Sleep revenue is expected to grow by 10 percent over the next 12 months, after growing at 8 percent over the last 12 months, according to the q4 2008 Sleep and Wound Care Survey of HME providers conducted by HME Business and Wachovia Capital Markets.

The fifth installment of the survey was conducted from Oct. 17 to Oct. 27 and included responses from 190 providers. The survey’s full results can be downloaded as a PDF from the white papers section of our web site.

Some key results:

• Providers have begun to manage CPAP costs ahead of Medicare’s 9.5 percent cut. Although Medicare’s competitive bidding program was delayed by 18 months, a 9.5 percent reimbursement cut begins on 1/1/09. A majority of providers (56 percent) have already begun to implement changes to lower CPAP costs. HME providers appear most likely to negotiate lower prices with existing suppliers and to move Medicare patients to lower cost CPAPs. And 81 percent of providers expect private insurers to cut reimbursement based on Medicare’s cut; this represents potential downside to our ResMed estimates.
• Respironics might gain some share, though ResMed Inc. should benefit from its new Apria contract. ResMed’s S8 II was rated 5.7 on a scale from 1 (very poor) to 7 (very good) while Respironics’ M Series was rated 5.8. ResMed’s Swift LT was rated 5.8 while Respironics’ OptiLife was rated 5.2. Respironics may gain share in both flow generators (43 percent expect to increase purchases, 18 percent to decrease) and masks (39 percent expect to increase purchases, 12 percent to decrease). This is somewhat better than ResMed’s flow generators (36 percent expect to increase purchases, 21 percent to decrease) and masks (36 percent expect to increase purchases, 16 percent to decrease). However, we continue to believe that ResMed will gain market share within Apria (which makes up about 15 percent of the U.S. sleep market but was likely underrepresented in our survey).
• So far, impact of credit crunch and economy appears minimal. Most (57 percent) Providers have reduced inventories to conserve cash though only a minority (20 percent) has seen more difficulty in borrowing money. On average, Providers indicated that 15 percent of CPAP purchases are “out of pocket” and 12 percent have seen a major decline in “out of pocket” purchases in the past three to six months.