The CPAP market looks a lot like the rest of the home care industry these days — full of potential mixed with uncertainty. Manufacturers and providers alike have reason for optimism, but reimbursement challenges, the threat of competitive bidding and troublesome Medicare audits have screeched business to a halt in some cases.
The undiagnosed sleep apnea masses beckon to home medical equipment providers, but as with any modality that sees a utilization spike, the government becomes suspicious. Helen Kent, president of Carlsbad, Calif.-based Progressive Medical, has responded by redirecting her energy toward private insurance and a large military presence in the San Diego area.
“I'm not going after Medicare, and I'm not marketing to people who have Medicare patients,” says Kent. “We have a huge military population, and that's where we are gearing a lot of our sales.”
Kent's current Medicare patient population consists of many neuromuscular cases (such as ALS) that get Medicare prior to age 65. “If I had my druthers, I would say no to every Medicare patient that comes through that door,” says Kent, “because there is a possibility that I have to pay that money back after all my hard work.”
In all, Medicare beneficiaries still represent about a third of Kent's patients, but that percentage figures to go down even further in 2011 and 2012.
“I'm passionate about this industry, and it breaks my heart to see what they're doing to us,” says Kent. “The boomers are here, and they are going to need us before we need them. If CMS gets rid of moms and pops, discharge planners are going to have chaos when it comes to many issues beyond just CPAP. Patients are going to be in the hospital twice as long.”
Round 2 of competitive bidding will hit Progressive Medical, but Kent has no interest in putting forth a number that she knows would be unsustainable. “I'm not going to bid,” she says bluntly. “Look at those prices they have established. Why would you go through the hassle of bidding when you're going to go out of business with those prices anyway? It is spinning your wheels.”
The stakes are even higher for Diana Guth, a provider with a Medicare patient population that hovers around 75 percent of her total business. The market-strangling tentacles of competitive bidding have not yet reached her door, but the Recovery Audit Contractor in Jurisdiction D recently brought its own misery due to a misinterpretation of the policy for CPAPs. If patients did not have a sleep study paid for by Medicare, providers received demand letters asking for money back.
In Guth's case, the RAC attempted to recover money from claims under its “look back” period of three years. “The first level of appeal is a rebuttal that must be done within 15 days of the [RAC demand letter] being issued,” says Guth, owner of Home Respiratory Care in Los Angeles. It was “very time-consuming” to respond in the allowed time frame, she says. “In the interim, they decided I had done nothing wrong.”
(Last month, the American Association for Homecare reported that after bringing the matter to the attention of CMS, the automated audits in Jurisdiction D would be stopped since CPAP therapy is frequently prescribed before patients are Medicare-eligible. CMS staff also indicated “that they would be refunding money that has been collected due to the misapplication of the policy,” according to the association report.)
The RAC snafu could end up being a minor annoyance when compared to the black cloud of competitive bidding, however. If the program is not defeated, it would almost surely close Guth's doors, she acknowledges. But as for winning a bid, Guth also says she has no plans to throw a number into the hat.
“If the bids are as low as they were in Round 1 — 30 percent less plus the other 9.5 percent cut — that is 40 percent less than what we were paid in 2008,” she laments. “It is simply not sustainable. If I can't do it the right way and take good care of my patients, I am just not going to do it at all.”
Plain Vanilla?
Despite the considerable hype surrounding the CPAP market, Tim Good, CRT, CPFT, RPFT, owner of GoodCare by CPCI in Logan, Ohio, characterizes the market as flat, a condition he attributes to a familiar foe — the government.
“Medicare requirements for CPAP coverage are becoming absolutely unsustainable,” states Good. “CERT audits of CPAP supplies for long-standing CPAP patients are applying the most recent audit standards to CPAPs set up 10 or more years ago. I believe many suppliers will exit the Medicare CPAP market.”
According to Good, ever-more stringent compliance standards are competing with declining reimbursements, setting up an inevitable clash. In short, better equipment usually costs more, and providers simply can't afford it.
“Pricing and reimbursement will destroy innovation and upgrading of CPAP equipment,” says Good. “A plain vanilla CPAP with AHI download capabilities will drive the market. Competitive bidding will severely impact the market, initially in the affected MSAs, and then reimbursement will degrade in other areas as well.”
Kelly Rudolph, president of manufacturer Hans Rudolph, Shawnee, Kan., believes government intervention in the form of taxation could also stifle innovation. “They are now [going to tax] medical device manufacturers,” notes Rudolph, referring to the 2.3 percent excise tax contained in the health reform law.
“They want to control what we do and how we do it. Building molds and tooling is expensive and time-consuming, and it requires a lot of support from bankers. When we get beat down by those who don't understand what it takes to design, prototype, manufacture, assemble, market, sell and distribute a product, it just makes it harder to come out with new products.”
Resupply Still Hot
It may not be as easy as some HME companies had first anticipated, but officials at manufacturers such as Somerset, Pa.-based DeVilbiss Healthcare are still encouraging sleep therapy providers to explore the resupply market. “The biggest misconception is that the sale ends once a suitable mask has been dispensed,” says Mike Marcinek, vice president of sales and marketing for sleep solutions. “To maintain patient comfort and satisfaction, providers must continue to touch base with users to ensure they are not in need of a new interface or replacement components.”
At DeVilbiss, the CPAP/mask market continues to expand, with officials reporting particularly consistent growth with the company's IntelliPAP and EasyFit lines. When looking at the market as a whole, Marcinek believes providers can maximize revenue by focusing on the basics, which inevitably comes back to compliance.
“Comfort is at the forefront of establishing and maintaining CPAP compliance,” says Marcinek. “The interface is a critical element to comfort, which includes scheduled replacement of components — cushions, headgear, etc. With these replacements comes a trailing revenue stream. Many providers understand the potential of replenishments, but struggle on where to start.” DeVilbiss has developed a turnkey solution called Keystone Services to address the need, Marcinek says, “and do it in a cost-effective manner.”
Supply sales are up over last year at Harrisburg, Pa.-headquartered CressCare Medical, while new CPAP set-ups have remained unchanged. “Some labs have increased the amount of CPAPs being prescribed, and some have decreased,” says Todd Cressler, the company's founder. “Overall it has remained constant.”
Relying on physician notes to justify reimbursement is a continuing challenge for Cressler, a situation he believes won't change for the foreseeable future. “We have to rely on the physicians to follow Medicare guidelines,” he says. “If physicians are not directly impacted by the documentation requirements, our mutual patients in the end will suffer. Our industry will continue to suffer under these ridiculous guidelines.”
Don Darkin, senior vice president at San Diego-based ResMed, has seen overall market growth numbers in the “high single digits,” a situation he attributes to a U.S. economy that is taking longer than expected to recover. “I don't think the business in general has slowed down,” says Darkin. “People are still coming through the labs and still requiring therapy. And you have a small but growing number of people pushing on home sleep testing.”
“We think home sleep testing is making up about 8 to 10 percent of all tests at this point, which is about double what it was a year ago,” adds Constance Bienfait, ResMed's director of investor relations. “We don't think it will keep doubling in the very near future, but we definitely think it will grow. The real catalyst will be if and when insurance companies mandate that you must have a home sleep test before you have a [polysomnogram].”
Down the Pike
ResMed continues a successful run with the company's Quattro full face line, but Darkin says some key modifications are on the horizon. “We realized that we could actually enhance that footprint by making a smaller product, which has a different cushion technology and would be easier to fit,” says Darkin. “We would reduce the time in the sleep lab, reduce time in the DME for fitting and, more importantly, reduce the time for callbacks.”
Company officials describe the Quattro FX as an unobtrusive and easy-to-fit full face mask targeted at nasal users who require chin straps for mouth breathing. “This is proving to be a hit in that space, and we're seeing one of the fastest take-ups of any new product in that category,” Darkin says.
The European market has already gotten a taste of ResMed's new Mirage FX nasal mask, which Darkin says is probably the smallest nasal mask on the market. “It concludes a family of products [including] the Mirage, the Quattro and the Swift FX,” says Darkin. “All have been developed with new technology in mind for ease, speed of fit through the lab and DME, plus higher compliance requirements.”
When it makes its U.S. debut, the Mirage FX will fall into the nasal category. “The major difference for this product is it takes a nasal mask from around 10 to 15 components down to four components, which makes it easier to manage, stock, clean and use,” he says.
“The response in Europe has been promising. That product will launch in the next few weeks in the U.S.,” Darkin says. “To complement the S9 range, we will also be launching a full range of bi-levels over that period as well, and that will come out in the near future.”
As Kent has gradually expanded her business, she has relied on ResMed and Fisher & Paykel, two southern California-based manufacturers. “Units from these manufacturers have download capabilities, so we can make sure therapy is effective. These are all important elements that you must have when you're in this market,” says Kent, who friends call the “grandmother of sleep.”
At DeVilbiss, officials are prepping a new addition to the company's EasyFit line, and Marcinek hopes to have the interface available by mid-2011. The expansion strategy is born of an optimism that he believes will see the industry through an era of declining reimbursements.
“Providers are now more attuned to the importance of quality and reliability with the reduced reimbursement environment,” he says, adding that providers are looking for products that can help produce the clinical outcomes they want in a reliable manner.
According to Marcinek, recent data indicates that 70 percent of interfaces and 58 percent of CPAPs are brand-specified by the referral source.
“Clearly, providers need to abide by referral source brand-specific desires,” he says. “However, for non-brand specified prescriptions, why not take a look at dispensing alternative products that provide reliability and value? Choice at the provider level enhances competition, which ultimately benefits the market in many ways.”
New AASM Program
The American Academy of Sleep Medicine (AASM) recently announced a new program called the Accreditation of Out of Center Sleep Testing for Adult Patients. Begun in February “to meet the changing needs of our members, sleep disorders centers, and the sleep medicine field,” the move signals what some believe is a growing acceptance of home sleep testing on the part of AASM. To review standards for the new program, go to www.aasmnet.org.
Wake-Up Call
According to ResMed and Philips Respironics, which have teamed to educate primary care physicians on the issue, approximately one in five U.S. adults has mild obstructive sleep apnea — but up to 90 percent are believed to be undiagnosed.
