Wachovia Survey Shows Sleep Revenue Will Grow; CPAP Pricing Is Stable, But NCB May Hurt Reimbursement Rates

The sleep market is still going strong, and CPAP pricing is currently stable, but reimbursement rates for HME suppliers could be hurt by the upcoming national competitive bidding (NCB) program, say the results of the latest Wachovia HME Sleep & Wound Care Survey. Findings also included expected growth in the negative pressure wound therapy (NPWT) market.

Providers surveyed remain bullish on the sleep market. They estimated 11-percent growth in the next 12 months, after growing 10 percent in the last 12 months. Nearly half (48 percent) of suppliers said they believe unattended home testing for sleep apnea is reliable, and 46 percent said they would sell home tests if Medicare changed its national coverage determination to include reimbursement for such equipment. On Dec. 14, the Centers for Medicare & Medicaid Services (CMS) announced it was “proposing to expand coverage of CPAP to include those beneficiaries with a diagnosis of CPAP made using a combination of a clinical evaluation and unattended home sleep monitoring using a Type II, III or IV device.”

More than two-thirds of survey respondents (68 percent) expect to participate in competitive bidding for sleep therapy products when the program reaches their region.
Asked about CPAPs, survey respondents said the prices they’re paying to purchase the equipment are stable, but under competitive bidding, they expect CPAP reimbursement to fall an average of 15 percent.  

CPAP Product Ratings

Asked to rate flow generator platforms on a scale of 1 to 7 (7 being the highest possible score), Respironics’ M-Series scored a 5.6 (vs. a 5.8 in the previous Wachovia supplier survey), with ResMed’s S8 scoring a 5.0 (vs. scores of 5.6 and 5.7 in the previous two supplier surveys), and Fisher & Paykel’s HC200/HC600 earning a 4.2 score. Other flow generator platforms in the survey included ResMed’s Tango (4.1), Puritan Bennett’s GoodKnight (3.8) and DeVilbiss’ IntelliPAP (3.3). In keeping with those ratings, 54 percent of respondents said they planned to increase the number of Respironics flow generators they purchased in the next 12 months — the greatest increase among the manufacturers in the market.

ResMed’s masks continued to earn the highest marks from respondents, receiving a 5.4 rating for its Mirage Swift II nasal pillow mask and a 5.3 for its Ultra Mirage full-face mask. The next highest nasal pillow mask scores were given to ResMed’s Mirage Swift (5.0), and Respironics’ OptiLife (4.7) and ComfortLite 2 (4.4).   High scores for full-face masks included Fisher & Paykel’s FlexFit 431/432 (5.1) and ResMed’s Mirage Quattro (5.1), followed by Respironics’ ComfortFull2 (4.9). Asked about future mask purchases, 49 percent of suppliers said they would buy more Respironics masks in the next 12 months, while 47 percent said they planned to increase the number of ResMed masks during the same period.

Negative Pressure Wound Therapy to Grow

A relatively small number of survey respondents (15 percent) are currently in the NPWT market, but another 13 percent plan to enter the market in the next six months. Asked whose NPWT products they purchase, suppliers currently in the niche most frequently answered Blue Sky/Smith & Nephew (64 percent) and Innovative Therapies and Medela (18 percent each).

Of suppliers currently working with NPWT, 61 percent said they rent the pumps vs. selling them, though another 39 percent said the sales model was dependent upon the care setting — respondents targeted acute and long-term care buyers in addition to patients living at home. None of the current NPWT suppliers surveyed said they sold the pumps. It was quite a different story among suppliers planning to enter this market: 29 percent said they  intended to sell the pumps, 0 percent said they intended to rent the pumps, and 71 percent said selling vs. renting plans would depend on the care setting.

About the Survey

For this latest survey, Wachovia Capital Markets (WCM) used responses from 100 HME suppliers received Nov. 2-13, 2007. WCM partnered with HME Business for this Q4 2007 HME Sleep & Wound Care Survey; previous Wachovia-partnered surveys occurred in Q4 2006 and Q2 2007.

WCM is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. WCM does and seeks to do business with companies covered in its research reports. WCM maintains a market in the common stock of Respironics, Inc.