Plagued by competitive bidding and other challenges, the sleep market has reason for optimism
by Larry Anderson

The same issues have been keeping sleep-focused HME providers awake at night for several years now. Competitive bidding and other government requirements are squeezing much of the profit out of the sector and, some say, have slowed its growth. But there is optimism in a rush of new patients — including new demographics and prosperous baby boomers — and in new product developments that make CPAP and other sleep-related technologies more effective than ever. Sleep providers simply have to stay in business long enough to reap the rewards.

“The sleep market has grown steadily for the last several decades from the introduction of the first CPAP mask in the 1980s,” said David G. Groll, chief executive officer of Circadiance, supplier of a comfortable cloth CPAP mask that can boost compliance. “The advent of competitive bidding has really caused a pause, or even a halt, in the growth of the market.” Previously a profitable segment for many DMEs, the sleep market has become more difficult both in terms of lower reimbursements and more stringent requirements to get paid, Groll noted.

There remains a widespread lack of awareness of the high prevalence and serious consequences of untreated obstructive sleep apnea (OSA), said Bernadette McBrearty, ResMed’s vice president of product marketing. For example, many health care professionals are reticent to address the topic of sleep with patients because of concerns about noncompliance with therapy and unlikely positive outcomes, she said. Patients’ ideas of treatment are often based on outdated technologies. “The key to reaching more patients and improving compliance is to leverage existing technologies and tools to drive compliance and demonstrate to patients and health care professionals that a better therapy experience is possible,” McBrearty said.

With more awareness comes more business. Maura Toole Weis, director of sleep marketing for Philips Respironics, says the historical patient mix has been the “tip of the iceberg”—the most severe patients. “Now we are seeing those who weren’t easily identified previously,” she said.

Challenges for a Large Market

Round 1 bids for CPAP were 34 percent lower than the old fees, and Round 2 encompasses more geographic areas and could bring the same or even lower numbers. Insurance and private payers will follow suit with the lower reimbursements. HMEs that lose the bid will see a large part of their sleep-related revenues evaporate.

“The government’s effort to push down on the prices and put more restrictions on reimbursement for CPAP equipment will ultimately impede the rate of people using the therapy,” Groll said. “It will be less accessible as fewer and fewer DMEs are able to provide CPAP products, and less profitable throughout the supply chain for various manufacturers and providers to continue to innovate.

“Competitive bidding is sending shock waves through the market,” he continued. “A lot of companies are taking a pretty grim view of the future. The reality is that the first round of competitive bidding is done, most of the companies are still around and the patients are still being treated. The market continues to move forward.” Groll points to a “new normal,” and said the industry will adapt through efficiency and focusing on customers.

There are changes looming in the sleep market beyond Medicare worries. For example, UnitedHealthcare, a major payer, has initiated a new program and recertification requirements to diagnose and treat OSA patients using a greater emphasis on home sleep testing. UnitedHealthcare has contracted with VirtuOX, an independent diagnostic testing facility, to perform home sleep testing nationwide, involving delivery of a device to the patient’s home and providing instruction and telephone support. Home sleep testing in conjunction with auto-adjusting positive airway pressure (APAP) devices in the self-adjusting mode for unattended treatment is an alternative to laboratory CPAP testing, according to UnitedHealthcare, which has contracted with Lincare, American Homepatient, Walgreens, Rotech and Apria Healthcare to provide APAP.

In another development, The American Academy of Sleep Medicine (AASM) has released a final draft of a proposal to create a pilot program built on an “integrated sleep management delivery model.” That could expand the services and products that sleep labs offer, and encroach on DME’s turf. In turn, it would decrease referrals to DMEs, shutting them out of CPAP business.

Boosting CPAP Compliance

Medicare challenges make it more important than ever to monitor compliance. The industry should not continue to accept the inevitability of low CPAP compliance, which has historically been about 50 percent, Weis said. “You can move the needle of compliance through a combination of technology and service,” she said. HME providers can increase compliance to 80 or 85 percent, and should have a goal of 90 percent. The key is a collective effort of manufacturers, HME providers, physicians and the patients themselves, working in a “care team” approach, Weis said.

Effective monitoring strategies include implementing patient data solutions and establishing protocols for follow-up, said McBrearty of ResMed. Research has shown that follow-up and education in the early stages of treatment can increase long-term compliance, which can lower long-term health costs by at least half. ResMed’s ResTraxx Online patient monitoring system provides simple reports to allow health care providers to identify and address patient issues proactively.

Medicare and private payer requirements mean that HME providers will not get paid unless they can document a minimum level of patient compliance (such as four hours a night, 70 percent of the time for a 30-day period) during the first 90 days. More audits are also costly. Weis says that Philips Respironics’ EncoreAnywhere web-based system supplies reports containing needed documentation and data to support billing requirements. For example, a report could be created to automatically alert the provider when the 30-day requirement has been met and that it’s time to bill the payer. Alternatively, information on non-compliant patients enables “management by exception” to identify patients that need attention. Using modem- and software-based monitoring also boosts efficiency, Weis said.

Another compliance-related issue is the timing of advance beneficiary notices (ABNs) issued to the patient. Historically, CMS has allowed use of ABNs for CPAP after 60 days, but the industry and several clinical groups contend there are unintended consequences of delaying execution of the document and favor issuing an ABN on the first day of CPAP therapy. “The patient has already developed some bad (noncompliant) habits after 60 days and has no financial ties to the outcome of those choices,” said industry consultant Andrea Stark of MiraVista. “The Hawthorne effect dictates that participants are more likely to comply with a regimen when they know from the start that they are being monitored and that there are consequences. We want more compliant patients, not less.” The ABN issue is now under discussion. CMS has met with AAHomecare and several individuals that raised the issue on the Association’s Home Medical Equipment/Respiratory Therapy Advisory Council, Stark said.

“From a financial standpoint, HME providers should understand that a compliant patient is an ongoing opportunity for resupply,” Weis said. Providers that achieve higher compliance should promote the number when marketing to referrals. Breakthroughs in remote management using modems and web-based software provide patient information to the care team from anywhere, and allow communication without waiting for a card to be downloaded. New devices provide daily downloads with sophisticated data to help make decisions quickly and easily, and to take the necessary steps to intervene. Follow-up with the patient is also critical, and Philips partners with providers to guide them and provide needed resources.

Accommodating an Expanding Patient Mix

As the understanding of sleep apnea has diffused into the general population, a broader range of patient types show up at sleep labs and ultimately go on long-term CPAP therapy, said Groll. A typical patient profile a couple of decades ago was an older, overweight man. However, today men and women of all ages and even children are being diagnosed with OSA and put on long-term therapy.

Expanding the market are the high prevalence of OSA among women and a growing attention to pediatric OSA. There is more opportunity than ever for product specialization targeted to specific patient segments. Among younger patients, for example, rising obesity rates impact OSA, said McBrearty. Also the need to control medical costs through preventative care and an increasingly proactive approach to health care by consumers themselves are driving expansion, she added.

In October, ResMed launched a positive airway pressure device customized for women, rounding out the line of products know as “Choices for Her.” Products include three masks designed for women from ResMed’s FX Series and the S9 AutoSet for Her therapy device. ResMed’s “Choices for Her” campaign seeks to bring more awareness to a historically underserved market by offering additional choices customized to women’s needs.

“Statistics show that there is a significant population of women with sleep apnea,” McBrearty said. “In fact, almost 40 percent of newly diagnosed sleep apnea patients are women (according to Medicare and private payor claims data), and the risk of sleep apnea in women after menopause is equal to that of men.”
“We hope to overcome the psychological hurdle of treatment for first-time female patients as well as introduce a new set of offerings for patients who have already been on therapy for a while,” McBrearty said.

Somnetics sees potential for CPAP growth in the occupational transportation industry, which is moving toward implementation of federal regulations requiring testing for sleep apnea as a condition of licensure. “Some large freight carriers have already implemented sleep apnea programs for their truck drivers,” said Clarence Johnson, president and CEO of Somnetics.

Impact of Technology

The marketplace for sleep products is also changing based on general technology trends. Mobile and computer technologies have led customers to expect a more intuitive experience with products. A trend toward personalization options for consumers has also had an impact. To address the shift, ResMed has focused on developing sleek, user-friendly products that fit and complement patients’ lifestyles, and therefore ease the transition to therapy for better long-term adherence.

ResMed develops, manufactures and distributes medical equipment to screen, treat and manage sleep-disordered breathing and other respiratory disorders. Products include CPAP, APAP and bi-level devices, as well as full face masks, nasal masks and nasal pillow systems. ResMed’s personalization options include a variety of headgear styles and the Skinit graphic designs for devices.

Philips Respironics serves the full gamut of sleep patient needs, including screening, diagnostics, treatment, ongoing management, resupply of equipment needs and patient support. The company’s REMstar Pro with Auto IQ is a fixed CPAP with an Auto Trial feature that analyzes the patient’s therapeutic pressures, breath by breath, to help validate the pressure requirement at home for up to 30 days. The feature evaluates the patient’s needs in the natural sleep setting of home. The system also helps to analyze how needs change with time, based on variables such as weight changes, different medications and menopause. “Now our homecare providers can standardize on a universal CPAP with Auto-Trial and Auto-Check modes and remote monitoring,” said Weis of Philips.

Another development from Philips is the new TrueBlue gel nasal mask, which emphasizes comfort and Auto Seal technology. The mask can help HME providers standardize on 10 or fewer masks to help control costs.

Other ways providers can lower costs are to standardize on fewer equipment choices and to streamline processes. Finally, resupply programs, including some turnkey solutions involving automatic patient contacts, can build business. Philips can consult with HME providers to identify financial goals, compliance management programs, resupply programs and business operations that provide opportunities to boost profitability.

A new product in the sleep/CPAP space is the Transcend system from Somnetics International, which weighs less than a pound and fits in the palm of the hand. Transcend also includes hassle-free waterless humidification, employing the heat moisture exchange technology used in hospital ventilation. “Many CPAP users forgo the use of their CPAP therapy while traveling because they don’t want to carry large and cumbersome CPAP equipment, don’t have portable battery options or are unwilling to deal with the hassles of traveling with a water-filled humidifier,” said Johnson of Somnetics. For travel, the entire Transcend system is easily packed into a carry-on suitcase with room to spare, and overnight and multi-night battery systems are available.

Circadiance makes products for OSA treatment and for patients with pulmonary conditions that use noninvasive ventilation. The company’s flagship product is the Sleepweaver, an extremely light, soft and comfortable cloth CPAP mask, which can boost compliance and is well-accepted by patients who can’t tolerate a hard-plastic mask. One size fits a broad range of patients, and the design of the mask creates a leak-free seal with no pressure points for the patient. The company’s newest product is a flexible tube, called the Sleepweaver Featherweight Tube, an accessory to a CPAP mask.

Resources to Boost Sales

If awareness is a route to greater sleep business success, the supplier companies are doing their part. For example, Philips Respironics provides resources for multiple audiences related to sleep disorders. For patients, Philips provides a booklet entitled “I Have OSA, What Now?” as well as videos and other materials. Philips educates clinicians and physicians using research from published studies. For homecare providers, materials offer guidance to reach out to primary care physicians and others in the medical community.

Somnetics offers a fully-stocked turnkey marketing program to HME providers for the new Transcend product and is constantly developing more materials based on feedback from providers and patients, said Johnson. Included are brochures, postcard mailers for direct mail campaigns, promotional videos, point-of-sale display materials, billboard ads, print ads, pre-recorded radio spots and web materials.

ResMed offers a range of print and online resources, point-of-sale materials, videos and other educational and promotional materials free of charge. Hundreds of educational videos are available at the ResMed page on YouTube (search for “ResMed Official”). ResMed also offers free online continuing medical education (CME) courses via its e-Learning Academy on ResMed’s team of clinical specialists can provide live product training and in-services, and territory representatives help HMEs identify growth opportunities. ResMed’s patient outreach program, providing support related to treatment challenges, is called “Wake Up to Sleep.”

How to Sell More Sleep Products

Establish a re-supply program. “Proactively reaching out to patients to remind them when their supplies are up for reorder enables HMEs to build a steady stream of trailing revenues and to reinforce the value HMEs bring to referral sources as a quality care provider,” said Bernadette McBrearty of ResMed.

Use new approaches to rescue noncompliant CPAP users. Medicare and many payers cover bilevel devices (such as ResMed’s S9 VPAP) for OSA sufferers who cannot tolerate CPAP or APAP. Many patients find dual pressures provide more natural, comfortable breathing, which can boost compliance rates, preserve reimbursement and maximize profitability. “Recovering noncompliant patients is like mining the existing database for new revenue,” said David G. Groll of Circadiance. “These are patients who have CPAP systems sitting in their bedroom closets not being used. Reactivating those patients is a very low-cost program for DMEs.”

Reach out to new demographics. If an HME’s OSA patient mix doesn’t reflect the 40 percent of newly diagnosed OSA sufferers who are women, there is an opportunity to market more actively to women, said McBrearty. Clarence Johnson of Somnetics suggests the company’s new portable CPAP system as a way to serve younger and more active people who suffer from sleep apnea.

Partner with primary care physicians (PCPs). Reach out to help PCPs implement simple screening practices, establish relationships with diagnostic centers and support patients after care following diagnosis and setup, suggested McBrearty.

Develop a cash sales program. It’s a hedge against market erosion and the effects of competitive bidding, said Johnson. As more affluent baby boomers are diagnosed with the condition, they are more likely to want two or more CPAPs for vacation homes and lightweight travel.

Consider comorbidities. Look beyond current referral sources to seek out new patients with cardio conditions, diabetes and other conditions common to patients with sleep disorders.

Build referrals by marketing compliance numbers. Providers should position themselves based on good clinical performance that differentiates them in the market, suggests Philips Respironics.

HomeCare, January 2012