Medicare Audits Targeting Wound Grafts and Skin Substitutes
Skin substitute grafts, cellular- and tissue-based, can be an essential form of care for patients undergoing eye surgeries, burn treatment, ulcer treatment, and other procedures. However, they have come under scrutiny in recent years. With a Biden-era plan intended to restrict Medicare coverage for wound grafts—and skin substitutes in particular—set to take effect this year, Medicare billings for wound grafts are already under the microscope.
President Trump has criticized the Biden-era plan, and it currently is not clear whether the Trump administration will allow the plan to go into effect. Either way, healthcare providers that bill Medicare for skin grafts will remain at risk of facing scrutiny—and they will need to be prepared to defend against this scrutiny when necessary.
Medicare Coverage for Wound Graft Procedures and Skin Substitutes: An Overview
Medicare currently provides coverage for wound graft procedures and planned skin replacement using skin substitutes in a wide range of cases, including those involving the use of a firm strength compression garment as part of the treatment plan. As the U.S. Department of Health and Human Services’ Office of Inspector General (DHHS OIG) explains:
“Skin substitutes help aid in wound healing and redevelopment of skin. Medicare covers skin substitutes that are reasonable and necessary for the treatment of an enrollee’s condition. Local coverage determinations state that Medicare Part B generally covers skin substitutes for treatment of diabetic foot ulcers and venous leg ulcers that have failed to respond to at least 4 weeks of standard wound care. However, no national or local coverage requirements apply for other wound types (e.g., pressure ulcers or trauma wounds), and coverage of skin substitutes for these wounds is determined on a case-by-case basis.”
Additionally, on April 11, 2025, the Centers for Medicare and Medicaid Services (CMS) published an article which states, “CMS believes it is important to maintain patient access to skin substitute products with high quality evidence of effectiveness.”
At the same time, however, both the DHHS OIG and CMS have raised concerns about the cost of wound graft procedures—and the use of skin substitutes in particular. For example, as the DHHS OIG notes, Medicare Part B covers skin substitutes billed at “approximately $100 to more than $1,000 per square centimeter,” and “Medicare Part B payments for skin substitutes have increased substantially” since 2020.
In light of these concerns, the DHHS OIG has also recently stated:
“We will review Medicare Part B claims for skin substitutes to identify payments that were at risk for noncompliance with Medicare requirements.”
Given that this is the case, Medicare-participating healthcare providers that bill for wound graft procedures, skin substitutes, and other forms of advanced therapy and care need to prioritize billing compliance. This includes not only ensuring that their Medicare billings comply with applicable local coverage determinations (LCDs) or satisfy Medicare’s medical necessity requirement on a case-by-case basis, but also that they are prepared to affirmatively demonstrate compliance during a Medicare audit if necessary.
Medicare Audits Targeting Wound Grafts and Skin Substitutes Can Present Multiple Risks
Crucially, while billing compliance is one concern when facing a Medicare audit targeting billings for wound grafts or skin substitutes, this is not the only concern that healthcare providers need to address. To mitigate their risk of facing scrutiny from CMS auditors, unified program integrity contractors, or the DHHS OIG, healthcare providers must address concerns including (but not limited to):
- Compliance with Applicable LCDs – When billing Medicare for wound grafts and skin substitutes for patients diagnosed with diabetic foot ulcers (DFUs), venous stasis ulcers (VSUs), and venous leg ulcers (VLUs), healthcare providers must comply with the applicable LCDs, including requirements for continuous compression therapy when treating VLUs. Given the current focus on skin substitutes, healthcare providers should monitor for new LCDs as well.
- Medical Necessity of Wound Graft Procedures – Regardless of whether an LCD applies, Medicare only covers procedures that qualify as “medically necessary,” as defined by the Medicare billing regulations, and excludes those performed during an active infection unless properly justified. If a wound graft procedure is not medically necessary—or if a healthcare provider has not adequately documented medical necessity—this can create significant risks in the event of a Medicare audit.
- Medical Necessity of Skin Substitutes – Similarly, even if a wound graft procedure is medically necessary, this doesn’t necessarily mean that use of a skin substitute is warranted. Healthcare providers must separately address the medical necessity of skin substitutes—and, here too, thorough documentation, including prior ulcer evaluation, is essential.
- Unbundling, Upcoding, and Other Common Billing Errors – Setting aside concerns specific to wound grafts and skin substitutes, healthcare providers also need to be careful to avoid common billing errors such as unbundling and upcoding. These errors can trigger scrutiny from CMS auditors; and, once an audit is underway, missing documentation–such as weekly SOC ulcer measurements–can come to light.
- Illegal Kickbacks and Referral Fees – Due to the high price of amniotic tissue products and other skin substitutes, CMS has raised particular concerns about illegal kickbacks and referral fees. If healthcare providers receive compensation for recommending high-price skin substitutes, they can face civil—or even criminal—penalties under the Anti-Kickback Statute.
Again, these are just examples. When facing Medicare audits, healthcare providers must be prepared to defend against all potential allegations—and this requires a comprehensive and custom-tailored approach to Medicare billing and Anti-Kickback Statute compliance.
What Healthcare Providers Can (and Should) Do to Protect Themselves
With all of this in mind, what can (and should) healthcare providers do to protect themselves going forward if they bill Medicare for wound grafts and skin substitutes? Here are some key risk mitigation strategies:
Review Past Medicare Billings for Wound Grafts and Skin Substitutes
With CMS and the DHHS OIG focusing on compliance in this area, healthcare providers should work with their counsel to review their past Medicare billings for wound graft procedures and skin substitutes, including any documentation addressing communicable disease risk. This needs to be an unbiased review focused on assessing risk, including completeness and accuracy of the medical records—not attempting to justify past Medicare billings. If this review uncovers any compliance-related concerns involving tissue-based products or any other issues, healthcare providers should work with their counsel to determine what remedial steps are necessary.
Review Current Medicare Billing Compliance Policies, Procedures, and Protocols
Along with reviewing their historical billing records, healthcare providers should also review their current Medicare billing compliance policies, procedures, and protocols as they relate to tissue-based products and other key areas of compliance. When conducting audits, Medicare Administrative Contractors and other auditors expect to see that healthcare providers are taking affirmative steps to comply with all applicable Medicare billing guidelines. As a result, if a healthcare provider’s compliance program is deficient, this alone can be enough to trigger further scrutiny of the provider’s Medicare billings.
Ensure Adequate Documentation of Medical Necessity
Along with maintaining robust and up-to-date compliance programs, healthcare providers also need to ensure that they generate and store adequate documentation of medical necessity, including records from any previous ulcer evaluations. While this applies across the board, it is especially important in high-risk areas. With CMS and the DHHS OIG focusing on wound grafts and skin substitutes, healthcare providers need to focus on ensuring that they thoroughly document patients’ need for these high-cost procedures and materials.
Conduct Periodic Internal Medicare Billing Compliance Assessments
Even when healthcare providers have effective compliance programs in place, their personnel still can—and inevitably will—make mistakes. Of course, mistakes can also occur due to inadequate control over internal billing practices. With this in mind, all healthcare providers need to monitor for Medicare billing compliance (and compliance failures) on an ongoing basis.
This involves conducting periodic internal Medicare billing compliance assessments. Healthcare providers should document these assessments as well; and, if an assessment uncovers a billing-related issue–such as claims tied to unsuccessful treatment without proper justification–they should take remedial action promptly. What this entails will depend on the specific circumstances involved, and healthcare providers should ensure that they are making informed decisions based on the advice of legal counsel and a critical review of each patient’s clinical history.
Ensure that Financial Arrangements with Skin Substitute Manufacturers Comply with the Anti-Kickback Statute
Healthcare providers that bill Medicare for wound grafts and skin substitutes should also ensure that their financial arrangements with manufacturers (and other third parties) comply with the Anti-Kickback Statute, particularly when a skin substitute’s commercial availability may influence product selection. If they don’t, this will require prompt action as well. While the Anti-Kickback Statute’s prohibitions are subject to various “safe harbors,” healthcare providers must structure their financial relationships to meet a specific safe harbor’s requirements–especially in cases where manufacturers self-determine pricing or reimbursement terms for their products.
What If It is Too Late to Avoid a Medicare Audit?
Now, what do you need to know if your practice is already facing a Medicare audit related to its wound graft or skin substitute Medicare billings?
If your healthcare practice is facing a Medicare audit, including (but not limited to) one initiated by a Supplemental Medical Review Contractor, time is of the essence. To avoid unnecessary consequences, your practice will need to present a proactive and effective defense. You will also need to know what (if anything) auditors are going to find—and you will need to be prepared to respond appropriately.
At Oberheiden P.C., we assist healthcare providers with Medicare billing compliance and Medicare claims defense. Regardless of the circumstances, we can use our experience to help mitigate your medical practice’s risk and maintain long-term Medicare billing compliance. Our team includes highly experienced lawyers and consultants, and we are able to provide representation on an emergency basis when necessary.
Request a Confidential Consultation with a Senior Medicare Compliance and Defense Attorney at Oberheiden P.C.
If you need to know more about the risks related to billing Medicare for wound grafts and skin substitutes, we invite you to get in touch. To request a confidential consultation with a senior Medicare compliance and defense attorney at Oberheiden P.C., give us a call at 888-680-1745 or tell us how we can get in touch online today.
