Value-Based Care Enters DME Market Amidst Federal Fraud Crackdown

AUSTIN, TX – April 09, 2026 – As federal regulators intensify their crackdown on fraud and waste in the medical supply industry, a new approach is emerging that shifts the focus from the volume of products shipped to the value of patient outcomes. Austin-based TenderHeart Health Outcomes has announced a value-based care model for incontinence supplies, a move that directly confronts the systemic issues plaguing the durable medical equipment (DME) sector.

The announcement comes at a critical juncture. The Centers for Medicare & Medicaid Services (CMS) recently took the dramatic step of imposing a nationwide six-month moratorium on new Medicare enrollments for certain types of DME suppliers. This regulatory freeze, effective since late February 2026, signals a deep-seated concern within the agency over a payment system that has proven susceptible to abuse. By challenging the long-standing fee-for-service model that has dominated the DME landscape, TenderHeart is positioning itself not just as a supplier, but as a potential architect of reform in a multi-billion dollar market under intense scrutiny.

A System Under Scrutiny

The problems within the DME sector are neither new nor isolated. For years, government watchdogs like the Government Accountability Office (GAO) and the Office of Inspector General (OIG) have published reports highlighting significant improper payments and vulnerabilities to fraud. A 2025 OIG audit, for example, identified millions in improper Medicare payments for supplies provided to patients during inpatient hospital stays. These persistent issues create a significant financial drain on the healthcare system and cast a shadow over legitimate providers.

CMS's recent moratorium is the agency's most forceful move yet. It targets specific categories of medical supply companies that data showed were disproportionately involved in revocations, payment suspensions, and law enforcement referrals. In its announcement, CMS framed the action as part of a broader strategy to "crush fraud, waste, and abuse," a mission that now includes leveraging artificial intelligence and machine learning to proactively detect suspicious claims activity.

This federal pressure has created a powerful incentive for innovation. The traditional fee-for-service model, which pays suppliers for each item provided, can inadvertently encourage over-utilization. In the case of incontinence supplies, this can mean patients receive a high volume of products that may be low-quality, ill-fitting, or simply unnecessary, driving up costs without improving health. TenderHeart's model aims to dismantle this incentive structure entirely.

Shifting from Volume to Value

At the heart of the new model is a fundamental shift in reimbursement. Instead of being paid per item, TenderHeart operates on value-based contracts with health plans. These arrangements remove the financial incentive to ship more products, instead aligning profitability with efficiency and positive patient outcomes. This structure inherently discourages the waste that CMS is determined to eliminate.

The program's mechanics are built around personalized patient support. TenderHeart employs incontinence coaches who work directly with individual members. Their role begins with a detailed assessment of the member's specific needs, clinical history, and living situation. Based on this assessment, they help select high-quality, correctly sized products designed for optimal performance.

This is a stark contrast to the often-impersonal process of ordering supplies from a catalog or website. The coaching extends beyond product selection to include education on managing the condition, proper product use to prevent leaks and skin irritation, and regular follow-ups to adjust the care plan as the member's needs change. By ensuring members receive exactly what they need, the program is designed to reduce unnecessary utilization and its associated costs.

The Human and Clinical Impact

Beyond the financial and regulatory implications, the shift to a value-based, patient-centric model is demonstrating a profound impact on health outcomes. Incontinence is not merely an inconvenience; it is a clinical condition linked to a higher risk of falls, urinary tract infections (UTIs), and painful, hard-to-treat pressure ulcers. Poorly managed incontinence can lead to a cycle of costly hospitalizations and a diminished quality of life.

Data from TenderHeart's programs with national Medicaid managed care organizations (MCOs) reveals significant clinical improvements. One case study documented an 82% reduction in UTIs, a 60% reduction in falls, and a complete elimination of pressure ulcers among program participants. Another analysis found a 44% drop in hospital admissions for UTIs and an 11% reduction in admissions related to falls.

These numbers represent a dramatic improvement in the well-being of a vulnerable population. By preventing these adverse events, the program helps individuals maintain their health and independence. Patients and their caregivers report increased confidence, reduced anxiety, and an overall better quality of life, empowered by the support and effective products they receive. This focus on holistic well-being aligns with the goals of patient advocacy groups like the National Association for Continence, which work to improve the lives of those affected by the condition.

A Compelling Case for Health Plans

The model's success in improving patient health translates into a strong financial case for health plan partners. With the U.S. market for disposable incontinence products valued at over $14 billion and growing, finding efficiencies is a major priority. By reducing costly hospital admissions and emergency room visits, the program has been shown to lower the total cost of care for participating members by an average of 20%.

For Medicaid MCOs, which serve millions of low-income individuals and people with disabilities, these outcomes are particularly compelling. These organizations operate under tight budgets and are increasingly measured on their ability to improve the health of their members. TenderHeart's partnerships have led to an average 10.7% improvement in related HEDIS scores—a key set of performance metrics used across the healthcare industry.

With over 1.2 million individuals already covered under these value-based arrangements through partnerships with state Medicaid agencies and national MCOs, the model has moved beyond the pilot stage. As the healthcare industry as a whole continues its slow but steady pivot towards value—with over 60% of organizations expecting revenue from such arrangements to increase—TenderHeart appears to be an early mover in a DME segment ripe for disruption. As federal oversight continues to tighten, the demand for transparent, outcome-driven solutions is only expected to grow, potentially paving the way for a new standard in how essential medical supplies are delivered in the United States.