Is the Sleep Market Slowing?

Wachovia Survey: Growth Expectations Down 5 Percent Since 2006

Results of the Wachovia 2008 Sleep Survey — a partnership with HME Business, Respiratory Management’s sister publication — reveal a slowdown of the sleep market. According to the study, HME providers expect their sleep revenue to grow by 10 percent in the next 12 months vs. 11 percent last year.

Low expectations for growth in this respiratory niche are a trend over the last four HME surveys conducted by Wachovia Capital Markets. Since 2006, growth expectations have fallen from 15 percent. The New York-based firm attributes the downturn to greater penetration in the market (estimated at 35 percent), slower expansion at sleep labs ahead of home sleep testing and a slowing shift in market mix toward higher-end flow generators.

Respondents reported a decline in sleep revenue of 11 percent over the past year, and 9 percent expect a decline in the next 12 months.

A total of 194 HMEs participated in the study, conducted May 19-June 2, 2008.

Here are the results:

Competitive Bidding

Preparations for competitive bidding may have impacted respondents’ predictions on revenue, in part. To handle competitive bidding, HMEs appear more likely to stick with existing manufacturers but to negotiate lower prices and move Medicare patients to lower-end devices, according to the study.

Approximately 56 percent of respondents indicated that they had already begun implementing some of these strategies. That number includes 12 percent of respondents in the first 10 MSAs and 44 percent of those not yet covered by competitive bidding.

Home Sleep Testing

Approximately 9 percent of respondents said they currently offer home sleep testing. An additional 42 percent of respondents plan to begin offering home sleep testing within the next 12 months, with the bulk starting in six months or more. According to Wachovia, home sleep testing could be a significant driver for the sleep market, though it is not likely to kick in until 2009 at the earliest.

Flow Generators & Masks

The average prices providers pay for flow generators and masks declined by 2.5 and 0.3 percent, respectively, in the past 12 months. Those percentages are up slightly from the previous survey (2.1 percent for flow generators and 0.1 percent for masks).

Respondents also rated both flow generators and masks. According to the survey, ResMed’s S8 Series II and Respironics’ M-Series tied as the top flow generators. For masks, ResMed’s Mirage Swift II nasal pillows and ResMed’s Mirage Quatro full face mask rated highest among respondents.

Editor’s Note: Wachovia does and seeks to do business with companies covered in its research reports. As a result, the firm may have a conflict of interest that could affect the objectivity of the report. ResMed is currently represented by Wachovia.

This article originally appeared in the Respiratory Management July/August 2008 issue of HME Business.

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