Skin Substitutes Provide Example of ACOs’ Role in Identifying Fraud, Waste, and Abuse

In October the National Association of ACOs (NAACOS) and the Institute for Accountable Care published research showing that spending on skin substitute products for wound care is projected to reach $15.4 billion by the end of 2025, a 55% increase over 2024 spending. In response to outcry from NAACOS members and other organizations and a New York Times investigation, the Centers for Medicare & Medicaid Services (CMS) has finalized new rules for skin substitutes, with major changes set to take effect on Jan. 1, 2026.

Will Robinson, senior vice president of accountable care at HarmonyCares, recently co-authored a piece in Health Affairs exploring how ACOs can play a pivotal role in stemming fraud, waste and abuse in wound care. He gave an impassioned talk about the subject at the recent NAACOS conference and spoke to Healthcare Innovation on the topic in depth this week. 

Troy, Mich.-based HarmonyCares is a provider of home-based primary care services for complex patients and it participates in both the Medicare Shared Savings Program and ACO REACH. I interviewed Michael Millie, M.D., M.B.A., the company’s chief medical officer, in September 2024. 

Before joining HarmonyCares, Robinson had worked for over six years at CMS, including as acting deputy director in the Division of Outpatient Care. 

NAACOS notes that since 2023, 102 new skin substitute products have entered the market, including more than 50 in 2025 alone. The average sales price varies, but 69 products cost more than $1,000 per square centimeter, and some cost up to almost $6,000 per square centimeter. Without the new products, spending from 2022 through July 2025 would have been reduced by more than 70%.  

Healthcare Innovation: I was watching your panel session at the NAACOS meeting. You called the skin substitute issue the worst thing in American medicine today. You said that it's hard to overstate how messed up this is. For readers who might be unaware of how bad this situation is, can you give a little primer on how we got here? Is there a lack of evidence for the efficacy of many of these products, and if so, how did Medicare start agreeing to pay for them in the first place? How did we get into this situation?

Robinson: To be clear, delivering high-quality, evidence-based care for patients with wounds is critical, and skin substitutes may be appropriate for some patients. But Medicare has had both a payment and a coverage problem for these products. On payment, Medicare has paid for them like physician-administered drugs and biologics, even though most of the products are not regulated that way. As a result it led to explosive growth in product launch prices, total Medicare spending, and incentives for providers on the ground to use the highest-cost products. And patients and Medicare are paying the price. We see this with our vulnerable patients, some of whom have had multiple millions of dollars worth of skin substitutes applied with at best suspect clinical benefit. 

I don't work for the FDA and I am not a Ph.D., but there are some things that I can say about the way that the products are regulated, and people can draw their own conclusions. A lot of these products are brought to market under what is called the human tissue pathway. To bring a product to market under that pathway, you don't need any clinical evidence. When I take a drug and it is prescribed by my physician, I am under the impression that the FDA has evaluated that product for clinical efficacy, and that it has done so in a way that is valid and legitimate, so that there is some assessment of the safety and efficacy. That is not the case for these human tissue products, and the barrier to entry to bring them to market is essentially a registration with the FDA. And if most of these products are not drugs or biologics, and there are less restrictive barriers to entry, why are we paying for them that way?

CMS administrative contractors did an analysis of the clinical evidence that these products have, and they found that very few of them had any legitimate clinical evidence.

HCI: But initially did CMS make a decision to pay for these? 

Robinson: What actually happened was the absence of a decision. What tends to happen is that for products where there is no local or national coverage determination, which is essentially no coverage policy from the government, then there is a sort of presumed amount of coverage. And over the course of years, the combination of that lack of coverage policy and this frankly ridiculous payment policy worked together to create a situation where wound-care providers on the ground are heavily incentivized to use products that are wildly expensive and have little to no clinical evidence.

HCI: They’re incentivized because they get reimbursed with a percentage of the billed amount? 

Robinson: Yes, it’s what's called the “buy and bill” payment system. This is the way that that all physician-administered drugs work for things like chemotherapy, ophthalmology, rheumatoid arthritis, and MS. There are drugs and also skin substitutes where the clinicians are buying the product, probably from a wholesaler or directly from the manufacturer, and then billing the Medicare program when they are used. And they are pocketing the difference between what they're able to buy it for and what Medicare will pay.

HCI: So in many of those cases, they're incentivized, in a way, to use the most expensive drug, not the most efficacious? 

Robinson: Without question. And the low barriers to entry, particularly with these human tissue products, created a cycle of product creation and high prices at launch, where the manufacturers could buy market share from from each other. I will give you an example: if the clinicians are incentivized to use a really expensive product, and you have a current product where you can bill a Medicare program for $1,000 and you're buying it for, say, $500 and then a new product comes out, and you can bill a Medicare program $4,500 and you buy it for $2,000, which product are you going to use? There's no clinical evidence on either of them. When you think about it, it is insane.

HCI: Were the ACOs among the first to call attention to the scope of the problem, because all of a sudden it was impacting their results with their patients?

Robinson: Yes, most ACOs are monitoring claims data as it's coming in. At HarmonyCares, we are treating exclusively very complex patients in their home who have a high degree of chronic illness and a high likelihood of developing wounds, because the severity of their illness makes them more susceptible to them clinically. Groups like ours saw this coming years ago, and have been following the increase in utilization of high-cost products. This has also drawn a lot of providers into this market because they want to make a million dollars and retire next year, so they just jump in. It is a horrifically bad situation, which is why CMS took action to address the problem going forward starting in 2026.

HCI: Could you talk about the data analytics and care management strategies that ACOs use to detect suspicious trends like this?

Robinson: On the analytics side, we are constantly evaluating our claims for trends that indicate something looks pretty out of whack. We saw this in the data and said, hold on, there's this product class that continues to grow. Does this make sense? Is this a sign of actually people getting better care? 

ACOs, including us, have layered in additional care management techniques to try to make sure that the patients who have wounds get to the right care at the right time, and try to prevent those wounds from deteriorating to becoming severe. Typically, these products are only used as second- or third-line treatments, but there are a lot of sketchy providers who are using them as first-line treatment. The only thing they do is skin substitutes, but they're supposed to be used after standard wound care has been tried, and a lot of wound care is about things like improving vascularization and addressing the underlying causes of why somebody developed a wound in the first place.

From a care management perspective, what we did was try to ensure that people are getting the right care and getting to the right providers in the market, and not the ones that we have identified as potentially fraudulent or abusive. 

Also, these products are covered under Medicare Part B. The reason why that's important is that there's a 20% cost sharing associated with the payment for the service, so Medicare pays 80% and then the patient, or the supplemental coverage, pays the remainder. Most beneficiaries have a form of supplemental but if you get $1 million in skin substitutes, where is the $200,000-plus money going to come from? A lot of these organizations are just waiving the cost sharing as a matter of policy, which is not allowed. That is a beneficiary inducement that is illegal. But it happens because the cost sharing is so egregious. 

HCI: Are there policy levers that would support the ACOs while protecting them at the same time —like stop-loss protections and rapid reporting channels?

Robinson: I think both of those things would be great. We think CMS should be applauded for what they did in the 2026 rule and beyond. The rule takes that crazy payment system and just says, we're going to pay $127 per square centimeter, period. That's it. There was a product in the October payment file from CMS that was paid at $5,800 per square centimeter with zero clinical evidence. So the change from what was happening to what will happen starting in 2026 is fantastic. 

There's the question of what sort of support should ACOs be given going forward to help identify this stuff — things like rapid reporting channels. CMS should definitely create pathways to try to identify and stop this kind of waste, fraud and abuse, in partnership with ACOs on a go-forward basis, and I think they are thinking about that now, and it will be really good to see what they come up with.

Looking back at this year, there also is a question about the high-needs ACOs, which are way overexposed to the waste, fraud and abuse in skin substitutes. What can CMS do to give them some relief for 2025? That could take the form of a change in the way that stop loss, particularly for the high needs ACO REACH program, works and the way the benchmarks are calculated. We’ve talked to CMS about both of those things.