The Office of the Inspector General (OIG) Continues to Make an Impact Targeting Skin Substitutes
Key Takeaways
Medicare Part B spent $10B+ on skin substitutes in 2024, raising major compliance concerns.
OIG investigations uncovered fraud risks, including excessive billing, improper specialties, and inflated claims.
Coders must ensure documentation accuracy to support medical necessity, wound size, and appropriate use.
Between 2020 and 2024 the OIG shows expected recoveries of $22 Billion, 11,515 provider exclusions, and 7,083 Enforcement Actions. Medicare Advantage programs cover 54% of Medicare beneficiaries, with an estimated $462 billion in expenditures. Since 2019 there have been 41 audits of risk adjustment payments with $800 million in overpayments recouped. An additional $7.5 billion in questionable risk adjustment payments to Medicare advantage organizations were identified for 2023 (a single year). The big story is Medicare Part B paid more than $10 billion for skin substitutes in 2024, meaning these products accounted for over 15 percent of the $66 billion the program spent on all Part B drugs that year. OIG has worked closely with the Department of Justice to uncover numerous fraud schemes related to inappropriate billing for skin substitutes, including one that resulted in over $1 billion in restitution.
By year end in 2024 the expenditures for skin substitutes in a non-institutional setting have surpassed $10 billion dollars. The OIG had highlighted concerns regarding the amount of product billed for each enrollee, especially in the home care setting. The OIG indicates the large mark up for skin substitutes creates an incentive to bill for an increasing number of units of the highest priced skin substitutes.
OIG investigations have identified several concerning characteristics associated with skin substitute billing such as the following:
· New providers (i.e., those who recently received a national provider identifier) for whom almost 100 percent of their claims are for skin substitutes with no other associated wound care management.
· Providers who are submitting multiple skin substitute claims for a single date of service to circumvent Medicare claims processing systems that reject any claim above $99,999.99.
· The use of skin substitutes for non-approved conditions (e.g., minor scrapes or blisters) or with an excessive quantity for the given condition (e.g., total body surface treatments).
· The consistent use of skin substitutes during enrollees’ first visit without attempting prior conservative treatments.
· Provider specialties that seem out of scope for the treatment (e.g., a neurologist or psychiatrist billing for skin substitutes).
Part B spending trends raise serious concerns, including:
(1) large increases in the number of enrollees with skin substitute claims and the amount of product administered to each enrollee;
(2) a massive gap in spending between Part B and Medicare Advantage;
(3) a steep rise in the cost of individual skin substitutes; and
(4) potential fraudulent schemes that allow criminals to quickly get paid millions of dollars with just a small number of Part B enrollees.
This substantial increase in spending, utilization, and possible fraud is being driven by several factors related to the ASP payment methodology and its intersection with characteristics of the skin substitute market:
• The relatively simpler pathway for bringing new skin substitutes to the market compared to the typical products (i.e., prescription drugs and biologics) paid under the ASP-based methodology.
• The use of WAC/invoices to set payment during the initial quarters after a new skin substitute reaches the market, often creating hundreds of dollars per unit in spread.
• The two-quarter lag allowing providers to maintain spread when manufacturers reduce prices once ASPs are available to set payment.
• The 6-percent add-on to ASP creating incentives to use higher-cost products.
https://oig.hhs.gov/documents/evaluation/10939/OEI-BL-24-00420.pdf
Coders submitting bills for skin substitutes in any setting should make sure the math is correct on the bill and represents the size of the wound covered and the amount of skin substitute used. Documentation must be specific to the type, size and depth of the wound under scrutiny. Is the skin substitute appropriate to be applied in a setting outside the operating room? Does the clinical record support attempts to heal the open wound prior to the need to utilize a skin substitute?
Current trends push for shorter inpatient stays and better home care for all patients. The place of service for home based care is not the issue as long as the person applying the skin substitute has the clinical training to do so, and the procedure for application does not require a procedure room, OR suite or anesthesia. Coders may raise concerns to supervisors if the documentation does not support the correct site, size, provider (specialty) or type of skin substitute.
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