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Sleep Centers Awaken Profit, Competition

Karen Minich-Pourshadi, for HealthLeaders Media, May 13, 2011
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Deciding whether to open one of these labs and whether to establish it within the hospital or off campus must be based on your cost and your certainty regarding your estimated market demand, explains Joy Finkenbiner, vice president of diagnostics and therapy services at Genesys. “What makes the choice to open one of these sites a good one depends largely on your demographics,” she says.

“Are you in an industrial area where there are a lot of smoke and respiratory issues, or where there is a large obese population? Then you need to look at your competition. How much of that population is the competition capturing?” she explains.

New Jersey-based Virtua, a four-hospital health system with annual net revenue of $1 billion, took similar steps when it developed the Virtua SleepCare Centers. Having started a sleep lab with one hospital bed 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; Virtua rents the property and contracts with SleepCare in Mount Laurel, NJ, to oversee the operations.

“We looked at the need in the community and what services we already provided, and we tried to round out our services,” says Dean Mazzoni, vice president of operations for Virtua’s SleepCare Centers. “With the high instances of obesity nationwide, which is one of the indicators for a sleep disorder, we knew we had a need which had to be met.”

Profit brings competition

Once a community need is established, a financial analysis should be completed. On average, hospital-based sleep labs earn a net revenue per patient from third-party payers of between $1,100 to $1,200 versus the expense per patient of approximately $600, earning a net profit of $500 to $600 per patient visit. If the volume is there, the center can break even or profit within a year.

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