Last week I wrote my thesis about the arbitrage that runs our industry: buy DME earnings cheaper than the cost of money, and the profit is baked in before anyone helps a single patient. A few people pushed back with a fair question. Nice theory. Does paying for outcomes actually work in DME?
Turns out someone already ran the experiment. In diapers.
Incontinence supplies might be the least glamorous category we have, and under fee-for-service it has every problem my last post described: payment tied to volume, zero connection to whether patients actually do better, and waste hiding in plain sight.
In Texas, Medicaid plans tried something different.
They stopped paying a supplier per unit shipped and started paying for members’ outcomes.
That’s it. That’s the whole change I’m going to describe. The interesting part is what happened next.
Supply spend dropped about 20 percent. The plans paid LESS while members got BETTER products. That gap was the waste fee-for-service had been quietly billing every month.
But the supply savings are small. One plan’s claims analysis found about $4.5 million in medical savings in six months. Hospital admissions down 63 percent for pressure ulcers. Down 44 percent for UTIs. A newer academic study of frail seniors living at home: UTIs down 82 percent, pressure ulcers eliminated, falls down 60 percent.
And the number I can’t stop thinking about: a Net Promoter Score of 85. Healthcare averages 46. A Medicaid diaper program is outscoring nearly all of American healthcare on whether people would recommend it.
Honest caveats, because I’d rather argue carefully than loudly: most figures come from the company or studies it commissioned, and the comparisons are before-and-after without control groups. Fine. Cut every number in half. The direction survives.
Now connect it back to the capital argument. Under per-unit payment, the investments that produced these results were pure expense. No rational owner funds them, fast money or slow. The moment payment flipped to outcomes, those same investments became the business model. Nobody’s character changed. The contract changed. And suddenly patients, the payer, and the supplier all did better at the same time.
That’s the proof the misalignment was never about who owns DME companies. It was about what our revenue rewards.
Four national Medicaid plans covering over a million people have adopted this model. It exists. It works. It’s spreading.
So here’s my question for other operators, and I’m genuinely curious: if your revenue depended on your patient’s outcomes instead of your shipment volume, what’s the first thing about your company you would change?
