Your guide to the common obstacles faced when developing a sleep center

Key market forces include:

1. Rapid growth in home sleep testing (HST)
   
   

   The volume of sleep studies is expected to grow rapidly across the next five years, but HST (a type of polysomnography test used to diagnose sleep disorders) is particularly popular. In 2014, a study on Medicare beneficiaries showed that HSTs comprised 12% of all polysomnography tests. In 2016, results from a sleep center survey showed HSTs made up 20% of all-payer volumes. This growing proportion of HSTs is largely attributable to increased awareness of sleep health, which has spurred patient engagement in sleep diagnostics and treatment. In addition, technological advancements and regulatory pressures encourage providers to prescribe HST instead of in-lab polysomnography.

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3. Sleep volume shift to freestanding centers
   
   

   In-lab sleep studies can be performed in the hospital outpatient department (HOPD) or a freestanding center, but right now—and across the next five years—volumes are only growing in the freestanding setting.

   This difference largely stems from patient preferences. Patients value highly convenient, low-cost care. Freestanding sleep labs are typically located in the community where they are easily accessible. In addition, according to Anthem officials in 2013, an in-lab polysomnography done in a freestanding center costs just $600—as opposed to $1,300 in the HOPD. HSTs are even cheaper, at about $300. For price-sensitive patients, freestanding or at-home sleep tests are often the clear choice.

4. Waning sleep center profits
   
   

   As the volume of sleep studies grows, sleep centers bring in more revenue. Interestingly, however, some centers are struggling financially, leading to closures and consolidation.

   Regulations, which impose high administrative costs, as well as low reimbursement for HST, are the primary contributors to this phenomenon. In fact, a 2015 economic analysis evaluating seven sleep centers accredited as Centers of Excellence found that providers were losing money on HSTs. Meanwhile, the CEO of the International Institute of Sleep reports that the fee schedule for all sleep studies has decreased by 45% from 2009 to 2017.

Strategies for adapting to current market conditions

Considering these trends, there are a few strategies organizations can use to prime their program for long-term success. For example, providers should:

• Build relationships with referring physicians and attract self-referring patients through consumer-focused marketing efforts. Growing volumes may help make up for the low profit margins of sleep services; and
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• As HST becomes increasingly popular, don't leave beds empty; instead, take advantage of excess space by diversifying service offerings to drive revenue for the center. Examples of potential services include neurodiagnostics, such as EEG testing for epilepsy monitoring, dentistry for sleep problems, psychology services for behavioral health treatment, and pediatric sleep services.