OIG Calls for Urgent “Skin Substitute” Payment Reform Based on Analysis of Medicare Data

The Office of the Inspector General (OIG) has just released a report on Medicare claims for “Skin Substitutes”. OIG analyzed Medicare Part B claims data, Medicare Advantage claims data, and manufacturer-reported sales data for skin substitutes in 2023 and 2024.

According to the report, in 2024, skin substitutes accounted for over 15% of the $66 billion that Medicare spent on all Part B drugs. The 28% of patients treated in the home setting accounted for >50% of spending on skin substitutes. Among new providers (i.e., those who recently received a national provider identifier), almost 100% of claims are for skin substitute procedures with no other associated wound care management. Data shows that skin substitutes are being applied at the first visit and for conditions like scrapes and blisters. The OIG concludes that the current ASP-based methodology creates perverse incentives for the use of these products and that without payment reform, Medicare Part B spending on skin substitutes is both unsustainable and vulnerable to fraud. Make sure to read the entire report.

Key Findings of the OIG report

• Explosive Spending Growth
  • Part B expenditures for skin substitutes rose from ~$400 million to nearly $3 billion per quarter between 2023–2024.
  • Annual spending exceeded $10 billion in 2024, making up over 15% of all Part B drug costs.
• Utilization and Spending Increases
  • 53% more enrollees had skin substitute claims.
  • 83% more units billed per enrollee.
  • Average cost per unit increased 153%.
• Medicare Advantage (MA) vs Part B Spending
  • MA spending was just 7% of Part B spending in Q3 2024.
  • MA patients received fewer units and lower-cost products, reflecting tighter utilization controls.
• Home Care Concerns
  • By Q3 2024, 28% of patients treated at home accounted for >50% of spending.
  • Average home-care cost per enrollee was 4x higher than in physician offices.
• Product choice may be price driven
  • Product billing appears to be driven by Average Sales Price (ASP) reporting lags, Wholesale Acquisition Cost (WAC) pricing, and manufacturer pricing strategies.
• Fraud & Abuse Risks
  • OIG identified questionable billing patterns:
    • New providers are billing almost exclusively for skin substitutes.
    • Multiple claims per day to bypass claim caps.