A new report from Frost and Sullivan on the sleep diagnostic market suggests that the makers of digital health sleep devices might have reason to be optimistic.

According to the report, the combined US and European market for clinical and ambulatory sleep disorder diagnostic devices was worth $96.5 million in 2013 and is expected to hit $125.8 million in 2017. The report doesn't include consumer-facing sleep tracking devices, but rather multi-parameter polysomnogram systems that check EEG, ECG, movement, and breathing while sleeping. But even among clinical devices, the market is shifting toward home care.

"If you're talking about the current market, the focus is shifting toward home testing," Frost and Sullivan Healthcare Research Analyst Akanksha Joshi told MobiHealthNews. "If you are talking about the comparison of Europe and the US, Europe has been more accepting than US and most other countries of home testing. But in the US the usage is increasing. There's a higher percentage of people accessing home sleep testing now, and it will grow to a higher number in the coming years."

Joshi said that in Europe, 49 percent of the market was home sleep testing and 51 percent was in-clinic. For the US, the breakdown was more like 30 percent home and 70 percent clinical.

Increased connectivity and a greater demand for care than available sleep technicians can handle are driving the market. Joshi said people are also just becoming more aware of how important their sleep health is. 

"The major reason is there is an increased awareness among people to get their sleep patterns checked. This is a new sense that people are aware that a growing lack of sleep can in the future create more health problems," she said. "Another thing is the availability of patient-friendly sleep testing devices. People generally prefer to get sleep testing at home, because it's more comfortable, and costs less out of pocket. And the reimbursement available is quite adequate, particularly in the US. It's patient-friendly, cost-effective, and people are willing to go for it."

MobiHealthNews has written about at least one home sleep-testing company in the past: NovaSom, a cellular-enabled sleep test that launched in January 2012, after raising $35 million in the fall of 2011. But most of the digital sleep market we've covered looks more like Zeo, the consumer sleep tracking company that went out of business a year ago. Most of these are over the counter, app-enabled devices not meant specifically for sleep disorder diagnosis, but for more general sleep health monitoring.

Since Zeo shut down, new contenders in the sleep tracking space have emerged. Beddit, a company tracking sleep with sensors that strap to the user's bed, had a successful Indiegogo campaign and began selling its product in December. Another company, IntelliClinic, raised $400,000 for a smart sleep mask called NeuroOn, meant to measure and improve the user's sleep. In January, SleepRate launched an app-based sleep system using cognitive behavioral strategies licensed from Stanford University’s School of Medicine, Psychiatry, and Behavioral Sciences. Finally, sleep tracker maker Bam Labs teamed up with smart bed maker Sleep Number to create an $8,000 bed with a tablet interface.

Activity tracker companies, too have been earnestly getting into the sleep game, starting with Lark, a tracker that was competing in the sleep space back while Zeo was around. Fitbit, Jawbone, and Basis have all touted their sleep-tracking features. And at CES this year, Withings announced a whole new multi-device system, called Aura, for tracking sleep and facilitating sleep behavior change.

Since Zeo shut down, there's been an open question of whether the consumer market is ready for sleep tracking -- whether it could ever scale to mass market acceptance. But Joshi, from Frost, thinks that as the market for prescribed, clinical sleep testing grows, the market for consumer sleep tracking will rise with the tide.

"[Consumer sleep tracking] is going to come in the near future," she said. "The future is about more of the disruptive technology. Self-monitoring is what people are going to do in the coming years. Zeo did not work at that particular time because [people] didn't know the reliability of the product. That option takes time for people. There is a time gap in terms of physicians accepting it. Whenever a device comes in the market, it's first the physicians that have to accept it, then it comes to the general [public]."