Sleep health is getting interesting

This episode of Out-Of-Pocket is brought to you by…

Meet Workstreet – the done-for-you expert fractional CISO that automates your security and compliance program. Our managed service is tailor-built for modern healthcare companies - HIPAA, SOC 2, GDPR, HITRUST, and more - and solves trust so you can get back to building.

Grab time with us and snag a free HITRUST roadmap today.

If you’re interested in sponsoring the newsletter…reach out to us.

-

A sleep care boom?

This year I turned 32, which means I’m one foot in the grave and teenagers call me “sir”. :( 

One of the most noticeable things that’s changed as I’ve gotten older is my sleep quality. I used to be able to sleep through anything - even cars with souped up woofers blaring Trinidad James outside my window at 3 am (oddly specific). Now I wake up a couple times every night and a night of bad sleep REALLY knocks me off my game. 

Sleep is an interesting healthcare market to me and it’s always been divided into two segments. There’s the totally consumer world of everyday mild-to-moderate sleep issues, and then the clinical-grade world of chronic insomnia, severe sleep apnea, narcolepsy, etc. 

I think those worlds are blending together in interesting ways. Specifically, I believe people with mild-moderate sleep issues are going to become much more aware of their sleep quality:

• Sleep trackers are making people more directionally aware of their sleep issues and clinical-grade home sleeping tests are coming to market en masse. This is going to massively increase the demand for sleep care and management of sleep disorders since underdiagnosis in this area is massive.
• You’re seeing more non-pharmacologic sleep interventions entering the consumer market like sleep hygiene apps, sleep headbands, smart beds, supplement stacks, and more.
• Telemedicine infrastructure has now improved enough to handle low-moderate severity sleep issues virtually. This is important because of the shortage of sleep specialists.
• This is almost entirely a consumer-driven market since payer coverage for low-moderate sleep issues isn’t great + HSA/FSAs are used more flexibly in this category. 

Let’s go deeper.

Sleep “Biomarkers” and Better Screening

A traditional sleep study is also known as a polysomnography. During this test, you’re hooked up to a bunch of wires and electrodes that measure things and video taped. You’re told to sleep normally in a room you’ve never been in while people watch you, something I’ve never done for free.

Here are a few of the things used to take these measurements. Some of these will be given to you in a kit you can use at home, and different permutations will be used depending on what they think is your issue.

• An electrocardiogram (EKG) to measure your heart’s electrical activity and rhythm
• Several electrodes measuring electro-encephalogram (EEG) aka. your brain waves, which can be used to deduce sleep stages (e.g. REM), sleep quality, and possibly, insomnia
• Electrodes placed near your eyes to measure eye movements called electrooculography (EOG)
• Electrodes usually on your chin or other body parts to measure electric signals from your muscles during sleep called electromyography (EMG)
• A pulse oximeter to gauge your blood oxygen levels while you sleep (useful for sleep apnea)
• A nose sensor to measure airflow going in and out
• A chest strap that measures how well you’re breathing in and out
• Microphones to pick up snoring
• Videos of your sleep to understand sleep behaviors
• A boxing glove for your partner to wake you up when they can’t take it anymore

As you can imagine, this is kind of clunky in order to test for a lot of issues at once. Plus, the test represents a few points in time vs. seeing how your sleep changes over long periods of time and in response to different things.

Today, we’re seeing the development of new “biomarkers” provided by consumer wearables. Many wearable companies now have some version of a sleep score which tells you how long you slept, the amount of time in different phases of sleep, and a readiness or recovery score that’s a composite of a bunch of these data points.

What’s interesting is that many people wear these devices before a diagnosed sleep issue. This allows us to see sleep trends over long periods of time and see how they morph into sleep disorders starting from the baseline. This is different from sleep studies that measure from when you already have issues.

A lot more people are now seeing they have sleep problems when they might not have known before. While most of these scores aren’t clinically validated, the new generation of hardware seems to be pretty good at measuring sleep phases. Oura does very well compared to a sleep study. Now you have companies like Apple who will flag if you have sleep apnea. You could see a world where the iPhone camera is good enough to capture low-light footage which gets interpreted by AI to suggest movement related sleep issues like restless leg syndrome.

Once flagged, you might need to test additional clinically-validated biomarkers that are traditionally captured in the sleep study. You’re starting to see companies “unbundle” the full polysomnography. Sunrise has a sensor that monitors your jaw. Beacon Biosignals has the Dreem headband which monitors brain waves, audio, and position. Withings has the Sleep Rx mat to monitor heart rate, snoring, respiratory rate, and more. Lofta has a sleep apnea test for $189.

While this probably won’t replace the full polysomnography test, it provides a clear escalation pathway of testing. You have a potential issue, you pick the at-home test that’s good enough to rule out or confirm the most probable issue (e.g. sleep apnea), and if not, then you get a full-fledged sleep study. 

Considering how massively underdiagnosed sleep issues are, I think making this screening more accessible is going to increase the prevalence of mild-moderate severity sleep issues and then create demand for follow-on services to deal with them.

Interlude - Course Enrollment Ending Soon

Two courses start soon. As always, you can reach out to us about group discounts.

‍How to Contract with Payors starts on 12/2 - This course teaches you the essentials of contracting with payors, including strategy, presentations, negotiations, and deal closure. By the end, you'll have a personalized playbook to deal with contracting confidently.

LLMs in healthcare starts on 12/9 - We know your boss has been asking you to “figure out what we should be doing with this whole gen AI thing”. This course will teach you how they work and walk through some real-life deployments so you know what to expect and watch out for.

You can see the rest of the courses enrolling right now here - including healthcare product 201, healthcare 101, and EHR data 101.

New Sleep Interventions

There are lots of drugs out there for sleep. My childhood was peppered with commercials from Lunesta with that glowing butterfly. My adulthood is peppered with rappers talking about pushing Xanax or taking it for long flights (that’s when I knew Drake was old). There are also devices like CPAP (continuous positive airway pressure) machines for sleep apnea–which I’m told are lifechangers and marriage enders for their users.

Many of these solutions are useful for people with diagnosed moderate-to-severe sleep disorders and need a prescription. But now we’re starting to see more experimentation for mild-moderate sleep disorders or poor quality sleep. These typically don’t need FDA approval, and their effect comes from personalizing interventions to the end users. 

Smart beds - Aside from supporting the entire podcasting economy, a whole new wave of mattresses have emerged that adjust while you sleep. For example, the latest 8sleep mattress changes the mattress temperature as it detects changes in your body temperature and also changes the position of the bed itself if it detects snoring. Sleepnumber has a similar product. I have no idea how any of these perform. But as someone who runs very hot when they sleep - this is probably going to be my next purchase. 

Supplements - A big part of online sleep improvement discussions center around using different supplements to help. You see people experiment with different combinations of valerian root, melatonin, etc. at different doses via personal experimentation. You can imagine a combination of the new biomarkers + supplement guidance to make it easier to find a supplement regimen that works for them. I recently saw this delayed release caffeine capsule that claims to help you wake up feeling more alert.

There’s definitely a lot of placebo effect, snake oil, and very…aggressive marketing in this segment. Some of these supplement regimens can also have long term sleep dysregulation issues. But simultaneously some people swear by them - when you turn 30 like half of your friends become magnesium shills. 

Headbands - There’s been a wave of new headband hardware that you wear to sleep like Nudge, Elemind, Somnee, and more, helping with sleep onset and insomnia. The mechanism seems to be different for each. Some use transcranial ultrasound waves to modulate neural activity. Others use electrical stimulation or auditory sounds pulsing that entrain slower brainwaves. Most of them claim to adjust the intervention based on EEG signals.

Light Therapy - 16% of Americans deal with shift work at odd hours or jet lag resulting in chronic circadian rhythm disruption Some companies aim to target these disorders by using light therapy, which exposes your eyes to light at the “correct” times to reset users’ circadian clock, better adapting them for non-traditional work/life schedules. Lumos does this via a sleep mask that lights up your eyes at certain intervals when you sleep and Ayo does this while you’re awake via a headband that looks like Google Glass’s chiller, weed smoking cousin.

Apps - At this point, you’ve probably heard of the apps like Headspace and Calm that help you with guided meditation, sleep stories, and Matthew McConaughey’s naturally ASMR voice knocking you out. You also have FDA-cleared apps like Sleepio that use Cognitive Behavioral Therapy (CBT-I) + a patient diary which are more intensive and still inexplicably to me require a prescription. 

But by far the most interesting to me is Pokemon Sleep, which is supposedly doing more than $100M in revenue using in-app game transactions. The game is extremely simple and uses components in your phone like the accelerometer to track your sleep. If you read on reddit, people talk about how the main thing it does is create incentives to put your phone down earlier before sleeping. Sometimes all it takes is a little intellectual property and game mechanics targeting behaviors like using your phone before sleeping.

The evidence for the interventions above range from “went through clinical trials” to “Andrew Tate recommended this”, so take all the claims with a grain of salt. Maybe these sleep biomarker companies can better help assess which of these interventions actually help and which are BS.

Virtual Sleep Clinics

I think that sleep medicine is an area that’s particularly well-suited for virtual care.

For some context, sleep medicine is a board-certified subspecialty within a larger specialty. You’ll typically see pulmonologists, or internal medicine physicians with a sleep medicine subspecialty, but you’ll also see it across neurologists, otolaryngologists, and even dentists as well. 

In 2011, to become a board eligible in sleep medicine you needed to complete a 12 month accredited sleep fellowship. A combination of that + lower reimbursements is one reason the number of physicians that specialize in sleep medicine has contracted, the residency programs aren’t filled, and the access shortage to sleep medicine docs is pronounced especially outside of cities. The ​estimated​ physician patient ratio is 1:43,000.

Shortages and lack of access to sleep specialists is one reason I think virtual care makes sense here. This is going to get more pronounced as the screening becomes more accessible to everyday people.

Second, I think sleep medicine should look more like care teams. My anecdotal observation talking to people with sleep issues is that depending on which specialist you see, they’ll have particular bias in thinking your issues are related to their specialty (e.g. dentists will tend to believe it’s a structural mouth issue). IMO optimal care here involves getting opinions from several different specialty perspectives, which is much easier and more feasible with larger patient panel sizes enabled by virtual care. You could also have sleep techs or nurses specializing in sleep represent the “hands on the body” of the patient, guided by a virtual sleep medicine specialist.

Third, a lot of the care could actually be done in the home/remotely and might even benefit from that since it’s where a patient naturally sleeps. Being able to understand that environment feels beneficial + with the hardware we talked about above you can capture more data than ever. Plus handling sleep disorders seems well-suited to asynchronous care. When patients have issues it’s usually at night when they want to message, a lot of the care is interpreting results that come from tests, and managing issues with devices that are in their home.

And finally, sleep medicine seems like an area where you could triage out some of the more common sleep issues in people’s homes. The two most common issues seem to be insomnia and sleep apnea.  

The work ups for both of these seem like they could mostly be handled at-home. For sleep apnea at least, the first few steps seem like they’re relatively algorithmic (sleep hygiene test, Epworth Sleepiness score, etc.) and could be done entirely asynchronously. More complex issues could be handled by an in-person sleep clinic that’s close by.

It seems like you could deal with the 80% of most common sleep issues at-home with a questionnaire/diary, a sleep apnea test, some medication/lifestyle changes, a CBT-i course, and potentially sleep apnea treatment like a CPAP device or oral appliance. This would free up sleep medicine specialists to focus on the more complex cases.

An enterprising group of sleep medicine docs could build a great virtual sleep medicine Center of Excellence if they really leaned into this.

Payer coverage? Employer coverage?

Today, most payers will cover issues with serious sleep. If you have suspected sleep apnea, a payer will cover a sleep study, most of the durable medical equipment you need like a CPAP machine, medications for insomnia, etc. There’s remote patient monitoring codes for setting up devices, coaching, and interpreting data. And there’s CPT codes that cover sleep medicine visits + telemedicine. 

For most of these things you need a confirmed or suspected diagnosis from a physician and prescription for the equipment, drugs, etc. There’s also often a significant amount of stuff you need to submit to the insurance company to get it reimbursed or covered.

However there still seems to be a gap for payer coverage for low-moderate sleep issues. 

A lot of the at-home sleep apnea tests ​aren’t covered by insurance​. Most virtual sleep clinics which also offer hardware give ​both the insurance and self-pay rates​. Supplements…lol obviously not (maybe in the new Dr. Oz regime). Many of these companies are leaning into being Health Savings Account eligible instead, powered by companies like ​TrueMed​ that get you a letter of medical necessity so you can spend tax-free dollars.

This is almost entirely consumer spend, which means more price competitiveness and patient experience focus. But that also means less access for people that can’t pay out-of-pocket.

One area that seems to be very early but interesting is outcomes-based pricing for sleep issues. There’s some examples of this on the employer side. Nox Health for example offers screening, diagnosis, and virtual sleep care. They also seem to charge a bundled payment for diagnosed patients, though I couldn’t find much online about how this actually works. Judging by the customer testimonials they have online, this seems mostly targeted to companies which have a measurable accident spend (warehouse workers, trucking, etc.). 

With all the new “biomarkers” we talked about, it would be interesting to see if any of the consumer paying companies would do their own version of outcomes-based pricing. If your sleep score from Oura doesn’t improve by X amount after 3 months, we’ll offer you 50% back on the purchase.

Conclusion and some isolated thoughts

Sleep feels like an area of consumer healthcare that’s becoming part of shitty cocktail party banter. Even at the slightest mention I was writing this post, 10 different people interrupted me asking “have you read ​Why We Sleep​? It’s amazing”. People want to get better sleep even if their sleep issues are mild, and now an ecosystem exists to support that.

A few random thoughts that didn’t fit neatly into the buckets above.

• Certain jobs require a health screening test, of which one component can be a sleep apnea assessment (e.g. trucking, pilots). It does make sense to me that you’d want these kinds of jobs that require high alertness/risk of sleepiness to require that screening for public safety. However there’s an interesting slippery slope here of where that line gets drawn for which jobs should be aware of your sleepiness. Should you only be able to drive for Uber a certain number of hours if you didn’t sleep well? It actually might make sense if we knew how sleepy our surgeon was? Do you remember that kind of dystopian Oura announcement where you could integrate it with Slack and show your coworkers your sleep/readiness scores?

• Sleep feels like an area where decentralized trials and research might work well. For people with sleep issues it makes sense for them to be tested in their home so it’s not a foreign environment. Plus wearables are already at scale and can more easily detect people that might be good fits for the trial. This doesn’t even need to be “clinical trial” grade - most people just want to try some self-experimentation and see how it compares to other people experiencing similar issues. This is already happening informally on reddit anyway.
• Through the course of writing this I went down the chronobiology rabbithole, aka the study of biological rhythms. Thanks to massive genetic databases + people filling out surveys, we’re identifying clusters of genes that tell us more about our underlying circadian rhythm. This can tell us things like whether we’re predisposed to being a morning or night person, which is a big issue when it comes to sleep. We live in a world designed for only one chronotype, and maybe we should have schools specific to your chronotype (e.g. for night learners) since that seems to impact learning.There also is increasingly more research around how your underlying biological rhythm can affect how your metabolism functions, which can affect how drugs work and potentially things like insulin resistance. This feels under discussed and related to sleep issues.

• It can’t be a healthcare post in 2024 without mentioning obesity drugs. Sleep apnea is very connected to obesity, and trials of tirzepatide are showing massive improvements for people with moderate-to-severe sleep apnea. I can imagine there’s a whole host of more subtle sleep problems it’ll help with as well.

Thinkboi out,

Nikhil aka. “I don’t sleep, cause sleep is the cousin of death (also I drank a coffee at 4pm)”.

Thanks to Morgan Moncada and Dr. John Huston for reading drafts of this

P.S. For our headhunting service, we’re looking for an excellent Head of Design for an early stage consumer health tech company. Sign up here if that’s you.

Twitter: ​@nikillinit​

IG: ​@outofpockethealth​

Other posts: ​outofpocket.health/posts​

--

{{sub-form}}

‎If you’re enjoying the newsletter, do me a solid and shoot this over to a friend or healthcare slack channel and tell them to sign up. The line between unemployment and founder of a startup is traction and whether your parents believe you have a job.