Over the past three months, the U.S. Department of Justice has brought several criminal and civil False Claims Act (FCA) enforcement actions against wound-care providers and suppliers as part of its continued efforts to combat fraud in the industry. Some of those matters involved conventional healthcare fraud allegations such as billing for medically unnecessary procedures or misrepresenting the amount of skin-substitute product used to increase reimbursement.
However, two more recent matters — United States v. McMillan (N.D. Tex.) and United States v. Cherny, et al. (S.D. Iowa) — suggest DOJ is expanding its wound-care-enforcement focus to include alleged misrepresentations about the acquisition cost of skin-substitute products used on patients, even where the medical necessity of those products does not appear to be in dispute.
This GT Alert highlights recent enforcement activity and discusses billing practices, product-use documentation, pricing representations, and compliance controls for healthcare providers and suppliers, including in connection with the year-end deadline for submitting any remaining Medicare wound-care claims under the prior reimbursement methodology.
Medicare’s Reimbursement Shift for Certain Wound-Care Products
The wound-care products currently under government scrutiny are skin substitutes—human cell, tissue, and cellular- and-tissue-based products used to promote the healing of skin wounds. Before Jan. 1, 2026, Medicare generally reimbursed providers for skin substitutes based on pricing documentation provided by manufacturers and distributors regarding the amounts they charged providers for those products. Under that pre-2026 pricing methodology, reimbursement rates varied widely among skin-substitute products, with Medicare reimbursing some products at more than $2,000 per square centimeter. Medicare’s annual spending on skin substitutes rose accordingly, from approximately $256 million in 2019 to more than $14 billion by 2025.
The Department of Health and Human Services, Office of Inspector General (HHS-OIG), addressed those spending trends in a September 2025 report that identified concerns with Medicare’s reimbursement of skin substitutes, including:
- The increase in the number of enrollees with skin-substitute claims;
- The amount of product billed for each enrollee, particularly in home care; and
- Financial incentives created when Medicare reimbursement for certain skin-substitute products exceeded their purchase price, allowing providers to keep the “spread.”
The Centers for Medicare & Medicaid Services (CMS) responded by adopting a flat national reimbursement rate of $127.14 per square centimeter for most skin-substitute products, effective Jan. 1, 2026. However, CMS’s standard timely-filing rule still permits providers to submit pre-2026 skin-substitute claims within 12 calendar months of the date of service and receive payment under the prior reimbursement methodology.
As a result, while the new 2026 reimbursement rate will undoubtedly reduce Medicare spending on skin-substitute products going forward, it is unlikely to end government scrutiny of this area—especially for claims submitted under the prior, higher-reimbursement methodology.
DOJ’s Emerging Focus on Acquisition-Cost Representations
On June 23, 2026, DOJ and HHS-OIG announced the 2026 National Health Care Fraud Takedown, in which 455 defendants were charged in connection with more than $6.5 billion in alleged fraud. The press release prominently identified alleged fraudulent skin-substitute schemes, including charges against 11 defendants across six districts. DOJ also stated that its data analytics team played a key role in detecting payment spikes for skin substitutes that led to certain prosecutions. Most of those matters involved allegations of billing for medically unnecessary skin substitutes or billing for products that were not provided.
The two recently filed cases mentioned above—McMillan and Cherny—stand out because they did not focus on alleged medical necessity issues. Instead, those matters (one criminal and the other civil) centered on allegedly false representations to Medicare about providers’ purchase prices for the products and, in one case, alleged pre-arranged agreements between providers and suppliers to share Medicare reimbursement.
In McMillan, the owner of several skin-substitute companies was criminally charged in connection with an alleged seven-year, multi-state healthcare fraud and kickback scheme involving approximately $268 million in government payments and approximately $94 million in alleged kickbacks to providers. The defendant allegedly recruited providers to participate in a profit-split arrangement under which his companies invoiced providers for approximately 60% to 70% of the Medicare reimbursement, while providers retained the balance in a manner similar to an undisclosed rebate. The defendant and his companies also allegedly assisted providers with billing for the products and submitted, or caused providers to submit, prices to Medicare that they allegedly knew did not reflect the actual price of the skin substitutes they purchased from the defendant and his companies.
In Cherny, DOJ brought a civil FCA case against a physician and his practice for allegedly providing false information to Medicare about the amounts paid for skin substitutes used to treat patients. The government alleged that the defendants obtained two invoices from a supplier for each product purchased: one invoice reflecting an inflated purchase price that defendants submitted in response to Medicare documentation requests, and a second invoice reflecting the substantially lower price the defendants actually paid the supplier. Relying on those allegedly false representations, the government alleged that Medicare paid the defendants more than $2 million for skin substitutes to which they were not entitled.
Key Takeaways Heading Into Year-End 2026
Federal review of wound-care claims — including increased reliance on data analytics as an investigative tool — is likely to continue. To help mitigate risk during this period of heightened federal scrutiny, healthcare providers and suppliers using skin substitute products may wish to consider the following steps, particularly for any remaining claims seeking reimbursement under the pre-2026 pricing methodology:
- Selecting skin substitute products with documented clinical effectiveness though randomized human clinical trials;
- Documenting the sale, purchase, and pricing of skin substitutes comprehensively, including communications regarding rebates, volume discounts, or other alternative pricing arrangements;
- Maintaining thorough medical records supporting the application and use of skin substitutes, such as failed prior conservative wound-treatment efforts, management of comorbidities, and clinical rationale for using the product;
- Confirming billing accuracy for each claim, including the amount and size of product used, applicable modifiers, and maintain consistency between invoices, medical records, and reimbursement submissions;
- Where available, participating in CMS’s Wasteful and Inappropriate Service Reduction (WISeR) Model for Medicare pre-claim approval for the use of skin-substitute products; and
- Engaging counsel promptly after receiving a CMS audit letter or overpayment demand to identify documentation or coding gaps, develop claim-specific support, and preserve appeal rights.