Sleep Medicine

Is Sleep Medicine at the Mercy of Insurance Companies?

Written by
Kashyap Purani
Published on
March 14, 2023

‘’We are 100% at the mercy of insurance companies”, quips Dr. Singh, who runs a chain of sleep centers in Virginia. ‘’We depend on their decisions every step of the way.”

And she’s not off the mark here.

The sleep medicine industry is faced with an incredulous paradox- on one hand the U.S. sleep disorder clinics market is projected to grow from $9.20 billion in 2021 to $15.92 billion in 2028, and on the other, local sleep diagnostic centers have seen lingering and unprecedented economic losses that have resulted in permanent shutdowns of some healthcare services post-pandemic.Insurance companies are at the heart of every sleep center’s revenue machinery — and behind the above incongruity in the US sleep market. They have a significant impact on the sleep medicine industry, holding both -the cost of running a sleep center and the quality of care that patients receive — in the palm of their slippery hands. Convoluted eligibility rules and uncertainty regarding reimbursement payments are often the culprits of causing increased work hours and staff burnouts.


Prior Authorization as A Cost Controlling Tactic

Insurance companies use prior authorization as a cost-controlling tactic to ensure that patients receive only medically necessary and cost-effective treatments. However, it can also lead to delays in patient care, increased administrative burden on providers, and even prevent some patients from receiving necessary treatments due to the complexity of the process.


Besides, according to an AMA survey, 88% of physicians said that prior authorization "generates high or extremely high administrative burden" for their practices. Practices are responsible for an average of 41 prior authorizations per physician each week, which can take almost 2 days of a physician's or a staff's time each week, as per AAFP. In sleep medicine, prior authorization is an issue and a point of contention for many referring physicians too. Uncertainty regarding the insurance coverage puts an additional burden on the already busy physician, requiring them to keep up with the insurance policies and perform menial tasks. This creates an additional obstacle for the patients to get access to sleep medicine and for the sleep centers to get referrals of high-risk patients needing diagnosis and treatment.

In sleep medicine, prior authorization is an issue and a point of contention for many referring physicians.


Prior Auth complicates sleep disorder diagnoses and treatments with downstream impacts on the healthcare costs. For example, a patient with sleep apnea may require a CPAP machine, which can cost several thousand dollars. Whereas undiagnosed sleep conditions can lead to adverse health outcomes and even more direct and indirect downstream healthcare costs. Different insurance companies may have different rules for approving similar patients and treatments, making it difficult for healthcare practices to navigate the process and provide their patients with the care they need. This adds overhead for the already struggling sleep centers due to rising costs and industry-wide staffing issues.


Low Reimbursements Rates For Sleep Practices

Insurance companies have significant bargaining power in revenue- affecting negotiations for services rendered at sleep centers, and often push back against high prices. As a result, sleep centers are often forced to accept lower reimbursements than they would like. There is also a huge disparity in the reimbursement rates between the urban and the rural sleep practices. The independent sleep centers struggle to have negotiation power when it comes to establishing contracts with healthcare payers. This leads to consolidation of healthcare practices resulting in restricting access to quality sleep medicine for the rural and low-income populations.


As Dr. Singh notes, this dynamic is exacerbated by the fact that sleep centers typically operate on narrow profit margins, with most of their revenue going towards staff salaries, overhead expenses and costly equipment. This means that even small changes in reimbursement rates can have a significant impact on a sleep center's bottom line. Unfortunately, insurance companies are not always willing to pay for the full cost of running a sleep center. In some cases, they may deny claims for services that are deemed "not medically necessary" or "experimental". This can be particularly frustrating for sleep specialists, who are trained to provide evidence-based care that is supported by the latest research.

Even small changes in reimbursement rates can have a significant impact on a sleep center's bottom line.


Furthermore, insurance companies often dictate which treatments and procedures are covered under their policies. This means that sleep centers may be forced to use certain equipment or procedures, even if they believe that other options would be more effective- ultimately limiting their revenue generating channels


Holding Sleep Centers to Outdated Methods

Despite advances in technology, many insurance companies still rely on outdated methods of communication such as phone and fax when it comes to reimbursing sleep centers for services rendered. The process can be particularly burdensome for smaller sleep centers with limited administrative resources, which can result in uncertain revenue cycle, reduced income and increased financial strain.

The use of outdated communication methods by insurance companies can be particularly burdensome for smaller sleep centers with limited administrative resources.


The use of outdated communication methods by insurance companies can also lead to errors and delays in processing claims. For example, a sleep center may submit a claim for a patient's sleep study, but if the insurance company is slow to process the claim or requires additional information, it can delay payment to the sleep center. This can have a negative impact on the sleep center's cash flow and revenue.

Innovation as a Way Forward

Insurance companies determine the extent of coverage for treatments and procedures and can limit the options available to patients. However, insurance companies can also play a positive role in patient care. They can provide coverage for treatments and procedures that would otherwise be unaffordable and can help to ensure that patients receive the care they need.


By embracing modern software solutions and offloading administrative tasks, sleep centers can improve their revenue streams and provide better care to their patients. The use of prior authorization automation and AI solutions can help streamline the process of obtaining prior authorization, reducing administrative burdens on medical practices and improving patient outcomes.


Additionally, sleep centers can leverage the expertise of external prior authorization services, allowing them to focus on providing quality care to their patients while outsourcing administrative tasks to trained professionals.


With these innovative solutions, sleep centers can overcome the challenges posed by outdated communication methods and restrictive reimbursement policies and continue to provide high-quality care to their patients — taking control of your healthcare businesses is a choice, after all.