Graymark Healthcare Inc, the nation’s second largest provider of diagnostic sleep services, reported financial results for the full year ended December 31, 2011.

Net revenues were down for the company. Revenues from Graymark’s diagnostic sleep services were $12.6 million, decreasing 16% from $15.0 million in 2010. The decrease was primarily the result of decreased reimbursement driven by a shift from out-of-network to in-network reimbursements beginning in the third quarter of 2010, an increase in the percentage of sleep studies performed at hospital-based locations, and the closing of unprofitable freestanding facilities partially offset by increased revenues from the company’s newly added hospital-based management locations.

Net revenues from Graymark’s product sales were $5.0 million, decreasing 11% from $5.6 million in 2010. The decrease was due to lower conversion rates of sleep studies to CPAP setups along with a decline in reimbursement levels, partially offset by an increase in the company’s resupply revenue.

Selling, general, and administrative expenses decreased $2.1 million or 13% to $13.7 million, compared to $15.8 million in 2010. This decrease was primarily due to staff reductions related to the centralization of billing and scheduling functions, reductions of executive staff, right-sizing of operating facilities, including renegotiations of facility leases, and the consolidation of unprofitable locations.