Sleep Solutions lands giant VA deal

Wednesday, June 30, 2004

ANNAPOLIS, Md. - Sleep Solutions, a specialty provider of in-home diagnostics for obstructive sleep apnea, is more than doubling its sleep business at the Department of Veterans Affairs with two new contracts at sleep centers in Puget Sound, Wash., and Salt Lake City.

The company has already performed more than 2,500 sleep studies for the VA. The new contracts set the stage for 3,500 more. Last year, Sleep Solutions did about 5,000 in-home studies overall and expects to do about 10,000 studies this year.

To ramp up for this business, the company has reached a new agreement with Asemtec, the San Jose, Calif.-based device manufacturer that makes the NovaSom QSG in-home sleep diagnostic testing device.

The boost in Sleep Solutions’ in-home diagnostics business parallels Medicare’s reconsideration of reimbursement for in-home diagnostics. While many believe Medicare will ultimately reject the proposal to sanction in-home diagnostics, at least one VA sleep center director says they’ve got to do sleep studies in-home.

“To make [veterans] wait eight months to get into our new sleep clinic, and do a sleep history, and another eight months to get them into a sleep test, and another month to get the results and CPAP set up, we are talking about two years by the time we see a patient from initial consult to when they are actually rated,” said Michael Dickel, who runs the VA sleep lab in Long Beach, Calif.

The prevalence of sleep apnea in veterans is estimated to be about four times greater than the general U.S. population, according to the American Sleep Apnea Association. While OSA may affect as many as 600,000 veterans, only about 30,000 had been diagnosed by 2001.

In Long Beach, Sleep Solutions handled about 300 patients on the VA’s backlog after Dickel got access to extra money in a VA slush fund. A full sleep test at the lab costs about $1,000. For an in-home diagnosis, the VA paid about $350 per patient for a five channel study.

To do the study, Sleep Solutions mails a NovaSom QSG diagnostic device direct to the patient’s house from Asemtec. The patient sleeps on the device for three nights and ships the unit back to Asemtec where the data is uploaded into a computer. From there, Sleep Solutions prompts the physician, by e-mail or fax, to let them know they’ve posted data for interpretation.

For Dickel, the technology works well, although he says he does retest about 10% of the screened patient base. If he had more money, he’d contract out more business to home diagnostics.

For Michael Thomas, CEO of Sleep Solutions, Medicare’s ignorance of this technology solution is a source of frustration.

“The people it hurts are the patients and the payors because everyone is crying about escalating costs and here you have [less expensive] technology solutions that are just sitting on the shelf,” said Thomas.