Medicare, the government-funded insurance program for the elderly and disabled, covers certain wound care products known as skin substitutes, basically artificial skin that’s used to replace damaged or missing skin. A new report by the Office of Inspector General draws attention to skyrocketing costs and potential fraud in the industry. In just two years, Medicare spending on skin substitutes has increased a whopping 640%.

 Concerns regarding fraud in skin substitutes are not particularly new. For instance, in April 2025, the Department of Justice filed a lawsuit against one of the nation’s largest wound care providers, Vohra, and its majority owner. Vohra contracts with hundreds of nursing homes and other long-term care providers to come in and provide wound care for patients in those facilities. The DOJ accused the company of exaggerating the complexity (and hence cost) of procedures it was performing (known as upcoding) and setting targets based on revenue goals without any sort of regard for patient need. Similarly, in 2023, a California doctor was excluded from the Medicare program for 15 years over the misbilling of skin substitutes.  And on the criminal side,  an Arizona couple was recently convicted of a massive healthcare fraud, apparently, via upcoding, kickbacks, and other schemes, they defrauded federal healthcare programs by over $1 billion.

The new report focuses on specific issues with the billing for skin substitutes that are clearly on the government’s radar and to which whistleblowers should pay special attention:

• Price Manipulation: skin substitutes are treated like prescription biologics for the purposes of reimbursement, meaning they are paid at 106% of average sales price (ASP), or, if ASP is not available, such as for a new production, wholesale acquisition cost is used as a proxy. As an OIG reported in 2023, some skin substitute providers have been less than diligent in reporting ASPs, making this hard to calculate, but charging Medicare a price higher than proscribed (pub intended) by law can prove to be a violation of the False Claims Act.

This is of particular concern because, in the past two years, the average Medicare has paid for each unit of skin substitute has increased by 153%.

• Medical Necessity: While some of the explosion in Medicare spending on these products is driven by higher prices, increased utilization is also an area of suspicion. Between early 2023 and mid-2024, the number of Medicare enrollees who received skin substitutes increased by 53% and the units of skin substitutes Medicare paid for increased by 83%. In short, significantly more people are using significantly more product. This, naturally, raises questions of medical necessity. Billing Medicare for providing skin substitutes to patients that don’t need them, or billing for more units than is necessary, can be a violation of the False Claims Act.

Another suspicious trend is the difference between Medicare Advantage and traditional Medicare payments for skin substitutes. Medicare Advantage is an alternative system to traditional Medicare. In Medicare Advantage, the government partners with private insurers and pays those insurers based on the demographics of the covered population, not based on the procedures done. Over half of Medicare beneficiaries are in the Medicare Advantage program, but traditional Medicare pays 15 times more for skin substitutes than does Medicare Advantage. There are no obvious demographic differences between these populations, but the delta could be due to significantly less friendly payment terms set by insurers compared to traditional Medicare (such as requiring prior authorization), suggesting some grey areas around proscribing activity.

• Kickbacks: Kickbacks make up the lion’s share of recoveries in all aspects of the healthcare industry, and substitute skin is no exception, as the criminal action mentioned above shows. In that case, a distributor of skin substitutes was paying kickbacks in exchange for their prescription. Kickbacks can take many forms, but, in general, paying or receiving renumeration in exchange for proscribing claims that the federal government ultimately pays for can be a violation of the Anti-Kickback Statute and the False Claims Act.

Experts have been sounding the alarm on this unsustainable expense for years. Medicare even recommended changes to the reimbursement regime for these products, but the new administration has put those changes on pause. This makes whistleblowers particularly important in this space: the reimbursement schemes are complex, and the field is quickly changing and growing. An insider’s perspective is likely to be essential to root out fraud. The attorneys at Whistleblower Partners have extensive experience representing whistleblowers in cases involving healthcare fraud. If you would like more information or wish to speak to an attorney at Whistleblower Partners, please contact us for a confidential consultation.