DME: A Growing Industry Shaped by Changing Healthcare Landscape

Published in Member Communities on March 20, 2024

Alan Morris, SVP of Strategy, VGM & AssociatesBy Alan Morris, SVP of Strategy, VGM & Associates

There is a tremendous reason for optimism in the durable medical equipment (DME) provider community today. It’s a market that’s poised to experience significant growth in the coming decade, driven by a myriad of compounding factors.

The 65+ population is forecasted to grow by nearly 30% over the next decade.

First and foremost, population shifts will mean significantly greater consumption of healthcare services. Our population is aging at an unprecedented rate, with baby boomers transitioning into their senior years. The 65+ population is forecasted to grow by nearly 30% over the next decade. In that same time frame, we’ll reach a point where more than half of all Americans will be obese, with a quarter being severely obese. These trends contribute to the fact that diabetes prevalence is expected to increase by more than 50% during the next decade. 

Diabetes prevalence is expected to increase by more than 50% during the next decade.

Currently more than 40% of healthcare dollars are spent through some form of advanced payment model.

Beyond the fact that the population is trending in a direction of greater demand for DME, evolutions in the healthcare ecosystem are trending in a favorable direction for our industry as well. There’s a growing presence of advanced payment model agreements between payers and health systems. These payment models outline value-based care arrangements, accountable care organization arrangements, and bundled payment models, among other types of risk-sharing agreements. In fact, currently more than 40% of healthcare dollars are spent through some form of advanced payment model, and CMS has a goal of ensuring 100% of all Medicare and Medicaid beneficiaries are covered under an accountable care arrangement by 2030.

Regardless of the agreement’s structure, these advanced payment models are all designed to share financial risk between payers and providers, a design that inherently incentivizes providers to find the lowest-cost suitable healthcare solutions. For DMEs, this means providers have incentives in front of them to move patients out of institutional care settings and into their homes when practical.

Today, many of the practices bred out of the necessity of the time are now common practice.

A Great Time for DME

Much of what’s going to drive the exponential increase in demand for DME and adjacent services has been coming for years. Some of it, however, was driven by the industry’s ability to showcase itself throughout the height of the COVID-19 pandemic. Overcrowded hospitals and fear around the spread of the virus created an immediate need for providers to find ways to transition care that would have been traditionally delivered in hospitals, SNFs, or LTC facilities into the home. Today, many of the practices bred out of the necessity of the time are now common practice.

Every year, CMS (through National Health Expenditures) releases updated industry spend and forecasts for each healthcare segment. When 2023 numbers were released, the future DME spend was increased by approximately 15% over what we’d previously seen forecasted, largely because CMS saw the transition of care into the home and sees that it’s sustainable in perpetuity.

DME spend increased by approximately 15% over forecast

It really is a great time to be in the DME industry. We’re well poised to be a solution to some of healthcare’s biggest challenges while capitalizing on demand forecasted to grow exponentially.

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VGM Playbook Elevating Performance Harnessing Human CapitalThis article was originally featured in the VGM Playbook: Forecasting 2024. To read the full article and more like this, download your copy of the playbook today


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