A number of medical practices have raised serious concerns with a trade group about skyrocketing wound care spending that is causing “heartbreaking cases of people who are on their last weeks of life in hospice getting million-dollar skin substitutions” and other excesses, a trade group leader said.
The official, Mara McDermott, is the C.E.O. of Accountable For Health, a national advocacy and policy analysis group whose goal is to speed the adoption of effective accountable care. She said around 10 of the group’s 55 members had raised the alarm about extremely expensive and often ineffective — or even harmful — care for non-healing wounds using skin substitutes. These members, she said in a Zoom interview, have observed “massive jumps in the amount of billing for skin substitutes — one year, maybe it’s $500,000 of claims, and then two years later, they would see it north of $10 million of claims.”
Five people from CareConnectMD, a member group of McDermott’s organization, said in a Zoom interview that they first noticed the skin substitute-wound care issue in 2022, with two patients incurring charges for $15,000 each. In 2023, there were 20 such patients. In 2024, the number of cases tripled, with costs up by a factor of eight. Two to three patients had Medicare claims for “over several hundred thousand dollars,” said Mary McCormack, vice president of contracting and administration at CareConnectMD. They had a couple of patients that cost over $1 million in a year. They recently raised their concerns with Accountable For Health, citing mobile wound care companies that appear at a nursing facility and start putting skin substitutes on patients.
In a related development, a prominent Colorado wound care specialist said he had discussed misdeeds in the wound care space with the Office of the Inspector General of the Department of Health and Human Services. The specialist, Dr. Pradeep “Raj” Rai of ProHealthOne, Colorado’s biggest wound care company, said representatives of several smaller mobile companies had “gotten in the door” of nursing facilities by falsely telling the nursing facilities that they were working with ProHealthOne, and then put skin substitutes on patients without ProHealthOne’s knowledge.
Shared savings
CareConnectMD, like other Accountable for Health member groups, is an Accountable Care Organization; the A.C.O.’s are groups of doctors, hospitals and other health care providers who unite to give coordinated high-quality care to the Medicare patients they serve, and can share with the government savings they achieve by meeting agreed-upon benchmarks (also known as performance payment).
What’s complicated, they said, is that small wound care companies swoop in to apply skin substitutes to their patients without their knowledge, charge Medicare for services and get paid, often without results or with ensuing complications. These patients tend to be in congregate facilities like nursing homes, they said. The small wound care companies have flooded into the market in the last few years.
Skin substitutes, used to treat wounds that do not heal properly, have become a focus of attention because of skyrocketing costs. Treatment of these wounds, including diabetic foot ulcers and venous leg ulcers, as well as other wounds like pressure injuries (bedsores), and some surgical incisions, can avert pain and other complications, including amputations. Many assume that skin substitutes are good because — of course — healing any wound must be good. But that is not necessarily true.
Doctors were careful to say that skin substitutes — made of substances like placenta tissue, infant foreskin tissue, fish skin, cadaver skin and the like — can be extremely helpful when used appropriately, but that they are sometimes being used willy-nilly and inappropriately, without comprehensive wound care practices, including assessment of the whole person. It is also true that the “Average Sales Price” pricing system used by Medicare allows manufacturers or distributors to set their own prices, which the market is supposed to adjust — a practice that seems to encourage some manufacturers to charge high prices and some wound care specialists to use the most expensive product, regardless of research on efficacy. (See one of our previous stories here.)
As a result of the skyrocketing spending and questions about efficacy and patient harm, new regulations were proposed by the nation’s seven Medicare Administrative Contractors to limit the number of products that are covered by Medicare, and also to impose some other restrictions. They were due to come into effect Feb. 12. But those new regulations, proposed in identical Local Coverage Determinations (L.C.D.’s) by the M.A.C.’s, were postponed Jan. 24 until April 13 by the incoming Trump administration. People in the industry are asking if they will be delayed again, killed, or reworked. Those who oppose the L.C.D.’s say they will unacceptably limit the number of products available and squelch innovation, potentially leading to more serious failures to heal and amputations. (More details here.)
Pressure sores
Most of the CareConnectMD patients were treated for pressure ulcers, like bedsores or pressure sores from staying in a wheelchair in one position, without movement. In these cases, if the patient remains seated in a wheelchair, the application of a skin substitute will not bring healing — the weight needs to be offloaded, they said.
Their patients are high-needs patients, they said. Two wound care companies in particular seemed to be problematic they said, but they declined to name names on the record.
“The nursing homes call in the wound care providers, and we don’t even know about it in many instances,” said Kim Phan, the C.E.O. “And they don’t coordinate with our doctors. And it’s almost like whoever they call in has a blank check to do what they want to do.
“I’ve been exposed to nursing homes for years. They get sued a lot for wound care issues. So instead of having their own wound care nurses, they tend to outsource it from a litigation perspective. That way, if there’s a lawsuit or something, it becomes somebody else’s problem, not theirs.”
Little documentation
Record-keeping is hard, McCormack and Phan said, because the wound care companies don’t tell the primary care provider — CareConnectMD — what they are doing. There is also a big issue with medical necessity, they said. The mobile wound care providers give little or no documentation. “We’ve tried to get the charts from the wound care companies because that’s the other thing — they don’t document well in the nursing home records,” McCormack said. “We’ve been unsuccessful in getting copies of complete charts to find out exactly what they’re doing. The one chart that we did get, we did do a review, and it was a one-time visit to a hospice patient that wasn’t necessary, and it was, I think, a $50,000 visit.”
When CareConnectMD talks with or meets with other A.C.O.’s, they said, they hear of similar problems, which led them to ask AccountableForHealth to help fight this problem. They said it particularly affects patients in congregate care at A.C.O.’s and at Medicare Shared Savings Program A.C.O. providers, another form of pay for performance care coordination.
“When we talked to C.M.S., they said, ‘Unless we can prove that it’s fraud, there’s nothing they can do,”‘ Phan said. “Everybody’s aware of the problem and the cost issue, but there’s not a lot of leadership around how to drive change.”
Addressing causes
Also, the less-than-diligent wound care mobile providers do not check the factors that might cause a wound — poor nutrition, poor circulation, and an inability to move, as in the wheelchair users who develop pressure wounds, CareConnectMD and others said. (See details here.) With those complicating factors, skin substitutes are unlikely to solve the problem.
“The nursing home offers a unique opportunity for our bad actors in wound care — open access, no need to collaborate with a [primary care provider], chart documentation requirements are minimal, etc.,” McCormack wrote in an email. “We don’t even know patients are being treated with skin substitutes until we receive our monthly” A.C.O. claims files from Medicare.
Could it be that the nursing facilities are being paid for referrals? The nursing facilities seem to have favored wound care providers, they said. There’s no evidence of payoffs, they said, but it is true that sometimes when they try to discontinue this practice, the directors of nursing get involved, which is unusual. They have also heard of wound care companies delivering additional supplies. Referral fees in healthcare are prohibited just about everywhere.
Prices of skin substitutes have gone up and up and up, partially owing to the fact that under the Average Sales Price pricing system, the sky’s the limit: Many of the earlier skin substitutes were priced around $125 a square centimeter, but newer entries to market are $2,500 to $3,000 a square centimeter and up.
Another group, the National Association of Accountable Care Organizations, a trade group for Medicare providers, said earlier that “some use of biological skin substitutes was abuse or potentially fraudulent,” in a statement made in the comment period for the Local Coverage Determinations for skin substitutes. (See details here.)
Possible cures
What might solve the problem, given that the manufacturers are seemingly playing by the rules, assigning themselves A.S.P. prices as C.M.S. allows, and there seem to be few limits on applications? (Generally for traditional Medicare patients, it seems Medicare will frequently pay for 12-14 weeks of skin substitute treatments even if no improvement is shown, industry figures said.)
Allen Bauzon, vice president of legal and compliance at CareConnectMD, pointed to Medicare’s actions to rein in bad behavior over catheters several years ago. In that case, Medicare imposed limits, citing “significant, anomalous, and highly suspect” billing activity on catheters from a few sources. The rule changes were prompted by a surge in billing for catheters, which A.C.O.’s and trade organizations pointed out to Medicare.
A New York Times story, “Staggering rise in catheter bills suggests Medicare scam,” said in part, “The massive uptick in billing for catheters included $2 billion charged by seven high-volume suppliers, according to that analysis, potentially accounting for nearly one-fifth of all Medicare spending on medical supplies in 2023. Doctors, state insurance departments and health care groups around the country said the spike … suggested a far-reaching Medicare scam.”
That C.M.S. action “details that two codes, both for different types of intermittent urinary catheters, can be deemed as highly suspect billing. The rule excludes payment amounts for these catheters,” Fierce Healthcare reported.
Bauzon said in the interview, “C.M.S., instead of a wholesale declaration of fraud, coined this word, S-A-H-S, suspected anomalous and highly suspect billings” for this category of catheters.
“That was a way for them to exclude those costs wholesale from the A.C.O.’s. That may be one of the solutions, but I think they’re being very careful about it.” This, he pointed out, would not require fraud declaration, but it would take account of what the CareConnectMd team called waste and abuse, even if it is not, strictly speaking, wholesale fraud by the Office of the Inspector General’s definition of “fraud, waste and abuse.”
The CareConnectMD officials and other sources agree that the money in the skin substitute and wound care market dwarfs the money in the catheter scandal.
Legitimate uses
McDermott said that is one possible course of action. But she also noted that there are legitimate uses of skin substitutes for wound care. In collecting information, discussing the topic and forming a response to advocate for, that’s been a key point.
“Where many of my member companies are in this journey is trying to figure out what is going on. Is that a new product has come on the market that’s more effective? Are other treatment options available, that physicians need to be educated? Or is it something more nefarious going on? And I think probably it’s a range of all of those things, and that makes it difficult to pick it apart,” she said.
“It raises the question, was that medically necessary and appropriate, or was it not? On its surface, it sounds like it’s not. But I’m not a doctor. I don’t know what that doctor was thinking when they did that. So I think where the catheter thing seemed very black and white, this problem is very much shades of gray.”
Are other members affected? She thinks yes. “You have some leading-edge who are digging into the data, who find things first. And then when it’s pointed out to the others, they find it. I imagine that will happen here as well. Or they may have found it and just not talked to me about it.”
How widespread is this? “My sense is that it’s a fairly widespread problem. I had mostly heard about this from the West Coast — Kim, who’s in California, and then we have another provider in Oregon. But I was with somebody from Texas, and he was like, ‘Oh, yeah, we have that problem really bad.’ “
“In Medicare Advantage, they have prior utilization management tools. Part of the promise of traditional Medicare is more open access to services. it feels very tricky to me in this specific instance, knowing what I know today, to figure out where to draw these lines in our advocacy.”
Overall, she said, “Just as a human being, it’s super upsetting. It’s terrible.”
Follow the money
CareConnectMD, based in Costa Mesa, Calif., describes itself as “a provider-enabling organization dedicated to caring for frail, elderly, and medically complex populations,” with 22 years of experience managing care for patients in long-term care. They are a multi-state Accountable Care Organization in the Realizing Equity, Access, and Community Health (REACH) Model. CareConnect MD is also a Medicare Shared Savings Provider, meaning they focus on the right care at the right time and can share in savings achieved with the government (also a performance payment). Their patients are high-needs, and the most medically complex Medicare beneficiaries. Most patients live in a nursing facility, and they are dually eligible.
Most of these patients are on traditional Medicare, and so prior authorization is not required (as it can often be in Medicare Advantage).
The Accountable Care Organizations contract with Medicare, Medicaid or private insurers to care for a large population of patients. They can earn bonuses for meeting cost and quality targets or, in some cases, suffer penalties if they don’t.
Traditional Medicare pays the wound care companies without question. Setting aside for a moment the large and troubling question of patient harm, where this hurts the A.C.O. financially is in the reconciliation process, McDermott said. When all the providers are paid for a patient, then the A.C.O. is accountable for the total spend against the agreed-upon benchmark. If the total spend goes up, there will be no shared savings, so — in addition to causing potential patient harm — the wound care issue blows a big hole in their bottom lines.
McDermott said: “What we started to loosely talk about was, ‘Could you put some limits on the A.C.O.’s financial exposure? Are there other ways to limit it? Because [Department of Justice] or [Office of the Inspector General] legal investigations are going to take years, and the A.C.O. financial reconciliation will happen before that is run to ground.”
Investigations
In a related development, industry figures said they had been hearing about audits and clawback attempts by authorities at doctors’ offices involved in wound care and skin substitutes. Details were sketchy, but there were reports from Florida, Montana and Texas.
One doctor said he had spoken again by Zoom to the Department of Justice, which is investigating the sector, and they asked him to be a consultant in their work. “I will do what I can to help them out,” he wrote in an email. He spoke on condition of anonymity to avoid affecting business relationships.
One industry insider, speaking on condition of anonymity, said the F.B.I. was raiding doctor’s offices. He declined to give any detail.
People who know I’m writing about this are sending in reports like this one: “I talked to a nurse yesterday who runs a hospice company and told me that one of the wound care mobile groups was talking patients into going off hospice so they could put a skin sub on the pressure ulcer. She’s had some sad cases in which the patient then died off of hospice (that’s a big mess because if they die at home off hospice you have to call the police to come investigate and it’s very traumatic for the family- if you die on hospice you just call the funeral home).”
Colorado patients
Rai, of ProHealthOne, based in Denver, said the wound care companies that sneak into nursing facilities apply the skin substitutes indiscriminately, on patients for which they are not appropriate.
“They prey on very vulnerable people,” he said. “Obviously, our population is already very fragile and vulnerable. They prey on hospice patients. They tell families in hospice care, ‘This product is going to take away your mom or your dad or your loved one’s pain.
“There’s absolutely no clinical evidence that these skin cells will take away pain. And so they prey on that vulnerable state that the patient and their families are in.
“These folks are just looking for patients with a wound and they’re just throwing them on there, very indiscriminately and very much not for the right reasons.
“Then you see the results, and you see some of these products costing a variable of an X amount one week and then getting bigger and bigger. Costs are going up and up. Whereas if they were actually working, they’d be going down.”
‘Very poor care’
Several patients, he said, left ProHealthOne’s care to go with the other, mobile wound care companies — but when their results weren’t good, or when Medicare stopped paying, they came back to ProHealthOne. Several, he said, returned to his care when they had serious infections brought on by poor care, or were on the brink of amputation — “they come back to us, and we wind up having to reverse the course of treatment — so it’s very poor care.”
He declined to name the companies on the record.
These companies are putting skin substitutes on inappropriately, he said. For example, a skin tear that he might treat with a $3 or $5 piece of a product called Xeroform — gauze with bismuth, with a high success rate — might get a $60,000 charge with a skin substitute oveer weeks and weeks.
There’s a lot of money at stake, he said: “Based on just the sheer volume of patients we have, if we wanted to, imagine products that are costing tens of thousands of dollars. If I even wanted to put them on 10% of my patients, you could retire off of that money. But we simply won’t do that. Our patient care comes first. We take a lot of pride in that, and we don’t affiliate with these companies.”
He first started seeing egregious behavior in 2021, he said, and it has grown much bigger. He said ProHealthOne gets calls almost daily from skin sub companies wanting to work with him.
Some of the skin substitute products are very useful under the right circumstances, he said, but ProHealthOne uses many other modalities first. He and his company tried them — “we had tried to get in on the sort of cutting edge of using these skin subs and saw some utility in some of the products that were out there. We pretty rarely use them nowadays.”
‘Very selective’
“It’s really not for every patient,” he added. “You have to be very selective where you use them. Clean wound beds, compliant — so many factors have to go into that selection of the patient. We’re very capable of using the skin subs. We just know that it’s a tremendous burden on the system to use products that cost tens of thousands of dollars, hundreds of thousands, and it’s not being a good steward of the healthcare system.”
Some limits need to be placed on this kind of wound care, he said: “There need to be really concrete parameters on when these products can and should be used. I almost feel like they should not be used in the nursing home environment, unless some parameters are set around that.”
In hospitals, for example, he said it’s unlikely that some random person could come in and apply a skin substitute. But congregate care is a less controlled environment. “The skilled nursing facility, the assisted living, the independent living, the home, where no one’s really watching what they’re doing — I feel like maybe it’s the wrong place for it, at least for right now. Until they get some better parameters and regulations on whom and when to use.”
Is what is happening here fraud? “It is,” he said. “Unequivocal. Unequivocal.”
He has discussed some of this behavior with the Office of the Inspector General, he said: “And I have no hesitation in doing that again, if I see it again. So, yeah, it’s blatant fraud.”
If so, why hasn’t anyone been charged besides the Arizona couple who made a guilty plea in 2024 to illegal activity as a result of an investigation? “Maybe they found, documentation-wise, that at least if they can document the way that the government has put some regulations on it, they’re starting to do that,” he said of the mobile companies he knows.
“They’ll tell their nurse practitioners, ‘Document this. As long as you do this, we’ll make sure that it gets covered.’ So I think that’s probably at least buying them some time right now. But you would think when products are costing that much, and they’re going in the wrong direction, meaning they’re getting more and more expensive, that should be a red flag, right?
“You have requirements, when things are not getting better, you’re obligated to make a change.
“If it’s not working after two weeks, you’re required to make a fundamental change in how you’re doing things. Meaning, maybe it’s infected. Maybe the product just doesn’t work. Maybe there’s a compliance issue.”
Is this malpractice, at least in some cases? “It’s just an overuse or misuse. I don’t know what the right word is for it, but they’re applying these products in ways that they should not be used.”
But is it malpractice? “Yeah. It is. It is. Some of the stuff,” he said. “Let me put that into context though. Not in the sense when you’re using it in the right scenario. When you go through wound care, you learn how and when to use certain things. And there is a how and a when to use these skin subs. You’re doing it following those guidelines. That’s awesome. Good. And that’s not malpractice, obviously.
“But when you’re putting them on skin tears — there’s that ethical portion of malpractice that you have to follow as well, right? Do what’s right for the patient. Do no harm to the patient.”
Also, the wound care providers are not always charging patients co-pays, we have heard. Isn’t that illegal? “You have contracts with insurance companies. If you’re getting paid by those insurance companies, you are supposed to send a bill for what’s not covered by the insurance companies to the patient.
“None of these companies are sending bills to the patient. They’re taking what they can from the insurance companies. Maybe they’re collecting from their secondary. I don’t know. But nobody today has ever gotten a bill from these companies. You’re violating your agreement with the insurance company.”
People are wondering, how does this square with the DOGE mission in the Trump administration of stamping out fraud and waste, if the proposed regulations are stalled or discarded? “It’s a good question,” he said. “That’s coming up in April. I’ll be curious to see what steps they take next.”
What else could be said or done that would make any difference in this less-than-ideal situation? He said he had spoken with Dr. Danielle Whitacre of Bloom Healthcare, a Denver area A.C.O. that also has noticed bad behavior in wound care, to do a webinar so “that people are aware that there are some ill-intended companies out there that are preying on their facilities.” (Here’s our story about Whitacre and Bloom.)
Rosy sales pitches
Meanwhile, the sales pitches to providers go on, with glowing promises. One that was sent to me by a person who had seen it on a forwarded email reads:
“Dear [redacted]
“I’ve prepared a short overview illustrating exactly how you could incorporate budget-friendly biologics at [practice name redacted] while keeping healthy profit margins.
“This is the same approach that’s allowing other podiatrists to achieve over fifteen thousand dollars in monthly income.
“Is it okay if I provide it with you?”
“Thanks.”
Do you have things to tell us about the wound care or skin substitute industry? Reach Jeanne Pinder at email jeanne@clearhealthcosts.com or encrypted Signal at 914-450-9499.
Posts in this series:
Wound care and skin substitutes: Rising costs, new policies and a whiff of scandal
Skin substitutes and possible danger: Is patient harm happening in wound care?
Federal investigators probe wound care industry
Trump makes social media post disparaging proposed wound-care rules, setting off speculation
Care groups raise concerns about ‘heartbreaking’ wound care practices
