The U.S. agency that runs Medicare said late Thursday that it's expanding reimbursement coverage for devices that help patients with obstructive sleep apnea to include patients who have been diagnosed at home, as well as in sleep laboratories.
Respironics Inc. (NASDAQ-NMS:RESP) (RESP), which is in the process of being acquired by Royal Philips Electronics NV (PHG), and ResMed Inc. (NYSE:RMD) (RMD) are the two major makers of continuous positive airway pressure systems for sleep apnea patients. The devices include air blowers and face masks that help keep airways open.
Only about 20% of U.S. patients who use the so-called CPAP machines are covered by Medicare, according to Matthew Borer, director of investor relations at ResMed (NYSE:RMD) . But Medicare coverage decisions often set the tone for private insurers. In this case, Thursday's announcement follows a policy revision by Aetna Inc. (NYSE:AET) (AET) earlier this week to also cover home-testing, Borer said.
In a release, the Centers for Medicare and Medicaid Services noted that up to 4 million Medicare beneficiaries may suffer from some form of obstructive sleep apnea. Patients with the disorder, which can be exacerbated by excess weight, stop breathing frequently during the night to the point where it interrupts sleep and can raise the odds for other problems.
Few patients are tested at home because such testing hasn't been covered by insurers, which means patients would have to foot the bill for CPAP equipment. But some patients won't get tested in sleep labs because they balk at paying some portion of the typical $1,000 to $1,200 testing price tag, Borer said. Home testing is cheaper.
Over time, the decision by Medicare could be helpful to the market, said Borer, who noted that local coverage policies need to be written.
CMS on Thursday also said that it's limiting initial CPAP coverage for obstructive sleep apnea to 12 weeks in order to determine whether patients are responding to the treatment. The agency will continue to cover patients who continue with and respond to treatment.
Borer estimated that CPAP machines are sold to wholesalers for about $400 to $ 600, and that masks, which need to be replaced occasionally, cost $50 to $100. Patients often get the systems on a rent-to-own basis from equipment suppliers.
Shares of ResMed (NYSE:RMD) moved up to $42 in after-hours trading, after rising 84 cents to close at $41.51 during Thursday's regular trading session. Shares of Respironics (NASDAQ-NMS:RESP) , which Philips is buying for $66 a share, rose 2 cents to $65.99 on Thursday.
The Medicare changes announced Thursday were first proposed in December.
-By Jon Kamp, Dow Jones Newswires; 312-750-4129; jon.kamp@dowjones.com
(END) Dow Jones Newswires 03-13-08 1843 Copyright (c) 2008 Dow Jones & Company, Inc.
