Survey Says: Sleep Market to Remain Strong

Wachovia Releases Second HME Sleep Analysis

• By Elisha Bury
• May 01, 2007

In a recent survey, a partnership between Wachovia and sister publication Home Health Products, HME providers said they saw average sleep market growth of 13 percent in the past 12 months and expected 12 percent growth over the next 12 months. That’s good news for the sleep industry, a segment recently slated for the first round of competitive bidding.

Wachovia predicted a slightly more robust year for the market as a whole, expecting growth in excess of 20 percent. The discrepancy was attributed to more sleep labs and HME providers entering the marketplace, which would distribute growth across many suppliers.

“That’s supported by the question that we asked about the sleep labs; 47 percent of the respondents said that the sleep labs have had an impact on their business because the sleep labs are starting to sell the equipment,” said Michael Matson, senior analyst, Medical Device Equity Research, Wachovia Capital Markets, New York.

Only a little more than half of respondents (59 percent) said they intended to participate in competitive bidding for sleep. Wachovia said the percentage reflects the fact that only a small number of Medicare patients make up the overall sleep patient mix.

In general, the study showed consistency with the results of last year’s survey. “We expect the market to remain strong and consistent with the past 12 months,” said Matson. “We expect growth at the HMEs of low to mid teens in their sleep businesses.”

Ninety-two HMEs participated in the survey conducted April 10-19, 2007.

Here are the results:

Percentage of Revenue — On average, 29 percent of respondents’ revenues came from sleep therapy products. The findings show that sleep therapy comprises a small but growing percentage of HME revenues.

Impact of Sleep Labs — Of those surveyed, 47 percent said that sleep labs that sell sleep equipment had impacted their businesses. Yet 59 percent said they would not partner with a sleep lab or open their own sleep lab.

Compliance Issues — HME providers are pushing compliance in a big way. The majority of respondents — 78 percent — follows up with patients at regularly scheduled intervals and uses respiratory therapists to ensure compliance. Among the other popular methods to drive compliance were using CPAPs with compliance-tracking data (70 percent) and CPAPs with “easy breathing” features (69 percent). Nearly all respondents (90 percent) follow up on mask replacement. The two most common ways to follow up on mask replacement included calling patients directly (60 percent) and mailing reminders to patients (37 percent). Overall, most of the responses on compliance were slightly up from last year. Matson said that increase could be related to insurers’ demands. “Insurance companies are generally wanting to see compliance data,” said Matson.

Competitive Bidding — In the wake of the Centers for Medicare & Medicaid’s (CMS) publication of the final rule on competitive bidding, 59 percent of HME respondents said they planned to participate in the program for sleep therapy equipment. For those who plan to participate, most respondents said they would push back on existing vendors for lower prices (5.7 out of 7.0). Medicare beneficiaries will likely bear the brunt of competitive bidding, with many respondents indicating that those clients would be moved to lower-cost masks (4.4 out of 7.0) or flow generators (4.3 out of 7.0) and/or lower-end products from existing suppliers (4.4 out of 7.0).

Central and Mixed Sleep Apnea — In an increase from last year’s survey, respondents said that 18 percent of their patient mix had either central or complex/mixed sleep apnea, up from 11 percent from the year before. Respondents also reported an average of 4.4 prescriptions for adaptive servo-ventilation in the past three months.

Flow Generators — The average price paid for a standard flow generator with heated humidification was $369, with an average decline of 1.8 percent during the past 12 months. Last years’ study showed prices had declined by an average 3 percent. Respondents rated ResMed’s S8, Respironics’ M-Series and Fisher & Paykel’s HC200/HC600 the top three products in this category.

Masks — The average price paid for a mask was $64, with an average decline in prices of 1.6 percent compared to last year’s 1.5-percent increase in prices. The introduction of several high-end nasal pillow masks could drive increased price competition, according to Wachovia. Nasal pillows, however, are still a minority in the market, says Matson. The top three masks, as rated by respondents, were ResMed’s Mirage Swift and Mirage Swift II and Respironic’s OptiLife.

This article originally appeared in the Respiratory Management May/June 2007 issue of HME Business.