Sleep market shows no signs of dozing off

Friday, May 23, 2014

The sleep therapy market has since shrugged off the interruption of Round 2 of competitive bidding and is now finding its equilibrium. The new landscape finds some providers out of the business while contract suppliers are changing conventional methods in the search for cost savings, manufacturers say.

“It has been 12 months since the Round 2 rates were announced and nine months since implementation began—there has clearly been some consolidation and repositioning,” said Dave Groll, CEO of Export, Pa.-based Circadiance. “Many bid winners saw net gains in patient volume. We made appropriate price adjustments in advance of Round 2 to help our customers position themselves for these changes.”

Jim Hollingshead, president of San Diego-based ResMed-Americas also points out the initial “disruption and confusion” that impacted providers on the winning and losing sides of the bids.

“Both were taking short-term defensive actions to grapple with the effect on their business,” he said. “For the winners, the pendulum has swung to a more long-term view of their patient base as they try to find ways to squeeze more efficiency out of their business.”

In the aftermath, the market has settled down into a “new normal,” said Brian Palmer, director of marketing for sleep at Somerset, Pa.-based DeVilbiss.

“The initial reaction was to provide lower pricing to the market and that seems to have now leveled off,” he said. “Customers are looking inward to their own efficiencies to see where they can make up the difference in payment without affecting service to patients.”

In looking at the repercussions of competitive bidding, there is no choice for providers except to change their methodologies, said John Frank, senior vice president and general manager, of sleep and respiratory care for Murrysville, Pa.-based Philips Respironics.

“CBR2 coincides with other current market forces, such as slower and maturing growth rates in sleep diagnosis and treatment, and the move from lab to home diagnosis,” he said. “In addition, the ever-increasing documentation required for reimbursement, particularly as it relates to outcomes evidence for PAP therapy, patient management and resupply, has further eroded providers’ efficiency and profitability. Ultimately, Philips and homecare providers alike need to develop ways to mitigate these pressures to not only survive, but thrive while continuing to provide quality treatment options.”

Using third parties

Because resupplying masks, hoses and other parts is an important business segment of CPAP therapy, contract winners are starting to see third-party suppliers as a cost-effective option for delivery, says Cindy Skerjanec, marketing director for Westminster, Colo.-based CareTouch.

“Providers are becoming increasingly aware that working with a third-party resupply partner gives them the freedom to better manage their patients while also bringing in new revenue,” she said. “The suppliers we work with see the value in outsourcing because it allows them to focus on new patient intake while maintaining their existing patients’ health and enabling consistent revenue streams through resupply.”

Overall, Hollingshead still sees “huge opportunity” to improve resupply in the sleep market.

“We’ve done extensive research in this area and found that HME communication about resupply has a big impact on a patient’s behavior, and that resupply enrollment is most successful when conducted at the initial set-up,” he said. “Two-thirds of patients we surveyed who infrequently changed their supplies weren’t given an option to join a resupply program by their HME, but more than half of them would like to have that choice. Setting up a resupply program is going to task an HME with adding new skills to its organization, but there are really good third-party vendors out that can set up and automate a resupply program paying dividends over the long run.”

Home study status

Besides CPAP therapy, sleep studies also represent business opportunities for HME providers. Based on recent trends, it stands to gain more ground going forward, said Ron Richard, CEO of Coconut Creek, Fla.-based InnoMed Technologies.

“There’s been a big shift—approximately 20% to 30% of studies being done on the West Coast are home-based and may go as high as 50%,” he said. “I don’t see more fixed-bed labs being built due to the shift toward home studies being done.”

Groll agrees with the assessment that half of all tests will eventually be home-based and says that could come as early as 2015. 

“It appears to be in response to economic pressure being applied by payers causing the need for pre-authorization for professional sleep labs,” he said.

Seizing sleep

The key to success in the sleep market is to be seen as an expert in the field and that takes more than just basic CPAP provision, Richard said.

“You have to offer more and specialize in complex patients with back-up rates and algorithms and auto bi-level,” he said. “Take care of the more complex patients and delve into the co-morbidities like COPD and ventilation. Be a one-stop respiratory shop.”

Empathy with patients is also essential, Skerjanec adds.

“Patients who are just diagnosed with sleep apnea walk into the HME provider filled with a great deal of apprehension, a lot of unknowns and many questions. Providers can position themselves as the go-to sleep expert by providing as much information to the patient as possible at the onset of the relationship.”

Branding is another, albeit overlooked, aspect of working in this market, Groll said.

“Be bold enough to use the word ‘sleep’ in the business name,” he said. “All things being equal, if you looked online because you needed something for your PAP therapy and Google returned a page of providers and only one had ‘sleep’ in the company name, the odds are very high that you will pick that provider.”