Ten years ago, I looked at my DME business and decided to ex-pand my small home sleep study activity by setting up sleep laboratories that could be brought into hospitals. This year, I opened my second sleep center.
It is a transition other suppliers might consider for two good reasons: 1) sleep medicine is the fastest-growing frontier in health care delivery; and 2) DME businesses already have a lot going for them that new start-up sleep centers do not have.
Nearly half the adults in this country experience some kind of sleep disorder. The medical community is becoming aware that when treating sleep disorders is viewed as preventive medicine, a lot of other conditions that patients have may improve. For example, one of the first consequences of a sleep disorder is depression. As the condition becomes more acute and the normal 90-minute sleep cycle is regularly interrupted, the immune system suffers and medical problems arise.
By The Numbers
• Assume average revenue of $700 per study.
• A two-bed center running 3 nights per week, 50 weeks
per year, at 80% occupancy, will produce gross
revenue of $168,000 per year.
• Subtract estimated costs of $133,920.
• After costs, net income is $34,080 per year.
• Variables involve revenue from CPAP and other treatments. |
Although 86 sleep disorders have been identified, the most common are sleep apnea, restless leg syndrome, periodic limb movement disorder, narcolepsy, sudden daytime onset of sleepiness, and insomnia. Children are not immune, and pediatric disorders can include bed wetting, apnea, night terrors, and developmental delay.
As more insomniacs and apnea patients discuss sleep issues with their physicians, demand for sleep evaluation will continue to grow. It is safe to say that nearly every community in the country lacks an adequate number of sleep centers.
Can You Do It?
In 1983, I opened my first DME retail store to complement my respiratory home care business. My experience showed me that suppliers have a lot going for them that new start-ups do not enjoy. For example, a new business usually takes 3 years to see a profit, but:
- DME providers already have an established business with cash flow, plus a staff and billing system that routinely deal with allowable deductibles and co-payments.
- Providers may already have adequate space available within their existing facilities.
- An established supplier has both name recognition and referral sources.
- Insurance contracts are in place.
Opening sleep centers was not part of a master plan. For 18 years, I headed the respiratory care department at what is now Fletcher Allen Health Care in Burlington, Vt, a teaching hospital and regional medical center. After establishing my business, I was involved with the medical center in a program collecting data for an infant apnea program identifying children who might be at risk for sudden infant death syndrome. It involved a two-channel monitoring and recording test called a pneumogram. A neonatologist was needed to evaluate the study. This program had almost all the components offered by a sleep center.
In 1992, I started doing sleep studies in the home with an eight-channel recorder. In 1995, I added equipment that enabled me to monitor patients in hospital sleep laboratories.
Ramon D. Paquette, RPSGT
In 1998, I sold my respiratory and DME business and built a two-bed sleep center, Vermont Medical Sleep Disorders Center in Essex Junction, which has expanded to six beds and soon will grow to eight. These facilities have video-monitored rooms where patients spend one or more nights wired with electrodes that record sleep patterns, brain activity, breathing, blood oxygen levels, and body movements. Trained sleep technologists monitor this activity, and our medical director recommends treatment options.
These treatments can often be carried out by the patient’s own referring physician. They may be as simple as relaxation techniques or weight loss, but they might require minor surgery, drug therapy, or use of a continuous positive airway pressure (CPAP) device.
Vermont Medical Sleep Disorders Center was the first freestanding sleep center in the state of Vermont. This year, we opened the Adirondack Regional Sleep Disorders Center in Plattsburgh, NY, a four-bed freestanding facility that will soon grow to six beds. I am convinced we will see a real movement toward independent sleep disorder centers as the need becomes more evident.
For HME providers, a business migration to sleep centers is an opportunity for an additional revenue source and a chance to get on the bandwagon of the new sleep medicine frontier. It is a matter of assembling components that already exist.
- The equipment and technology are here today.
- Physicians are available to evaluate the tests.
- The protocols necessary for accreditation have been written.
- Insurance normally covers the cost of tests.
Sleep disorder centers collect raw data from patients who spend one or more nights wired with electrodes.
To succeed, management must commit to the idea and develop a solid business plan. A first step is a sleep market analysis of your area to establish need and to determine the role of existing or potential competition. A second step is determining what type of facility or service to offer. This can range from portable equipment for use in the home and/or hospital, to a full-service sleep center. I have evolved my business along the full-service center path.
Equipment and Personnel
Digital polysomnography equipment costs from $18,000 to $35,000 per bed. You must determine who will use the equipment and where. Now is also the time to create a detailed cost structure based on the number of beds (or laboratory), the number of nights used per week, and the projected occupancy rate.
As mentioned, the staff needed for a sleep center often involves personnel you already have: a receptionist; medical billing, accounting, and shipping and receiving personnel; respiratory therapists; and nurses. You will also need a medical director and sleep technologists.
Referral sources among the medical community tend to expand as sleep medicine awareness advances. They can range from primary care physicians to cardiologists, psychologists, and even dentists. Marketing through the usual channels must be an ongoing activity.
Ultimately, operating sleep centers is rewarding on many levels. It is a good business that provides the opportunity to improve lives in a real way—and in a short amount of time. DP
| Did You Know? 1) Before Thomas Edison invented the light bulb, people slept an average of 10 hours per night. Today, Americans average 6.9 hours of sleep on weeknights and 7.5 hours per night on weekends. 2) Sleep apnea affects as many as 18 million people. 3) Approximately 100,000 police-reported crashes each year (about 1.5% of all crashes) are caused by drowsy drivers. These crashes result in more than 1,500 fatalities and 71,000 injuries, and result in an estimated $12.5 billion in diminished productivity and property losses. 4) Up to 40% of adults report at least occasional difficulty sleeping; chronic and/or severe insomnia affects about 10% to 15% of adults. 5) A majority of American adults (63%) do not get the recommended 8 hours of sleep needed for good health, safety, and optimum performance. In fact, nearly one third (31%) report sleeping less than 7 hours each weeknight, though many adults say they try to sleep more on weekends. 6) Children who have problems breathing during sleep tend to score lower on mental development and intelligence tests than do other children their age. 7) At least 40 million Americans suffer from chronic, long-term sleep disorders each year, and an additional 20 million experience occasional sleeping problems. 8) New findings show that adolescents who do not get enough sleep may be more likely to have suicidal thoughts and to attempt suicide than their more well-rested peers. 9) The average total sleep time increases slightly after age 65, but so do reports of difficulty falling asleep. One study found that after age 65, 13% of men and 36% of women reported taking more than 30 minutes to fall asleep. |
Ramon D. Paquette, RPSGT, owns and operates the Vermont Medical Sleep Disorders Center, Essex Junction, Vt, and the Adirondack Regional Sleep Disorders Center, Plattsburgh, NY. He is also the founder of RDP Consultant LLC, and can be reached via e-mail: rdpconsultant@yahoo.com.
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