By Ann H. Carlson

With its March 13 ruling, CMS took a long-awaited step toward coverage for CPAP based on in-home testing. However, many key details have yet to be defined in Local Coverage Determinations (LCDs). Without a clear understanding of how portable testing will be integrated in the marketplace, many sleep labs may be tempted to maintain business as usual until more details fall into place. But doing nothing can be dangerous. During this wait-and-see period, sleep labs have the opportunity to beef up their businesses to prepare for a potential increase in competition.

“You can’t be passive about this,” says Kathryn Hansen, senior consultant for Sleep Center Management Institute (SCMI), Atlanta. “This is no longer a climate in which you sit back and say, ‘Come one, come all.’ You have to go out and get the business.”

Taking action now means solidifying your referral base, protecting your geographic area, and expanding your services. By implementing the following tips, you’ll be better prepared for changes that in-home testing could bring to your market.


Even if you’re not sure whether you want to incorporate home testing into your business, it’s a good idea to secure accreditation.

“It brings a lot to the table,” says Dan Helmchen, CEO of Sleep Logistics & Kraydan Diagnostics, Las Vegas. “It says a lot for the center to be accredited.”

The best time to get the ball rolling is now—you don’t want to be waiting for accreditation approval while your in-home testing business goes elsewhere.


Shoring up relationships with your current referral sources is key in this changing field. With the market opening up to in-home testing, companies based 200 miles away may be able to encroach on your territory. “With in-lab testing, there are fixed costs for the facilities, equipment, and staff that tended to limit competition geographically, and made it easier for the sleep lab to know when competition moved into their area,” says Dan Levendowski, president of Advanced Brain Monitoring Inc, Carlsbad, Calif. “Portable testing reduces the barriers to entry, and when barriers to entry drop, competition increases.”

To hold onto your current business, be an advocate for your referral sources and partner with them to provide high-quality patient care. Schedule face-to-face meetings to discuss the services you provide, the changes coming down the pike, and how you plan to approach in-home testing. “The more you can help them understand it, the more referrals you’re going to get out of it,” says Duane M. Johnson, PhD, senior partner at SCMI.

At the same time, expand your referral base by seeking out disciplines beyond family practice and cardiology. Dental practices are great candidates, for example, as they stand to benefit from increased oral-appliance therapy business.


Encourage your referring physicians to screen all new patients for sleep disorders, and make this as easy for them as possible. Del Henninger, MD, FCCP, of Complete Sleep Solutions, Marieta, Calif, supplies referral sources with the computerized ARES Quest system from Advanced Brain Monitoring Inc. New patients fill out a brief sleep questionnaire that is scored electronically for not only the probability of sleep apnea, but also the level of severity. The staff prints out the results and adds it to the chart, and the primary care physician can discuss it with the patient during the appointment. The physician then refers sleep study candidates to Henninger’s office.

The system is also designed to help continuity of care by providing the sleep study results to both the referring physicians and the patients. “It makes it much easier for us to follow them through the whole process and make sure they get the appropriate treatment they need,” Henninger says.


Health management organizations (HMOs) are always on the lookout for low-cost solutions, and medical directors may find in-home testing attractive. Striking a preferred-provider or exclusive arrangement for in-home testing with HMOs can help expand your reach. “You’re going to have less money per tick, obviously, in doing home studies, but you can make it up in volume,” Helmchen says. “You can serve the population effectively that way.”

Managed care programs also give you the chance to try providing these services before further clarification from LCDs puts in-home testing in the mainstream. Henninger has been providing some in-home testing to programs like these for the past 5 or 6 years. “We have tried to stay as in front of the curve as possible by using in-home studies when it’s appropriate,” Henninger says. “The only way we really get it done is through managed care contracts.”


For most labs, the decision to incorporate in-home testing depends on reimbursement rates. While the reimbursement rates for in-lab studies are larger than those for portable testing, make sure to look at the underlying costs before dismissing in-home testing.

When comparing the costs between in-home and in-lab testing, the numbers may surprise you. “After averaging the cost of the equipment, supplies, labor, and overhead from two sleep centers, we found that the cost for PSG was around $325 and the cost for a 2-night ARES study was $82,” Levendowski says. “Both models will generate approximately $300 in gross profit when the reimbursement is $625 for PSG and $380 for an in-home study.”


When it comes to choosing a device, Henninger says it is important to research all of the available options. In addition to the initial price, cost of disposables, administrative costs, and maintenance requirements, weigh the sensitivity, specificity, and false-positive/negative rates carefully. Also look at how long your techs will spend scoring tests with this equipment—5 extra minutes per test in staff time adds up very quickly.

“You need to watch out for patients by providing devices that are still easy to use at home, but generate enough inputs and enough channels to truly diagnose these patients,” says Hani Kayyali, president of CleveMed, Cleveland. “This allows you to move safely into the CPAP treatment from the diagnosis. We believe you can do that with type III or type II devices.”


Once you choose your equipment, it is important to protect it from loss or damage. While drop-shipping equipment may seem like an attractive option, having patients come to your office for an orientation may be the better bet.

Be sure to have patients sign a form that explains how to take care of the equipment, what not to do with the equipment, and when the equipment needs to be returned. Outline any late-return fees and instances where patients will be responsible for paying for replacement equipment.


Spending 15 minutes to go over portable-testing equipment with every patient may seem like a large investment, until you consider the rework costs if the study fails. “It reduces your false negatives and false positives,” Hansen says.

It is possible to educate more than one patient at a time. Depending on the number of machines you have, you could have 10 to 20 patients in an education session at once. In addition to these sessions, ensure that someone on staff is available by telephone 24 hours a day to provide answers to any questions the patient has during the night. This will contribute to more successful studies.


Sleep apnea patients have long been the bread and butter of the sleep lab industry, but Henninger cautions that sleep labs will start to see fewer of these patients, unless they offer in-home testing services as well. “Sleep labs are really going to have to become sleep centers, not just labs,” Henninger says.

Still, in-home testing is not for everyone, particularly for patients with chronic obstructive pulmonary disease and congestive heart failure. The hope is that sleep labs will be able to concentrate their resources on treating these complex cases—more of which will likely emerge as more patients seek care.

“This provides the sleep lab with an opportunity to move much of the diagnostic volume to an outpatient setting,” says Robert Koenigsberg, president of SleepQuest, San Carlos, Calif. “This will allow labs to increase their throughput as the total number of patients requiring in-lab diagnoses will decrease. So, a greater fraction of a lab’s capacity will be used for CPAP titration, for the diagnosis of non-OSA disorders, and supporting referred volume from primary care physicians, who will continue to refer the most complex cases to sleep specialists.”


Koenigsberg has long seen in-home testing as a way to provide access to care for a large undiagnosed population. “There are anywhere from 20 to 30 million people out there that are suffering and don’t know why,” he says. “Home testing provides the basis for accessing that multitude of patients.”

Of course, testing and diagnosis of sleep apnea is only the beginning of the patient relationship—there are many opportunities to follow up with patients to ensure CPAP compliance or to fit patients with alternative solutions, such as oral appliances. While these ancillary services may increase your costs, it also increases your center’s reputation and ability to help patients. “We’ve really got to pay careful attention to managing the disease as opposed to focusing entirely on the economics of the disease,” Kayyali says.

For more than 10 years, SleepQuest has offered a comprehensive program including screening, in-home sleep testing, treatment devices and supplies, compliance reporting, and ongoing care of patients. “Our reporting mechanisms keep the referring doctor informed of the patient’s progress,” Koenigsberg says. “This program lends itself to any insurance company program already utilizing a disease-management approach for other disease states. The company also partners with sleep labs that prefer to specialize in testing for all sleep disorders, leaving the difficult task of achieving compliance with CPAP to cohorts whose reputation for this is well respected.”

SleepQuest also receives referrals from primary care doctors. “We empower primary care physicians to manage sleep apnea the way they manage diabetes and asthma,” Koenigsberg says. “The focus really needs to be on compliance and adherence, getting the patient well.”


Sleep medicine professionals are excited about the possibilities portable testing brings to reaching the undiagnosed population. “Portable monitoring can do that in different ways, not just necessarily in the home,” Johnson says.

For example, SCMI is working with large employers in the area to help identify employees with sleep disorders. The idea is to help improve the health and productivity of the workers. “We partner with them to help them determine who needs to be treated, who needs to be evaluated, and who needs to have better quality of life,” Hansen says.

Henninger is also working with local hospitals to create systems to identify these patients during their initial preoperative screening. “I’m working with my local hospitals about trying to set up a risk-assessment plan,” he says. “We’re just trying to get sleep apnea assessment added right to that.”


While the in-home testing ruling has stirred up fears that sleep labs will be usurped in the field, Hansen says this is a misconception. “This is actually an opportunity for sleep medicine to grow,” she says.

To take advantage of opportunities, keep abreast of in-home testing trends through the AASM and your local insurance carriers. “Watch very carefully to see how it’s doing for people and what the pluses and minuses are,” Helmchen says.

This is also the time to educate insurance carriers, referring physicians, and the community at large about the services you provide and your vision for how portable testing should be implemented. “We as professionals in sleep need to be out there leading the way and setting the standards,” Johnson says. “We never want to sacrifice the quality of patient service.”

In the meantime, be sure to build on what you have. “Entrepreneurship always involves risk, and you have to be willing to have both the business plan and the market plan, which is continuous cultivation,” Johnson says.

Ann H. Carlson is a contributing writer for Sleep Review.