Peeling Back the Layer of Skin Substitutes
Background
A skin substitute is a material used to replace or support damaged skin tissue. Skin substitutes may be allogeneic, xenogeneic, synthetic or a combination of these types of materials. When used appropriately, they can aid in healing chronic wounds and reduce complications.
Billing Codes
HCPCS Q codes for skin substitutes and biologicals are within the code range of Q4100-Q4367. Skin substitutes are billed per square centimeter. The April 2025 Medicare Part B Drug Average Sales Pricing shows reimbursement can reach several thousands of dollars per square centimeter billed. The significant reimbursement rates, combined with newly discovered kickback schemes, make skin substitute claims susceptible to fraud, waste, and abuse.
Growth in Spending
Healthcare costs for skin substitutes have surged, particularly those made from human amniotic membrane. The Medicare Payment Advisory Commission reported from 2021 to 2022, Medicare spending on skin substitutes rose by 52%, from $1 billion to $1.6 billion. This growth continued in 2023, reaching $4.4 billion. Notably, $1.4 billion was spent on a single skin substitute product, Dual Layer Impax Membrane [code Q4262], making it the third most costly Part B drug that year. Estimates suggest Medicare spent more than $10 billion on skin substitutes in 2024.
Recent Fraud Schemes
In February 2025, an Arizona couple pleaded guilty to submitting over $1.2 billion of false and fraudulent claims to Medicare and other health insurance programs for unnecessary wound grafts applied to elderly and terminally ill patients.
In June 2024, the Department of Justice announced charges against 193 defendants for over $2.75 billion in false claims, including $900 million for fraudulent amniotic wound grafts for terminally ill patients and over $330 million in kickbacks in exchange for purchasing grafts.
In April 2023, Dr. Joel Aronowitz; Daniel Aronowitz; and others agreed to pay $23.9 million for false claims of skin substitutes billed with inaccurate place of service, billed as performed by both facility and physician; and billed for unused portions of skin substitutes retained for other patients.
How Health Plans Can Mitigate Losses
Conducting proactive reviews of a provider’s use of costly skin substitutes can significantly help health plans mitigate long-term losses. By examining a provider’s history of claims, health plans can identify and address areas of overutilization and non-compliance. Areas of review include:
- Skin substitutes used in ways not FDA approved
- High claims volume with modifier JW, indicating waste
- Extensive use of costly skin substitutes without evidence of prior conservative treatment
- High utilization of expensive skin substitutes for patients in hospice or skilled nursing facilities
- Lack of recent evaluation and management by a primary care provider
- High utilization of skin substitutes for a single patient over an extensive period
How Fraud Scope Can Assist in Detection of Unusual Billing Practices
Fraud Scope’s pattern-based detection models, such as Suspicious Trends and Outlier Abuse, can detect outlier utilization based on units of service, services per day, and high patient volume. The detection models, AI analysis, and charting options across the line-level details allow the user to assess the provider’s billing patterns and identify potential fraud, waste, and abuse.
Fraud Scope’s Query Builder applies healthcare intelligence at the line, claim, or aggregate levels. Users can define criteria specific to their scope of focus.
- Providers with outlier utilization of skin substitutes compared to their peers
- Higher paid per patient values by skin substitute codes compared to all peers
- Skin substitutes provided to patients without qualifying diagnoses
- Higher paid per patient values for skin substitute codes billed with modifier JW
Fraud Scope’s Association Graph identifies relationships between providers using common addresses or common patients. When a user identifies a provider offering excessive services, it might be useful to check if this provider shares a high volume of patients with other providers, as this could suggest patient sharing or kickbacks. Additionally, if the provider shares an address with other providers, it could indicate potential patient sharing or split billing.
References:
Centers for Medicare and Medicaid Services, Part B Drug Pricing
MEDPAC spending report
https://www.medpac.gov/wp-content/uploads/2024/09/09062024_2025_PFS_MedPAC_comment_SEC.pdf
Department of Justice, Press Releases
Arizona Couple Pleads Guilty to $1.2B Health Care Fraud
National Health Care Fraud Enforcement Action Results in 193
Beverly Hills Plastic Surgeon Agrees to Pay Nearly $24 Million to
Food and Drug Administration – Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use