Even before CMS rendered its March 2008 verdict to expand coverage of CPAPS for patients diagnosed with obstructive sleep apnea (OSA) via home sleep testing (HST) devices types II, III and IV, HME providers had been anticipating how HST might become a viable revenue stream for them.
Fast forward to 2013, and you will see that HST has grown dramatically in popularity, says Jeffrey S. Baird, Esq., Chairman of the Health Care Group of Brown & Fortunato, P.C. And he thinks the reasons are obvious: convenience for the patient and accuracy of the test results.
“Over the last 10 years, the medical community has been focusing on obstructive sleep apnea,” says Baird. “In doing so, two conclusions have been reached. First, OSA is a common problem and there are millions of Americans who are undiagnosed. Second, OSA is a cause of a number of health problems. There are two ways that a patient can be tested for OSA. One way is for the patient to spend the night in a ‘brick and mortar’ sleep lab in which the patient undergoes a polysomnographic test. Until recently, this has been the most prevalent test for OSA. However, it is not convenient for patients to spend the night in a sleep lab. Plus, technology has improved. As a result, we are seeing a dramatic increase in the second way for a patient to be tested for OSA: home sleep testing.”
According to Baird, with a home sleep test, one of three individuals/entities will allow a patient to take home an HST device: physician, sleep lab, or company that specializes in manufacturing/distributing such devices. The patient will hook the device up when he or she goes to sleep and then will return the device the next day. The treating physician will review the results of the HST, determine whether the patient has OSA and, if so, determine whether to order a CPAP for the patient.
Home sleep testing is defined as portable testing for sleep apnea, which is conducted away from a sleep lab and in most cases is unattended by a sleep technician, says John Carter, VGM Group, National Sleep Services, Associate VP Marketing and Contracting. What is measured, he says, varies depending on the device that is used. Most tests measure oxygen saturation, breathing effort, airflow, and body position.
“Like all things in healthcare, cost seems to be the main driver for HST,” says Kelly Riley, Director of The MED Group’s National Respiratory Network. “Secondly, there are numerous pieces of published data that point to both the efficacy and similar/same outcomes with HST when compared to in lab testing. For example, the findings of Samuel T. Kuna, M.D, Chief of the Pulmonary, Critical Care and Sleep Section at the Philadelphia VA Medical Center, is one of the published data sources I was referring to.”
Riley says that many payors are actually driving the market away from in lab testing and into an HST model now.
Several, including Aetna, Humana and Wellpoint/Anthem, are now requiring that in lab testing (PSGT) be pre-authorized; that makes it easier to open the doors to HST.
Baird says that the American healthcare system is the best in the world, but unfortunately, as a country, the U.S. cannot afford its healthcare system.
“The watchwords of healthcare are ‘cost containment,’” he says. “In particular, the goal is to keep patients out of physicians’ offices and facilities and to conduct testing and deliver healthcare in the home. This saves money and is much more convenient for patients. Therefore, the genesis for HST is the same as the genesis for many of the technological developments that we see in healthcare: patient convenience and cost savings.”
What’s in it for HME Providers?
Before answering whether HST is or can be a viable revenue stream for HME providers, Baird says it is important to look at the big picture.
“Approximately 75 percent of CPAP patients are commercial (non-Medicare) patients; approximately 25 percent are Medicare patients,” he says. “In order for a DME supplier to survive, it needs to lessen its dependence on Medicare fee-for-service. The fact that most OSA patients are non-Medicare opens up opportunities for suppliers.
“So let’s talk about commercial OSA patients,” he continues. “Unless the commercial insurer says otherwise, the DME supplier can provide the HST device to the commercial patient and then also sell the CPAP to the commercial patient. Thereafter, the DME supplier can sell, for example, every three months, the mask, filter and tubing necessary for the commercial patient to use the CPAP.”
Baird calls this the “classic ‘razor and razor blade’ model.” In other words, Gillette loses money on selling the razor but makes up for it by selling the disposable razor blades. Similarly, a DME supplier mightly only break even in selling the CPAP, but will generate a profit in selling the subsequent supplies.
However, that business model doesn’t work when the DME supplier is working with Medicare patients, since they are barred from doing both types of services. According to 42 CFR 424.57(f): “No Medicare payment will be made to the supplier of a CPAP device if that supplier, or its affiliate, is directly or indirectly the provider of sleep test used to diagnose the beneficiary with obstructive sleep apnea.”
“In plain English, this says that if a DME supplier has any connection with the home sleep test, then Medicare will not pay for the CPAP (and subsequent supplies) sold by the supplier,” Baird explains. “This means that when it comes to Medicare patients, the DME supplier can either provide the home sleep test or can provide the CPAP, but not both. The DME supplier must choose between the two options. Compare this to commercial patients in which the DME supplier can provide the home sleep test and the subsequent CPAP (and supplies) unless the commercial insurer says otherwise.”
Ted Wawrzyniak, manager of home medical services, HealthPartners, says that HST is becoming extremely popular. He points out that some areas of the country are more popular than others, but it appears to be spreading across the country. Many providers are minimally experimenting with it right now.
Wawrzyniak started doing HST as part of a pilot test with his dentists to test for oral appliance efficacy. Once patients have the oral appliance, HealthPartners uses HST as a means of testing to see if the appliance is effective at treating OSA. In the past, HealthPartners would bring patients back for a much more expensive facility-based sleep study. Now, they are able to test the efficacy without the expensive test. Wawrzyniak adds patients were never excited to go back for another night at the sleep center.
HealthPartners is just concluding the pilot as this article goes to press and Wawrzyniak hopes that results will determine how HST is used at his company in the future. Overall, he sees it as a positive practice.
“HST has allowed us to improve the affordability of sleep testing for our patients, although the patient type has been real limited to this point,” he says. “We think that in the future, it will greatly improve affordability of sleep testing for payors and our patients. At HealthPartners, we are doing what we can to make healthcare more affordable and improve the health outcomes of our patients.”
As far as HST goes, Wawrzyniak says it can be profitable, but not as much as facilitybased testing.
“There are still inconsistencies among payors and reimbursement is generally too low,” he says. “Patients often have large out-of-pocket expenses for these tests. More payors are reconsidering this policy and they are increasing their reimbursement now to the point where it can be profitable if you can do the testing in an efficient manner. Because we have a complete sleep program, with a DME that provides CPAP, it can be a sustainable program that contributes to our overall goals of improving the health and experience of our patients, while at the same time, contributing to the increasing affordability of healthcare.”
Thomas Rothe, regional manager, Freedom Respiratory, Inc., says that HST should be a viable revenue stream for IDTFs and should not be something HME providers conduct. By remaining out of the HST arena, Rothe has been able to enhance his company’s relationship with sleep diagnostic centers.
“HME Providers should not be HST providers because HME providers are not licensed in most states to furnish patient assessment and testing,” he says. “That is the role of an IDTF.Although Medicare/CMS has recognized that an HME can be the ‘courier’ for overnight pulse oximetry testing, there isn’t much opportunity for problems with obtaining an appropriate and accurate test — and if IDTFs are following the Medicare CMS Guidelines, they are simply dropping off the device and the patient does his or her own test and then they pick up the device to download after the test has been conducted.
“With HST, there is a need to ensure proper placement of electrodes, belts and other sensors that should be done by trained individuals in order for them to claim that the test results are reliable and can be used to prescribe therapy or additional testing,” he adds. “There is also a strong likelihood that the patient will be asking questions because of the nature or level of this test that should only be answered by licensed, qualified or trained individuals, which is not likely to happen because they are doing this in the home without a medically licensed supervisor. Whereas a sleep lab, has a medical director who is responsible for providing this oversight.”
And one industry sleep veteran, who prefered to be quoted anonymously, added this reminder:
“HMEs are NOT IDTFs and Medicare aside, this type of behavior is what has hurt our industry. This is an example of why AASM wants to strip us of our role in sleep. Going after the dollars without regards to the science. We are not diagnosticians and to say we are is a real reach. It ‘reeks’ of self-referral and sets the stage to allow questioning as to the validity of not only the purpose for the test, but the outcomes. Driving awareness of the prevalence of OSA and then creating relationships between qualified parties ( doctors and IDTFs or simply teaching doctors who want to test out of their clinics how that can be done) I feel is a model that is both best clinical medicine and presents the best model to avoid scrutiny. Too many HMEs don’t know an AHI from and RDI, and how to differentiate central apneas from obstructive. This sets up some real risk.”
HST Revenue Sources for HME Providers
According to Baird, in serving commercial patients, the DME supplier can realize income in two ways: First, the supplier can participate in the home sleep test and subsequently sell the CPAP unless the commercial insurer says otherwise. Second, the DME supplier can have no connection with the entity that conducts the home sleep testing, but can sell the CPAPs/ supplies to the commercial patients who test positive for OSA. In serving Medicare patients, the DME supplier can realize income in one of two ways. The supplier can conduct the home sleep test and receive payment from Medicare for the test; however, the reimbursement is small. Alternatively, the DME supplier can have nothing to do with the home sleep test, but can sell the CPAP/subsequent supplies.
“DME suppliers need to understand that Medicare is more restrictive than commercial insurers,” Baird says. “An easy way to find out if commercial insurers accept home sleep testing is to review their published coverage guidelines. These are normally found online. Another way to find out if a commercial insurer accepts home sleep testing is to pick up the phone can call it.”
“Like it or not, HST is going to be part of what we do in the future,” says Wawrzyniak. “We have to be very careful in making sure we select the appropriate patients so that we are accurately diagnosing patients. Home medical companies will benefit by seeing more CPAP; however, we need to be careful about making sure these patients are seeing outcomes as good or better than those who get facility-based testing. By this, I mean better compliance, decreased hospitalizations, better hypertension management, and better diabetes management.”