2015 HME Handbook

How to Employ Innovative Strategies to 'Upgrade' Your Sleep Business

The sleep patient population is sizable, but declining reimbursement has become a problem. That’s a challenge, but it's one that smart providers can overcome.


When you look at the numbers, sleep providers might need to relearn a market they used to know like the backs of their hands. They expect continued volume growth, but must find a new pathway to sustained profitability.

Sleep providers reported their sleep patient volume grew 5.2 percent in the last 12 months and expected 6.1 percent growth in the next 12 months, according to the latest survey of seep providers conducted by HME Business and Needham & Company LLC. Conducted during the fourth quarter of 2014, only 17 percent of respondents experienced a decline in their sleep patient volume over the past 12 months, and 12 percent said they expect a decline in the next 12 months.

A key issue is declining reimbursement, not due solely to Medicare, but also private payor insurance. Respondents indicated that, on average, 51 percent of commercial incurrence carriers had reduced reimbursement as a result of Medicare competitive bidding. This corroborates the anecdotal reports that private insurers have been cutting reimbursement rates. Other respondents, including those that didn’t get Round Two contracts, indicated that flow generator prices declined 5.8 percent over the last 12 months (vs. a 5.4 percent decline in the prior, second quarter survey), while mask prices declined 5 percent over the same period (vs. a 4.8 percent decline in the prior survey). These marked the largest declines in the eight years of our joint survey.

So, the patient population is there, but the reimbursement has become a problem. That’s a challenge, but the home medical equipment industry is a resilient one. Let’s look at some of the ways providers can innovate and reinvigorate their sleep businesses:

Resupply Is Critical

This isn’t breaking news, but it’s important to reinforce: Follow-up resupply efforts are critical in shoring up the business. Nearly all — 78 percent — of respondents to the latest survey said they follow up with sleep patients to drive resupply sales. Of the methods used, live phone calls topped the list of follow-up techniques, being used by 69 percent of respondents; followed by automated calls, which was used by 59 percent; email, which was used by 34 percent; and regular mail, which used by 13 percent.

In terms of re-supply equipment, sleep providers said they expect mask use to increase, but only so much. Respondents reported that patients used an average of 1.95 masks per year in the last 12 months, and they expect this to increase to 2.1 masks per year in the next 12 months. Needham estimated that this could increase mask market growth by 8 to 9 percent. But, as patients are now using almost two masks per year, the effect of increased replacement rates is probably slightly diminishing since the survey estimated this measure will hit its ceiling at roughly 2.5 masks per year.

Differentiation Through Communication

Obviously, compliance is king when it comes to sleep therapy, and the main way to ensure that compliance is through patient monitoring and communicating that data to referral partners. The sleep industry is experiencing and sometimes leading many of the connectivity trends that are impacting the entire healthcare continuum. Monitoring technology has evolved to better track patient vitals with the goal of prompt intervention earlier than previously possible. In fact in many cases sleep patient monitoring is bordering on real-time capability. The technology being applied to the care of sleep-disordered breathing patients is fueling a change in the industry because it helps HMEs more effectively and efficiently manage patients. 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. This is the kind of data that outcomes-oriented referral partners will expect, and will appreciate, which is a critical differentiator.

Driving Patient Education

Providers are also taking a more active approach to continually educating their sleep patients through regular marketing campaigns that tell them more about their condition and equipment. But they are also going real-time as well, but more regularly providing one-on-one communication based on the data that the patient is generating. Here again we are seeing an outcomes-oriented approach that will have a positive impact on compliance and therapeutic results. And it will benefit the bottom line, as well. Patients need regularly updated supplies in order to ensure good performance, and these communications efforts can also help drive re-supply efforts.

Continue to Watch Technology Trends

Connected health and individual performance monitoring will only expand. At this point nearly every sleep equipment manufacturer offers turnkey systems for monitoring patients to see how they are performing and how the provider can help those patients improve their compliance and results. And those systems are now becoming cloud-based so that providers can easily share them with their referral partners. The “connected health” landscape that people have been talking about for a decade has finally evolved into a viable platform for producing positive outcomes, and in many respects sleep therapy is sitting right in the heart of this revolution.

Points to Take Away:

  • Our regularly, twice-yearly industry surveys continue to show that sleep provider expect overall patient volume and revenue growth, but they expect per-patient revenue to continue to decline.
  • Competitive bidding has been the driver for winnowing reimbursement, and private payor insurance carriers are matching declining Medicare rates.
  • As a result providers are getting smart about driving resupply efforts in order to shore up their revenues.
  • Patient monitoring is a key way to improve outcomes, and providing a constant flow of that data to referral partners is a key differentiator for the provider.
  • That communication can also go downstream to the patient in order to help them improve their compliance and outcomes, as well as to drive re-supply.
  • Sleep will continue to sit at the epicenter of more “connected health” technology developments.

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

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