For Sleep Disorder Clinics, Results Are Positive

shutterstock_166135529For years, Americans have proven unable to put their sleeping problems to rest, giving rise to a multibillion-dollar sleep industry. According to the National Sleep Foundation, Americans maintain among the worst sleeping habits of all advanced industrialized nations, with only 44.0% of people reporting that they get a good night’s sleep on a regular basis.

In addition to remedies such as potent pills, soft pillows and firm mattresses, Americans have increasingly turned to the Sleep Disorder Clinics industry, which includes establishments that treat patients with sleep disorders like insomnia, sleep apnea, restless leg syndrome and sleepwalking. To date, more than 2,800 sleep clinics have been opened in the United States, generating an estimated $7.1 billion in revenue in 2015.

With sleeplessness on the rise, industry labs look to prosper

Sleep labs have proven to be immune to economic instability, with industry revenue expected to increase an annualized 4.0% during the past five years. By comparison, the 2,280 sleep labs in 2010 generated just under $5.9 billion. Americans have traditionally mismanaged their sleep, but the prevalence of technology in the bedroom has made it harder than ever to get a good night’s rest. The connection between electronic use before bedtime and poor sleep has been well documented, and with more Americans curling up with their cellphones and laptops, the inability to sleep well has become more widespread. The loss in productivity and the rise in health concerns stemming from sleep deprivation have led individuals to seek professional help from sleep disorder clinics.

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Under healthcare reform, expectations of growth buffeted by reality of rate cuts

Since 2010, healthcare reform has been responsible for enlarging the industry’s perspective customer base. Under the landmark Patient Protection and Affordable Care Act (PPACA), an estimated 16.4 million people have gained health insurance coverage from the insurance marketplaces, expansion of Medicaid and the proliferation of other coverage provisions, according to estimates by the Department of Health & Human Services.

While these changes have better enabled Americans to pay for sleep disorder treatments, healthcare reform is not expected to be solely positive for the industry. Under the PPACA, changes to government reimbursement policies are expected to negatively impact clinics that treat a high number of Medicare and Medicaid patients, and have the potential to slash into profitability moving forward.

Although private insurance accounts for the bulk of industry revenue, funding from government health insurances also comprises a sizable share. In 2015, payments from Medicare and Medicaid will reach an estimated 27.0% of receipts, their highest share in recent years. However, government program payments, particularly Medicare, typically reimburse at rates lower than the cost of care and have faced continual cuts. In 2012, the Centers for Medicare and Medicaid Services (CMS) reduced Medicare reimbursement for sleep test interpretation services by 29.0%. In 2014, CMS once again slashed reimbursement rates for multiple sleep service procedures, reducing payment rates between 3.2% and 4.7%. With further reductions expected in the future, sleep disorder clinics will face continued pressure under the PPACAs efforts to reduce ballooning healthcare costs.

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