Business Solutions

Solving Sleep Success

Despite having to hurdle audits, competitive bidding, caps and cuts, the sleep industry continues to grow. Here is how some providers are solving these problems for success in 2013.

• By Joseph Duffy
• Oct 01, 2012

With revenue potential being stifled throughout every sector of the home medical equipment industry, growth in the sleep market is moving upward, with providers seeing their sleep revenue grow by 8.9 percent in the last 12 months, according to the a sleep market survey conducted by HME Business and Mizuho Securities USA Inc. earlier this year.

“In the beginning of 2009, we faced our first year of capped oxygen and then added the 9.5 percent cut, as well,” says David Baxter, President, Medical Necessities & Services, LLC. “This is the only year in existence since 1997 that we lost money as an organization. We worked very aggressively that year, changing our organization to offset these cuts and additional challenges within our organization.”

As a result, Baxter’s company is experiencing 20 percent grow in its 2012 sleep business and anticipate growing its sleep business 20 percent to 30 percent in 2013.

Other reasons for expected growth in the sleep industry include the rise of obesity in America and the increased exposure of the consumer public to CPAPs, says Miriam Lieber, President, Lieber Consulting.

Jim Duncan, VP Respiratory, Home Health Depot, expects his company’s sleep business to grow next year as well. Home Health Depot, like many HME companies, has fewer people than in recent years and is learning how to be more efficient, including the implementation of technology that has helped his company to reduce visits to the home and remain vigilant in patient compliance. But through the optimism, Duncan names Round Two of competitive bidding as the wild card to just how much growth will be achieved in 2013.

Sleep Solutions Home Medical, a provider in the Detroit metro area, has evaluated every aspect of its business in preparation for the Round Two bid (they did not participate in Round One). Last fall, BCBS MI changed its payment patterns, which stifled Sleep Solutions Home Medical’s cash flow. They also saw a handful of insurance providers cut reimbursement rates. The result for Sleep Solutions Home Medical has been greater focus on compliance and communication with referral sources and patients.

“Our non-Medicare patient population will continue to grow,” says Robyn A. Parrott, RRT, President, Sleep Solutions Home Medical. “We are in the second round of competitive bidding and this will have an impact on the Medicare market.”

Preparing for Round Two

Growth and business success will not happen without roadblocks, and the first comes early in 2013 with the announcement of the winners of Round Two of competitive bidding.

The continuation of the DMEPOS Competitive Bidding Program in 2013 is likely the greatest concern for providers in the sleep industry. In July, providers will see the implementation of Round Two and National Mail-Order Competition contracts and prices.

Regarding providers with CPAP business, Lieber says the majority of providers do not rely on Medicare for the vast majority of their CPAP payments (many have as few as 25 percent Medicare CPAP business). Therefore, many CPAP providers can remain successful in several ways.

“They can tap into additional supply revenue from non-Medicare patients, they can increase efficiency via automation and cost-cutting measures, and they can sell non-covered complimentary products to add revenue per patient,” she said.

For Baxter, only 20 percent of Medical Necessities & Service’s sleep business is Medicare. Therefore, he feels his company is not required to win a bid in sleep to still have a very successful program in 2013.

“If we don’t win a bid,” Baxter says. “I am sure we will purchase a company that has a bid.”

For Sleep Solutions Home Medical, a missed bid has the company falling back on the company’s a very successful PAP replenishment program, established six years ago and now using interactive voice response (IVR) to cut costs. Also, the staff has been extensively trained on accessory sales to help bolster a lack of income the company would have expected to make in previous years.

Home sleep testing

Home sleep testing (HST) has become more appealing for HME providers, with several private payers requiring pre-authorization for in-lab testing. Less expensive HST is becoming more accepted and sleep providers need to keep their fingers on the pulse of this potential revenue stream.

When cost is an issue or when the patient doesn’t like the thought of going to a lab, Duncan informs physicians that HST is a less costly alternative to in-lab testing. He is also finding that many insurance companies are requiring in-home studies prior to traditional in-lab studies.

When it comes to sleep apnea, the American Academy of Sleep Medicine (AASM) says that “a home sleep test can help detect obstructive sleep apnea (OSA) in select adults. A home sleep test involves the use of a portable-monitoring system that you wear as you sleep in your own bed. It consists of a small recording device, sensors, belts and related cables and accessories.” They stress that only select adults will benefit form HST for sleep apnea.

“HST is currently not part of our business plan,” says Ryan McDevitt, General Manager, Sleep Solutions Home Medical. “To enter into this market in the Detroit Metro area, we would be competing for the same patient population that our current referrals are vying for. We recommend that DMEs across the country educate themselves on HST and the effects it will have in the area they service.”

Sleep Resupply

A sleep resupply business should mean more than just selling complementary products. Growing resupply into a lucrative, integral part of your business involves implementing other business components, such as education, maintenance, inventory control and marketing.

“We have been very successful with CPAP wipes, RemZzzs and PAP pillows,” says Parrott. “The staff is trained to suggestive sell on every resupply order. To run a successful resupply business you must be organized and consistent. A plan must be in place and followed on an on-going basis. There are a variety of ways of doing this: phone calls, postcards or an interactive voice response system. We were very successful with mailing post cards on a quarterly basis but with the cost of postage and the time involved in getting 1,100 post cards out per month became overwhelming. So we instituted IVR in the middle of July with positive results.”

Up until recently, Sleep Solutions Home Medical’s mailed hot pink check box response cards. The patient would check off which supplies they needed and return the postage paid reply card. They were mailing approximately 1,100 reminder cards per month, which required two employees two full days a month to manage printing labels, placing labels on card, placing patient identifier on each card, postage and moving the template in the billing software program. The employees’ time was $352 per month. Outgoing postage was $450 per month. Return postage was $195 per month. Monthly total was approximately $1,000.

The IVR system is automated and walks patients thru a series of questions to allow them to order their supplies. Patients still have the option of receiving a reminder via email, mail or a phone call.

Parrott believes this new program will capture additional revenue, especially from those patients who did not return their pink card on a regular basis. Her staff has already experienced orders from patients who have not reordered in over a year.

Lieber suggests that to run a successful sleep resupply business, providers must understand utilization limitations, guidelines, and compliance. Further, she agrees with Parrott in using automation to help run a successful resupply business, such as IVR and drop ship programs.

Good candidates for running a resupply business are providers who are willing to track patient outcomes and willing to take a hard look at costs associated with this. Resupply should be integral for patient compliance and overall good, effective therapy. The provider must continually make sure that patients are benefitting from treatments.

When marketing your resupply business, always adhere to HIPAA and CMS regulations when reaching out to patients. There is information you can and cannot leave on a voicemail, rules associated with mailings and maintaining confidentiality, and timeframes in which you are allowed to contact patients. All marketing materials should be in the form of patient education and product care.

“Replacement has been a challenge for us,” says Baxter, “but we are currently restructuring this part of our business and adding a project manager specifically to capture the thousands of patients that we set up annually who don’t get resupplies. We feel that this will dramatically affect our net revenue and growth next year. We have attempted several replacement programs and feel they all have been subpar. This is the reason we are going with a project manager for this program.”

Educate, educate, educate

Education is key to creating a successful sleep business, according to all experts interviewed for this article. In fact, some said it topped their list of what was most important to their success.

McDevitt goes as far to say that his company’s foundation has always been education.

“We are known as the education company, not only for patients but also for referral sources,” he says. “Without tipping our own hand on the way we market ourselves, our approach to education is very diverse. There are multiple ways that we educate. We would advise any DME to focus its education from several platforms. Don’t forget to include community events, email campaigns and social networking as part of these strategies.”

Lieber says education and follow-up go together and are integral for sleep business success.

“By exposing referral sources and patients to the sleep business, you should certainly garner additional revenue,” she says. “Through education and follow-up communication, you remind them of the need for compliance and a better quality of life.”

Baxter’s RTs spend at least an hour and half with new clients to educate them about their pap therapy, effectiveness of use, and the importance of following up with a physician, Medical Necessities & Services, and reordering supplies. Medical Necessities& Services tracks its overall PAP compliance within the organization. Currently, 84 percent of their patients obtain Medicare’s standards for PAP adherence, no matter their insurance.

For Duncan, education is a two way street: information goes to the patient and then from the patient to the company. His company places modems on the back of the CPAP and BiPAP machines upon setup with the patients. The modem downloads every night to a web-based program that tracks compliance, leaks, AHI, etc. These indicators help Duncan to see how patients are tolerating therapy, if the interface is working/fitted appropriately, and if pressure is appropriate for the patient.

“It is done at no cost to the patient,” says Duncan. “The patient does not have to do anything. The modem does all the work. It is like the wizard behind the curtain. Once the patient meets compliance, we have the patient take the modem off and mail it back to us in a prepaid box that we gave to the patient at the initial setup. Easy for the patient and a small cost to us, it saves us on the labor of sending a employee to retrieve it.”

Positioning to the customer

Another key to success is how you position yourself to patients as an expert in the sleep industry. Sleep Solutions Home Medical has developed a niche that helps them stay top of mind.

Parrott started treating patients with sleep apnea since 1986 and took a big interest in this then untapped market. Since then, she has worked with infant, pediatric and adult patients suffering from sleep apnea. She also owned a sleep lab that treated infant, pediatric and adult patients from diagnosis to treatment in the home. She brought all this experience to Sleep Solutions Home Medical and her staff has been trained to handle this patient population. Her company is one of a handful that will work with the infant/pediatric sleep market.

McDevitt’s background, though not medical, is rooted in sales, communication and promotion. After joining Parrott’s team, he spent many nights in sleep labs as well as time with patients and clinicians to help understand the needs in DME. To him, becoming knowledgeable in the sleep industry was the beginning and learning to educate people appropriately that Sleep Solutions Home Medical is the best in the business has been a much taller challenge.

To help promote their position in the industry, McDevitt sends out a weekly referral newsletter, “Friday Snewzzz,” and a monthly patient newsletter, “Solutions Buzz.” These newsletters are loaded with education and information regarding sleep. The company also strategically sponsors and supports organizations that are in line with their educational models.

Lieber suggests continually educating and exposing the customer to your business. Provide in-services and CPAP tune-ups, and communicate frequently with the referral source and customer.

Steps to success

The most important elements of any sleep practice are simple: communication and care, says Parrott.

“Sleep therapy is much different than traditional DME,” she says. “These differences often create unique opportunities. In our experience, the most important key to success with sleep patients is their own ‘buy in’ to the therapy prescribed. Often, this can include other income opportunities for your company because we live in a world of personalization. As DME professionals, if we analyze some of the retail products available, sometimes we don’t see the value that the patients might see. Suspending ones disbelief is quite a challenge, but as our market changes and the ‘traditional’ patients become less and less defined, keeping an open mind to opportunities is the clearest path to success. It may sound cliché, but it works.”

Duncan says that success comes from education, compliance and continued follow up. This ensures that patients benefit by OSA being treated effectively and patients having fewer health issues, referrals benefit by being comforted in knowing the patient has been treated and followed up with properly, and the DME benefits by a continued flow of referrals sent and replenishment supply revenues generated. Duncan call it “a win, win, win.”

Another important step to success is compliance.

“Most of the insurance payers we deal with require compliance,” says McDevitt. “The first 90 days are the most intense to assure patients are using their equipment according to their insurance guidelines. The goal is to get them compliant, keep them compliant and have a patient for life. About 10 percent of our monthly setups are replacement units for patients who have had their equipment for more than five years. If you can get patients compliant and keep them compliant, they will be a stream of revenue for years to come.”

And don’t forget to target primary care physicians (PCP) to help grow your sleep business. Baxter targets PCPs with discussion and education about effectively screening their patients for co-morbidities that have high relevance with OSA. PCPs typically screen their patients with overnight oximetry and then send for a sleep evaluation if the patient is positive. PCPs typically are good about communicating to sleep specialists that Medical Necessities & Services assisted them with education about their patient base and screening. Baxter then hopes that his company will be used if the patient tests positive.

“The challenge has just begun,” says Parrott. “Companies need to be proactive in preparing for the impending storm. Innovative ideas for expansion and ways to cut costs need to be creative and need to come from all employees. Employers need to have all hands on deck during these changing times. If employers are disengaged, their business may soon be disappearing in front of their own eyes.”

This article originally appeared in the October 2012 issue of HME Business.