Business Solutions

The New Sleep Landscape: Should You Rest Easy?

The key to boosting sleep revenues lies in understanding industry challenges and what other sleep providers are doing to stay successful.

sleep revenuesCompetitive bidding, national mail order bidding and other roadblocks across the HME landscape have challenged the sleep business, but it continues to see growth that some experts say will continue into the foreseeable future. The question is, how? How are providers surviving despite these tough odds. The answer: a combination of keeping a cool head and thinking creatively.

Robyn Parrott, RRT, President, Sleep Solutions Home Medical, told HME Business magazine that despite not being awarded a bid in the Detroit market, her company’s sleep business has increased over the last year. They have also seen an increase in auto-CPAP orders because the BCBS in Michigan has mandated home sleep testing. Parrott says part of their success has been in not being afraid to say no to bad business.

“Not all business is good business and you must decide if you should take all business,” she says. “Sleep Solutions will not be bidding in Round Two. We feel we have crossed the hurdle without the Medicare business and have decided we don’t want the lower reimbursement with all the audits and headaches that come along with the bid.”

David Baxter, president of Medical Necessities, says his company’s new sleep setups (new patients receiving PAP devices) are increasing at about 15 percent annually, while sales for sleep replacement supplies are increasing over 50 percent annually. Baxter says that sleep is his company’s most profitable product line.

“The state of the sleep industry today is strong and growing, but you have to be realistic about the economic environment in which we are working,” Mark D’Angelo, sleep business leader for Philips explains. “Year after year we continue to see growth and our data suggests that trend will continue for the foreseeable future, but the sleep industry is undeniably changing. Reimbursement policies and new technology are creating a ‘new normal’ for HMEs. The companies that will continue to be successful and profitable in this industry are the ones that can best navigate the changes, embrace new demands and realities, and find new, innovative ways to efficiently support patients’ compliant and long-term use of therapy.”

The sleep industry is experiencing and embracing many of the same connectivity trends that are impacting the entire healthcare continuum, according to D’Angelo. Monitoring technology has evolved to better track patient vitals with the goal of prompt intervention earlier than previously possible. This same technology that is at work in hospitals and home health settings is being applied to the care of sleep-disordered breathing patients, fueling a change in the industry that enables HMEs to more effectively and efficiently manage patients. Similarly, he says, new solutions and products are empowering HMEs in such a way that they’re able to gather clinical data in real-time and make more informed, personalized decisions about individual care plans.

“In sleep and across the health spectrum, we’re seeing people take a more active role in their health,” D’Angelo says. “Sleep patients are taking compliance more seriously and utilizing self-management applications to learn about their therapy and find the motivation to make significant changes in behavior. Technology enables the patient to be self-sufficient yet engaged in therapy, and that is driving some very positive trends for everyone.”

Sleep Business Challenges

Jim Hollingshead, president of the Americas, ResMed, says that for some time now one of the main challenges facing the industry is a lack of awareness of sleep apnea itself, as well as its relationships with other chronic conditions, such as diabetes, obesity, and heart disease. That says, Hollingshead is encouraged by the research community’s continued focus on comorbidities, which ResMed highlighted around World Sleep Day earlier this year. He is also encouraged by the growing interest from consumers in tools and technologies that can help individuals learn more about their sleep characteristics and open the door to conversations with their physicians if they have questions or concerns.

Parrott says that although she sees a lot of profit in sleep business if done correctly, the biggest challenges over the last several years have been competitive bidding and decreasing reimbursements. When Medicare instituted compliance, it changed the course of the sleep industry and almost every insurance followed suit, she says.

“The biggest challenge is Medicare and documentation requirements that are always in flux,” Baxter says. “However, the last couple of years have been relatively stable. The other difficulty is insurance companies not paying for titration studies so mask issues are a little more common because the first exposure a patient gets to CPAP is from us. Therefore, our mask exchanges for these types of patients are more common.”

“Audits have emerged as a significant hurdle in the sleep industry in recent years with data suggesting less than half of pre-payment audits are successful, meaning the claims are ultimately paid,” D’Angelo says. “Successful or not, these audits are a challenge. A physician’s chart notes are a huge part of the audit and payment process, but chart notes, by their nature, are very subjective and therefore, difficult to standardize. Auditors can interpret chart notes differently than a physician intended, resulting in a rejected claim. The silver lining is that this hurdle is fueling an industry push toward system integration and giving HMEs direct access to EMR systems. Furthermore, we’ve seen an emergence of sleep-specific modules within EMRs to ensure that the necessary documentation is correct and to prevent a payment problem altogether.”

System Integration is also a key factor in helping to mitigate competitive bidding. As part of the competitive bidding process, significant numbers of patients can be displaced from their provider. To get those patients up and enable billing again, the documentation requirements are substantial. The more open and integrated systems are, the easier it is for HMEs to access historical patient data and to begin billing for their new patients.

Staying Competitive in The Sleep Business

To be a viable, profitable HME sleep provider, Parrott advisers that providers start by decreasing your product line.

“We used to stock four different manufacturer PAP machines,” she says. “We have decreased this line to two manufacturers to better our buying power. It was difficult in the beginning because we wanted to keep the referral source happy, but tough times lead to tough decisions.”

She also pointed out that there are many viable insurance companies out there and says you have to know your cost of doing business to make an educated decision on whether to accept a new insurance into your current business model. If reimbursement is too low, Sleep Solutions we will not accept the patient.

“Resupply in the sleep industry is a must for any sleep business,” she says. “Recurring revenue is needed these days in order to survive. There are many options on the market to assist the provider with their resupply business. The most important piece of advice for success is engaging the patient early and stressing the importance of replacing their supplies on a regular basis.”

To strengthen her business, Parrott says Sleep Solutions collects compliance data to distribute back to the sleep labs. Sleep Solution’s patient compliance is at approximately 91 percent, and Parrott says this makes a difference in the referrals’ eyes.

“If we get the patient compliant,” she says, “it will be recurring revenue for both the sleep center and Sleep Solutions.”

Parrott also recommended selling ancillary cash items.

“There is a whole line of cash items that go along with PAP therapy,” she says. “We have found that people will spend cash for these items on a regular basis. Some of the items we stock include CPAP pillows, pillow cases, aromatherapy, tubing dryers, SoClean machines, sound therapy and ear plugs.”

Finally, she says it is important to keep the cash flowing positively, so collect your co-pays and deductibles up front, set up automatic monthly charges and give patients on-line access to pay their bills.

Demonstrating Positive Patient Outcomes

Hollingshead says that Sleep apnea is a high-cost chronic condition that requires an investment in technology, and patient engagement and education in order to drive better outcomes.

“Sleep providers face unprecedented challenges when it comes to reimbursement cuts, and are often asked by commercial health plans to do more with less,” he says. “In an effort to control a rise in utilization, some health plans have put requirements in place to ensure that patients are using the prescribed equipment, and may cease reimbursement if compliance to therapy is not demonstrated.

“We believe that over time, there will be opportunity for those sleep providers that demonstrate an improvement in outcomes, especially as our healthcare system moves from fee-for-service to value-based payment models,” he continues. “But in the short-term, improving operating efficiencies is going to be key for the entire industry.”

Baxter says that over the last two years, his company has focused on its replacement program and revenue has grown 300 percent during this time. Medical Necessities’ net receive on this segment of the business over the last two years has been 28 percent. This has been critical to do because of cuts from Medicare and other payers related to competitive bidding. Baxter says he uses an outreach that doesn’t involve automation. Instead it is live managed with multiple types of patient interaction (live call, email, text, smart phone app, and patient portal).

“We have utilized other platforms in the past but they were not effective because they were not being live managed,” he says. “Today, patients require different methods of communication and you can’t manage that in house. In addition, all the IVR platforms don’t allow a successful replacement program either. Patients don’t like to talk to automation. And live calls are not 100 percent effective because a significant number of patients don’t want to talk to anybody but will order with text, smartphone app, or email.”

Baxter says other technology is also helping his company stay profitable. They continue to use modems for all patients for compliance and now leave them on indefinitely, as he says this helps manage patients more effectively. Also using smartphone apps to stay in touch with patients regarding their therapy is critical for replacement supplies and helping that patient to stay engaged in therapy.

Finally, Baxter says he reports the company’s overall compliance to their top-referring MDs to show the company’s objective data. Having modems running all the time, Baxter says they can manage patient needs much easier with the ability to collect data for all patients once they are on therapy for a year. And Baxter says where most HME providers see over a 50 percent reduction of patients who don’t reorder replacement supplies after the first year because they aren’t contacted appropriately, Baxter’s company keeps greater than 80 percent of his patients who are ordering replacement supplies annually.

“Patient education is key when it comes to resupply,” says Hollingshead. “We know from the data that communicating the importance of mask replacement and informing patients of their options go a long way. According to a recent study of 400 sleep apnea patients commissioned by ResMed and conducted by Peel Research Partners, 85 percent reported that replacing supplies is extremely important or very important; of patients who were educated about resupply at a later date, only 29 percent subsequently embrace frequent replacement.”

Continued Push Toward Technological Innovation

D’Angelo says that it is crucial for HME sleep providers to service patients over the long term, but a lot of providers aren’t doing this effectively or efficiently. It’s not just about taking care of a patient for 30 or even 90 days, he says. The industry will be sustained on continuing to engage with patients and assisting them with resupply as they progress along the healthcare journey over the course of years. Maintaining relationships with patients will not only keep them connected to quality care, but will help foster ongoing business opportunities with the possibility to expand the relationship as patients’ needs change or progress.

“Effective revenue models can enable better use of resources within an HME’s business,” he says. “By utilizing end-to-end technology solutions, HMEs can eliminate redundancies and use data to make better decisions and engage patients in ways that will reduce the number of patient-provider touch points without negatively impacting results. This streamlined approach allows HMEs to redeploy resources toward new sources of revenue or growth.”

Like Baxter, D’Angelo also says that Information technology and system integration can provide the solution to many of the challenges the sleep industry is facing, while adding new opportunities for sleep providers.

“Connected health technology is becoming the standard across the health continuum and is improving therapy for sleep patients in the new world of outcomes-driven reimbursement, as well as helping HMEs to operate more efficiently,” he says. “Backed by data-driven information that enables tailored patient care and greater adherence to therapy, this approach to sleep therapy provides a range of new opportunities for HMEs to stay virtually connected to the patient.”

This can take providers to a whole new level of care that can help differentiate their businesses.

“With effective use of new technologies, HMEs can coach patients more efficiently and effectively to success (i.e. compliance), while reducing touch points, and eliminating redundancies in billing and patient medical records,” D’Angelo explains. “How HMEs embrace connected and integrated solutions to balance their patients’ needs with their own business needs will determine their success. Automated processes can empower HMEs to improve the patient experience, giving them the opportunity to play a vital role in today’s healthcare ecosystem and demonstrate that they can perform effectively and efficiently in the ‘new normal.’”

This article originally appeared in the May 2015 issue of HME Business.


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