated into the market,” adds Mick Farrell, vice president of marketing for the Americas for San Diego, Calif.-based ResMed. “If [providers] are thinking of markets to get into, this is a no-brainer.”
MARKET PLUSES
Doris Posner, an RRT with Samaritan Medical Equipment in Newport, Ore., has seen the sleep market grow greatly in the last few years. “It's very, very dynamic,” Posner says. “It is a good niche.”
Posner says her customer base has expanded to include increasingly younger patients and a lot of husbands and wives. That growth has spurred Samaritan Pacific Hospital, with which Posner's HME is affiliated, to open its own sleep labs in Newport and Corvallis.
What is prompting the growth? Posner says sleep apnea is being diagnosed more as, increasingly, physicians see a link between OSA and cardiopulmonary function, obesity and diabetes.
“Increased awareness is the main driving force behind the growth,” says Tom Pontzius, president, Nationwide Respiratory, for Waterloo, Iowa-based VGM.
Indeed, articles on OSA have appeared in the Wall Street Journal, the Los Angeles Times and the New York Times, and there was even a recent segment on NBC's “Today” show.
“Here's [‘Today’ host] Matt Lauer wearing a small, nasal pillow on his face, talking about sleep apnea for five minutes in prime time,” says ResMed's Farrell. “That sort of timing and exposure is unbelievable. The things he said — ‘Gosh, that machine is so quiet’ and ‘This pillow is so comfortable’ — we couldn't have paid him to say.”
Such exposure is also leading people to their physicians to inquire about sleep apnea, Farrell adds.
“The biggest challenge in the market is ignorance,” he explains, “and there is no question that breaking of that ignorance and positive education is leading people to think more about their sleep and ask more questions of their doctors.
“The consumer pull and the physician push are contributing to a very positive market.”
Pontzius sees another plus in the sleep market. It isn't, he notes, as heavily dependent on Medicare as are other segments of HME.
“The patient population is younger, and there is less reliance on Medicare reimbursement,” he says. “Many people who are diagnosed with OSA are working people and, therefore, come into a provider versus a provider calling on the patient in their home.”
That's good news for home care companies because with non-Medicare patients, they save delivery costs, have the opportunity to make sales of other items to the patients and are reimbursed either by the patients or private insurance.
And there's another positive to having a younger clientele. Because patients with sleep disorders are generally going to be under treatment for the rest of their lives, “they add a lot more value to your business in the long haul,” says Dave Myers, director of marketing, sleep disordered breathing, for Pittsburgh, Pa.-based Respironics.
“If they use [the product], there's a supply business that's going to go on forever — masks, filters, etc.”
PRODUCT PLUSES
For years, compliance has been an issue for patients using continuous positive airway pressure devices. Patients have historically balked at being tethered to a trunk-like apparatus and wearing a sleep mask that sometimes caused sores. But times are changing.
The dynamic marketplace has inspired manufacturers to design increasingly comfortable and compact products.
The first CPAPs “looked like a swimming pool pump,” recalls Farrell. “We've gone from a swimming pool pump to a clock radio.”
The new devices are indeed getting smaller and better.
“Technology keeps improving,” observes Med's McClure. “Telemedicine has embraced this sector of the market, allowing compliance downloads to be done from the office environment. Reports can be sent electronically to the labs and the [primary care provider].”
Samaritan's Posner says the advances enhance the care she can provide to patients.
“You can actually give value to the patient beyond, ‘Yep, it looks like you wear it every night for six hours.’ [The machine] can collect a lot more data and, with the card technology, it can be downloaded and mailed back and forth to the patient. With some [products], you can do oximetry at the same time they are on [the apparatus], and that is very helpful.”
Masks are also continuing to evolve, says Posner. While she still sometimes has to give patients up to three masks before they find the right one (and you only get reimbursed for one, Posner points out), there is still a better chance that a right fit will be found.
That and smaller CPAPs are going far in getting patients to use the apparatus, even when they are on the road.
“People want [their equipment] to be portable,” Posner points out. “Now, [CPAPs] can fit in a briefcase.”
Such strides also seem to be aiding in overall patient compliance.
“It's a safe bet that comfort and convenience is the direction everyone is heading,” Farrell says. “The more comfortable, the more convenient, the more likely [the CPAP] will be worn. We are seeing better outcomes.”
Compliance issues now “have more to do with how we care for patients and how we follow up” than with technology, Posner confirms.
However, not every sleep provider has embraced the new technology, according to Myers. For example, some providers are unwilling to spend the extra money for downloadable machines.
“Everybody is paid for a piece of equipment, not service,” Myers reminds. “The insurer doesn't pay you more because you take better care of your patient.”
But the data is important because it allows you to better serve your customer and thereby increase the lifetime value of the patient to your business, Myers continues. “You have to make sure the patient receives a successful outcome,” he says. “People aren't going to put this mask on their face every night if there is no value.”
If there is value, however, then compliance will be better, he says — and better outcomes could help drive reimbursement up, a welcome idea for most providers.
MARKET CHALLENGES
Sleep might sound like a dream market, but it does have its challenges.
“It's not all roses and the land of milk and honey,” Farrell says. “It's a beastly competitive market; there are always new entrants coming in. There's the general trend of declining reimbursement [in the HME market] and going from uncapped to capped rental, and those things have an effect.”
And historically, even though the volume can be great, sleep has not produced big profit margins, Myers notes. That has deterred some providers from entering the market.
Then, too, says McClure, there is the issue of proof of outcomes. “This hot market requires proof of outcomes in order to continue growing and not get caught in the reimbursement funnel,” she says.
McClure is also concerned “that the creation of standards and clinical practice guidelines lags behind the need to establish clinical pathways for home diagnostic screening that can aid in the control of health care costs.”
Another challenge for sleep providers is staying abreast of the sector's changes. Being an informed provider is time-consuming because there are so many products to choose among, and the technology changes swiftly. But it is crucial for success.
“Home care providers who are more informed about sleep therapy options and products can better educate referral sources,” Wilson of Puritan Bennett points out.
They can also better serve patients, says Farrell. “[Providers] need to know the outcomes associated with certain products. Putting that whole story together is important so that when the patient goes home, [the CPAP] is not used as a doorstop but used by the bed by the patient every night so that they get the benefits.”
Providing a patient with a CPAP isn't the end of the story, either. Wilson points out that “sleep-related disorders represent a complex lifetime of care, and providers must be equipped with technologies that effectively and efficiently manage patients throughout that continuum.”
Posner agrees. Providers wanting to get into the sleep field need to be committed to the program for the long haul, she says. “It's one thing to sell a piece of equipment, but it's what you do after you sell the equipment,” she says, pointing out that encouragement and follow-up care are important for patients.
“This is something that can make a huge difference [in a patient's life]. It really is that partnership with the patient that makes a huge difference.”
That translates into patient education. “To improve patient acceptance and compliance, patients need to be educated to ensure they receive optimum treatment and take responsibility for their care,” says McClure. “Routine assessment for effectiveness of CPAP treatment is warranted.”
It's not just the patient who needs to be educated, though. Myers says providers need to market to the physicians and other referral sources.
“Talk about your successes, how you are achieving outcomes and what you are providing to the patient,” he encourages. “And talk about your failures. Don't be afraid to go back and tell the treating physician [about a problem with a patient]. Because if they were a problem for you, they were probably a problem for him. You have to be an ally [and] a resource for that referral source.”
As if those challenges weren't enough, another one looms.
“Home care providers are faced with many challenges by the sleep centers that are dispensing their own CPAP devices,” Nationwide's Pontzius says. “There are a number of programs that exist today that will allow home care providers to continue to grow their sleep business while also competing against the self-dispensing sleep lab.”
One of the best things a provider can do, he says, is “diversify their sleep business and offer more than just putting out CPAP devices and interfaces. They can educate, teach, train and, to some extent, do sleep testing.”
In other words, provide the best service you can.
“It's a long-term investment in patients, products and procedures,” Farrell sums up. “The better a provider is at providing care, the more profitable the provider is.”
