If you are looking for a new service line to add—one that could be a dream to get off the ground—then don’t rest until you determine if your community needs a sleep center. In the past decade, the number of people reporting sleep problems has increased nearly 13%, according to the National Sleep Foundation. The growing number of potential patients, combined with a low start-up cost, minimal operating expense, and high level of reimbursement, makes this service line something you shouldn’t sleep on.
On average, hospital-based sleep labs bring in $1,100 to $1,200 revenue per patient from third-party payers, against an expense per patient of approximately $600, earning a net profit of $500 to $600 per patient visit. If the volume is sufficient, the center can break even or even make a profit within the first year.
Since their inception in the 1970s, nearly 3,500 sleep labs or centers have been opened across the country. Approximately 1,400 of these centers are accredited by the American Academy of Sleep Medicine. Research supports the need for these facilities; new studies link sleep disorders with increased risk of stroke, cardiac disease, diabetes, rheumatoid arthritis, metabolic disorders, and other ailments.
Making sleep centers even more attractive to healthcare financial leaders is that these facilities can operate as an ancillary service, either in-house or as satellites off-campus. Yet for billing purposes, hospitals and health systems are still able to use the same provider number without sacrificing the most expensive real estate—a hospital bed.
Paul Brown, manager of non-invasive cardiology and sleep labs at Genesys Regional Medical Center in Grand Blanc, MI, says that over the past 25 years, he has seen steady growth in sleep lab service lines, from one bed in 1985 to two off-campus locations today, 10-bed and 4-bed facilities.
As operations grew, Genesys moved its labs off-campus to help keep costs low and provide a better site for patients. “It’s also quieter, which is better for the patient,” Brown notes.
Brown says an off-campus sleep center can be built for approximately $500,000, with the majority of the cost going to creating a hotel-like site for the patients to relax and sleep, as well as some basic equipment such as digital diagnostic equipment and a digital video recorder.
Virtua, a four-hospital health system based in New Jersey, launched its sleep lab with one hospital bed back in 1994. Virtua has since moved its sleep labs out of the hospital and now operates four centers, totaling 20 beds. The start-up cost for the centers has been minimal, explains Dean Mazzoni, vice president of operations for Virtua’s SleepCare Centers, in part because Virtua rents the property for these centers and contracts with SleepCare in Mount Laurel, NJ, to oversee the operations.
Mazzoni says partnering with an established sleep lab company like SleepCare has helped keep costs low and brings technical and clinical expertise. “We expected our volumes to get us to the break-even point the first year, and it has. We’ve been at break-even or above now for years,” he says. The same is true for Genesys, which earns a net profit of $600,000 to $700,000 and revenues of $1.7 million annually from its two sleep centers.
My column last week encouraged you to stop trying to cut your way to prosperity, instead looking for unique approaches to growth. If your community has a need for a sleep center, don’t snooze or you may lose on this money-making service line.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
