Are Sleep Labs a Threat to HMEs?

• By Deborah Cooper
• Mar 01, 2007

The home medical industry continues to buzz about the relationship between sleep labs, sleep centers and HME providers. It’s as close to a celebrity fistfight as we usually get in this industry. But is the rhetoric of “threat” and “competition” merely media hype? It really depends on whom you talk to.

“The threat is real,” says Tom Pontzius, president, National Respiratory, The VGM Group.

“I think that it is overblown,” says Jeffrey Baird, Esq., specialist health care attorney with the Amarillo, Texas-based firm Brown & Fortunato.

The truth may lie somewhere in between. And while there is no smoke without fire, when the situation is approached on a case-by-case basis, the signs look good for a healthy and eventually productive relationship between the two entities.

The Cons

Reliable Medical Supply is one provider that has seen referrals suffer due to the increase in physician-owned labs. The company has three locations, serving a 60-mile radius in Minnesota.

“We are challenged with getting patient referrals,” owner Jeffrey Hall explains. The area saw an increase in physician-owned labs beginning in 2001 with a rapid increase through 2003 and 2004. And, many of the major sleep labs in the area are doing their own DME. Hall says that the referral base has been cut by about three-quarters, from 1,500-1,600 per year down to 300-400 per year. “Just about every lab is doing their own DME. There are approximately 18 labs in the St. Paul/Minneapolis area alone,” Hall says.

To remain viable, Hall says that diversifying is important for both new and existing customers. Encourage CPAP replacement after five years and look into things such as selling a second CPAP for those people who travel to keep in a cabin, boat or RV. A good marketing program also helps with conversion sales, he says.

“We let customers know we do other things besides sleep. We have a fully stocked showroom, and they themselves may not necessarily need something else but they may know someone who does.” In terms of the future, Hall says, “we just have to look at and manage the population we
have right now and continue to follow up, and be in
front of the labs.”

The Pros

Other providers are proactively planning to grow their sleep business and have seen positive outcomes from working cooperatively with sleep labs. DeFeliceCare, based in West Virginia and serving 40 counties, sends one of its therapists onsite to four labs for fittings four to eight days per month. “We get the opportunity to do the CPAP and the interface business with the patient. We have a new customer and we look forward to a long relationship,” says Leslie DeFelice, president and CEO.

The relationship is one of mutual respect. “When the labs started seeing some of the compliance results, it’s a small community and word gets back,” says DeFelice.

The provider began this reciprocal relationship back in 2001 in one location and 2003 in another. “Simply through the excellence of our clinicians, we gained the respect of the labs,” he says. DeFelice believes that when HMEs focus on the highest degree of compliance possible, then the referrals will follow.

Striking a Balance

HMEs continue to express keen interest in growing their sleep business and figuring out how to live alongside the labs. The VGM Group held a workshop in January called “Diversifying Your Sleep Business in 2007 for HMEs.” According to Pontzius, the workshop was offered in response to members’ requests.

Partnering with sleep labs in some way is good for business, he says. “It helps both companies diversify their business, so it’s a win-win for everybody.”

The workshop looked in-depth at some of the opportunities for HMEs in the sleep market. An HME, for example, could help a partner with a sleep lab to do follow-ups. An HME could partner with a sleep lab to provide a fee-for-partner type of program, such as contracting to do their mask and patient follow-up. An HME can help a sleep lab diversify into other areas such as pulmonary function testing.

Overall, Pontzius says, while providers are dismayed at losing referrals, there is also an opportunity as more links with co-morbidities are discovered, and the diagnosed population continues to grow.

This article originally appeared in the Respiratory Management March/April 2007 issue of HME Business.