Dave Todd 00:00:00 In 2024, Medicare expenditures had increased by more than sevenfold from just two years earlier in 2022, so they now exceed 10 billion annually, and estimates are that it will hit 15,000,000,000 in 2025. Skin substitutes seem particularly vulnerable to fraud, waste, abuse, and there's been numerous investigations that have come back with findings of fraud.

Austin Littrell 00:00:33 Welcome to Off the Chart, a Business of Medicine podcast featuring lively and informative conversations with healthcare experts, opinion leaders and practicing physicians about the challenges facing doctors and medical practices. My name is Austin Littrell. I'm the assistant editor of Medical Economics, and I'd like to thank you for joining us today. In this episode, Medical Economics Senior Editor Richard Payerchin spoke with David Tawes, regional inspector general in the Office of Evaluation and Inspections, part of the Office of Inspector General at the US Department of Health and Human Services. Their conversation centers on a recent OIG report examining explosive growth in Medicare Part B spending on skilled substitutes for wound care, where annual costs have risen more than sevenfold in just two years, surpassing $10 billion in 2024.

Austin Littrell 00:01:12 Tawes explains what's driving those increases, how fraudulent billing schemes have contributed, and what policy changes could help rein in abuse while preserving patient access to legitimate treatments. He also discusses how enforcement works behind the scenes, why Medicare Advantage spending tells a very different story, and what physicians should watch for when approached about skin substitute products that sound too good to be true. David, thank you for joining us. And now let's get into the episode.

Multiple Speakers 00:01:41 Thank you for joining us today.

Dave Todd 00:01:43 Thanks for having me.

Multiple Speakers 00:01:45 And can you introduce yourself and explain a little bit about your training and background?

Dave Todd 00:01:50 Sure. So as you just said, I'm Dave Tawes I'm the regional inspector general for evaluation and inspections. within the Office of Evaluation Inspections, or OCI. That's part of HHS. OIG. How I got here I got out of grad school in 1997 after receiving a master's in public policy. got a job in the Philadelphia regional office of E.I. and then worked there as an analyst and then a team leader before, in 2011, I was selected to lead the Baltimore regional office of OCI.

Dave Todd 00:02:28 Since then, our regional office mainly focuses on work involving prescription drug payments and Medicare and Medicaid, as well as access to substance abuse treatment.

Multiple Speakers 00:02:40 Those are two tremendously important topics, so that's good to hear that there is a level of oversight involving both of those. Our physician audience, I think, probably has some idea of what the Office of Inspector General does under Health and Human Services. Can you briefly introduce the Office of Inspector General and what is its mission and purpose?

Dave Todd 00:03:00 Sure. So we've been around since 1976 trying to ensure that HHS programs are operating, well and protecting the health and welfare of beneficiaries who depend on HHS programs. We really have three primary goals. One is fighting fraud and abuse. Another is promoting quality, safety and value in HHS programs and finally, advancing excellence and innovation. Majority of our resources go towards the oversight of Medicare and Medicaid, but we're also responsible for overseeing the overseeing, 100 or more other departmental programs like, the FDA, CDC, Head Start. Basically anything that's covered under HHS is something that we're responsible for oversight.

Multiple Speakers 00:03:53 One of the things that I, I think is interesting, we had a new teammate who had transferred within our company last year, and just kind of getting him up to speed. We were talking about the scope and scale of health and human services and just the size of the department, everything under that umbrella, it's just huge. So that's a heck of a lot to keep track of.

Dave Todd 00:04:12 It is that's what we tend to spend. That's what we tend to specialize like in like, nobody can nobody can know all of it for sure.

Multiple Speakers 00:04:20 And recently there was a report that was published by the office regarding payments on skin substitutes for wound care. Can you explain briefly about how that report came about?

Dave Todd 00:04:32 So we've actually been working in the skin substitute area for a few years. They're paid as prescription drugs under Medicare Part B, which was an area that we've done a lot of work in, but they weren't held to the same requirements, the price reporting and payment requirements as other part B drugs, because they're not really a drug.

Dave Todd 00:04:57 So there were some changes to the law in 2021, and manufacturers of skin to skin substitutes began having to report their prices to Medicare the same way that other drugs did. So we looked to see whether they were following, then or complying with the new requirements. And we found that at least at the start, it was only about 50% that we're complying. so we made recommendations to CMS and it looked like reporting was improving. But strangely, we noticed that payments for skin substitutes, Medicare payments kept going up and up and up. So we wanted to dive into it to see, what could be causing what was behind these increases.

Multiple Speakers 00:05:44 And that's a great segue to the the next question. Actually, at least two more questions. What did you find as the main cause or reason for that increase in skin substitute billing?

Dave Todd 00:05:56 So, it's a lot there were a lot of different things. One is that, at least in part B institution or non-institutional settings like physicians offices, nursing facilities, home care, that the number of of enrollees that were associated with skin substitute claims.

Dave Todd 00:06:20 We hesitate to see save received skin substitutes because we're not sure how many of them actually received them. But as far as being billed, a lot more enrollees started getting skin substitutes. And then for the ones that were getting it, on average, the number of units. So it's built by per square centimeters, a tiny amount, the number of units each enrollee that was getting the skin substitute like was increasing. And then the cost of the products being billed kept going up and up and up. So by the third quarter of 2024, the average cost of the of the skin substitutes being billed, the Medicare was $1,500 per square centimeter, and your average enrollee was getting 80 some square centimeters to treat, or reportedly receiving 80 or so square centimeters to treat a wound each quarter. So that's about $120,000 per patient each quarter. And that's that was triple the amount just two years earlier.

Multiple Speakers 00:07:33 Say, Keith, this is all well and good, but what if someone is looking for more clinical information.

Multiple Speakers 00:07:38 Oh, then they want to check out our sister site, Patient Care online.com, the leading clinical resource for primary care physicians.

Multiple Speakers 00:07:46 Again that's patient care online. Com.

Multiple Speakers 00:07:52 Again a great segue because you touched on these points both with the trends and then the the size of the skin And substitute amount of per, you know, per square centimeter. The little things can add up. And I wanted to ask if you could give an idea about the total dollar amounts involved here.

Dave Todd 00:08:11 So yes, in 2010 I'm sorry, in 2014. In 2024, Medicare expenditures, had increased by more than sevenfold from just two years earlier in 2022. So they now exceed 10 billion annually. And estimates are that it will hit 15,000,000,000 in 2025.

Multiple Speakers 00:08:35 Definitely wanted to ask, because when you talk about an increase of that magnitude and some of the factors and causes behind it. Are there indications that the increases in billing were for skin substitutes were due to fraud?

Dave Todd 00:08:49 So we can't say exactly what percentage of the payment increase in increases are due to fraud, but it definitely appears to be a significant issue given the high payment amounts. In many cases much higher than their cost.

Dave Todd 00:09:06 Skin substitutes seem particularly vulnerable to fraud, waste, abuse, and there's been numerous, investigations that, have come back with findings of fraud.

Multiple Speakers 00:09:17 To elaborate on that, maybe a little bit. Can you comment on whether there have been any criminal criminal charges, say, or civil filings for recovery based on the report and investigation?

Dave Todd 00:09:28 Yes. There's been, several cases, but I'll hit the biggest one. that is actually, there's going to be a sentencing today. And so earlier this year, the Department of Justice publicized a case involving an Arizona couple that pled guilty to health care fraud. Alexander Gerke and Jeffrey King pled guilty for causing over $1.2 billion of false and fraudulent claims to be submitted to Medicare and other health insurance companies for skin substitutes over just a period of around 12 to 18 months, so they weren't even medical professionals. She had run an art studio and worked in real estate. He was a DJ and a producer. They started to work a wound care company, hired a bunch of marketers, supposedly from the solar panel industry, and they scoured nursing homes, hospices, hospices and other settings to find patients with wounds.

Dave Todd 00:10:29 And then they offered to pay health care professionals, usually nurse practitioners, a flat fee to apply and build for the maximum amount of product. So if it comes in an eight centimeter by eight centimeter sheet, that's what you're supposed to build 64cm², even if the wound is tiny, even if the wound is healed. they were actually arrested at Phoenix, at Sky Harbor Airport, preparing to leave the country. They said it was for a honeymoon. we'll never know. And their plea agreements. The couple did admit to targeting elderly Medicare patients, many of whom were in hospice care for medically unnecessary skin substitutes. And along with more than 1 billion in restitution, they face up to 20 years in prison. As I said, Alexander is actually being sentenced or scheduled to be sentenced today in Arizona.

Multiple Speakers 00:11:22 And not to put too fine a point on it, but when you're talking about that figure, just to emphasize for our audience, that's billion with a B, this is money involved.

Dave Todd 00:11:31 Yes, that that is a lot of money.

Dave Todd 00:11:33 And there's obviously that's a huge case. There are other many smaller cases out there. But I mean, it was $1 billion again in just 12 to 18 months. So that shows you how much money is to be made on this by unscrupulous actors.

Multiple Speakers 00:11:54 You know, I wanted to maybe differentiate a couple more issues, if I may, for our audience, because it appeared that there were some differences in the spending trends for Medicare Part B and Medicare Advantage, and I was hoping you might be able to discuss that distinction.

Dave Todd 00:12:11 So Medicare Advantage now covers about more than half of Medicare enrollees. So you would expect maybe spending or utilization to be the same between or close to the same between Medicare Advantage and traditional Medicare. But in the third quarter or in all of 2024, excuse me, only 3800 patients received or were billed for a skin substitute in Medicare Advantage, compared to 24,000 in part B, so more than six times more people in traditional Medicare received a skin substitute compared to Ma, and then spending an Ma was less two.

Dave Todd 00:12:51 So the average per patient was less than number of units. The amount of the or the cost of what was billed. So Emaar spending was just 7% of part B spending. This is likely because Emaar can use reimbursement and coverage tools like prior authorization that at the moment aren't really available in traditional Medicare.

Multiple Speakers 00:13:16 This is this is maybe a little bit wonky, but I think our audience will appreciate only because I know that there are a lot of different arguments around Medicare Advantage and its goals and purposes and functions, and whether it is an ideal system. Where I'm going with this is, is that I know that in the past, there have been some claims that there is greater propensity for fraud, waste, abuse and Medicare Advantage than in traditional Medicare. And this one, this is a scenario kind of flipped it on its head a little bit.

Dave Todd 00:13:49 Yes. And I think it speaks specifically. I can't get into bigger differences in fraud between the two programs. There's just something specifically about skin substitutes, and I think it has to do with, if a lot of these are fraudulent prior authorization and Medicare Advantage to catch them.

Dave Todd 00:14:07 So if you got an item that is particularly vulnerable or vulnerable to fraud, some of the aspects of Ma will keep payments from being made compared to part B, where those kind of tools are more limited.

Multiple Speakers 00:14:25 One of the things I wanted to ask about is, well, like I said, we have a physician audience, and I know that doctors work in a number of different care settings, you know, across the US health care system based on the analysis. Was there. Were there any trends that you noticed regarding typical care settings that used the most skin substitutes?

Dave Todd 00:14:45 So our work focused only on non-institutional settings. I think as I said earlier. So most of it, most of the units, most of the enrollees are being treated in physicians offices, and that would include podiatrists, and nurse practitioners. a lot of times wound care professionals. But home care has grown to about a quarter of patients. But interestingly, that quarter of patients represent more than half of expenditures. And that's because, for whatever reason, those reportedly being treated at home get much more expensive products and a lot more units of that product, than they do in physicians offices.

Multiple Speakers 00:15:33 One of the things I was kind of wondering about, and let me sort of formulate the question, because I didn't have this down exactly in my my question list.

Dave Todd 00:15:41 Very.

Multiple Speakers 00:15:42 Specifically. But in our conversation, you had referred to that report that had come out earlier. I had it dated as March 2023 that began to identify those significant gaps in manufacturer compliance with the reporting requirements for skin Substitutes. And I was hoping specific to this report and analysis or maybe just more in general. Can you talk a little bit about, as trends maybe emerge over time? It seems like sometimes a situation happens and then like I said, the trends sort of show up in the data, and then there has to be maybe enforcement action or audits or additional requirements for compliance. And I guess, can you talk a little bit about just sort of that process maybe in general terms?

Dave Todd 00:16:32 And I mean, that is something that we face all the time, especially in traditional Medicare, where bills are required to be paid like within a certain amount of time.

Dave Todd 00:16:44 So in those cases, we have to wait for claims data to come in. Notice anomalies in the claims data and then hopefully make recommendations to You, Medicare or Medicaid? to make changes. It's a it's a timely process and, you know, a time consuming process. And, we've gotten much better at accessing data in real time. But I still there's always going to be a lag in between, when something pops up and when the enforcement can, can catch up to, hopefully trying to fix it.

Multiple Speakers 00:17:41 Hey there, Keith Reynolds here. And welcome to the P2 Management Minute. In just 60s, we deliver proven real world tactics you can plug into your practice today, whether that means speeding up check in, lifting staff morale, or nudging patient satisfaction. North. No theory, no fluff. Just the kind of guidance that fits between appointments and moves the needle before launch. But the best ideas don't all come from our newsroom. They come from you got a clever workflow hack and employee engagement win, or a lesson learned the hard way.

Multiple Speakers 00:18:09 I want to feature it. Shoot me an email at Kay reynolds@lifesciences.com with your topic, a quick outline, or even a smartphone clip. We'll handle the rest and get your insights in front of your peers nationwide. Let's make every minute count together. Thanks for watching and I'll see you in the next P2 management minute.

Multiple Speakers 00:18:32 And again, specific to the skin substitutes, the Inspector General report includes a call to action needed to rein in massive increases in Medicare Part B spending. Can you talk about those recommendations?

Dave Todd 00:18:47 Sure. So we want to make sure that when policymakers are thinking about what to do here, we want enrollees who need the treatment To get the treatment. but we also want to remove incentives that drive inappropriate and even fraudulent billing. So what we suggested to policymakers is they're looking to fix this issue, too. We just posed a few questions like, should skin substitutes be treated as drugs and biologics for Medicare payment purposes? That could be one of the issues driving them, that they're not like drugs and biologics and the same methods that maybe work to pay for drugs and biologics don't work to pay for skin substitutes.

Dave Todd 00:19:33 And then even if skin substitutes continue to be paid as a drug and biologic, are there methods other than ASP or average sales price, that can be used to set payment? And finally, what lessons could part be take for Medicare Advantage regarding coverage and payment, given that expenditures and utilization under part B are just or under Medicare Advantage, or is the function of part B, so it's hoping to find that balance between ensuring folks that need the care get it, but making sure bad actors can't just come in and build for hundreds of millions or even $1 billion and get and get paid and then try, try to flee the country.

Multiple Speakers 00:20:16 And I think you touched on these points a moment ago, offering some of that guidance. How do you anticipate. Office of Inspector General will remain involved with CMS guiding future policy on reimbursement for skin substitutes.

Dave Todd 00:20:31 So CMS is enacted, or proposed, not yet enacted. A few changes to deal with this, including how payment is set for skin substitutes, as well as some other AI tools.

Dave Todd 00:20:49 Their skin substitutes are being included in a model in six states to try and identify claims that should be subject to prior authorization. What OIG will do is will track to see how those changes affect billing for skin substitutes, if fraudulent expenditures or just expenditures overall even and utilization go down if it shifts around if there's new products that maybe these bad actors shift to. so we'll keep an eye on things knowing how much money is at stake.

Multiple Speakers 00:21:28 And this goes back to a point you made a few moments ago, and especially talking about some of those processes involved in Medicare Advantage. I know with our audience, I think a lot of times you hear the term, the phrase prior authorization and the red flags automatically go up. But maybe in this instance, it sounds like this is a case where prior authorization is helping avoid or maybe guide the right treatments for the right people at the right times.

Dave Todd 00:21:53 Yes. I mean, I can't speak to that specifically other than to say that Medicare Advantage is spending a lot less money, and we've not heard of lots of claims about folks there not being able to get wound care treatment if they need it.

Dave Todd 00:22:08 We're hearing a lot more of fraudulent billing on the traditional Medicare side of things.

Multiple Speakers 00:22:14 One question I always like to ask our main audience is primary care physicians. What would you like to say to them or what would you like them to know?

Dave Todd 00:22:22 So these products have been heavily marketed even outside the wound care community. there's people that will post on Reddit or other forums that are like, hey, I, somebody approached me today. A nurse practitioner said, somebody approached me today and said, I can make all this money. Like by applying skin substitutes on promises of like, promises like that. Be wary if you hear something that sounds sketchy or too good to be true. It's probably not on the up and up. So if you see something like this, you can submit a complaint to OIG online through our website, or call one 800 HHS tips.

Multiple Speakers 00:23:02 We covered a heck of a lot of ground in a short amount of time here. What did I not ask about that you would like to emphasize?

Dave Todd 00:23:08 I would just like to emphasize the sort of the role that payment plays in this, that, these skid substitute products, unlike traditional drugs and biologics that physicians that listen to you might prescribe.

Dave Todd 00:23:29 we found that providers were switching from product to product almost on a quarterly basis, whichever one would have sort of the biggest difference between what the Medicare payment amount was and what those marketing folks were selling it for. They would switch to that product. So you would see like $500.500 million in Medicare expenditures one quarter and then a quarter later it's down to 1 million. And that just does not happen in the in the prescription drug world. So it reimbursement especially and reimbursement issues specific to skin substitutes is one of the major drivers of this. And it's something that CMS is proposed rule is attempting to fix.

Multiple Speakers 00:24:21 I'm Richard Payerchin reporting for Medical Economics. My guest today has been David

Multiple Speakers 00:24:26 Tawes.

Multiple Speakers 00:24:27 Regional inspector general with the Office of Evaluation and Inspections in the HHS Office of Inspector General. It's been a great conversation. Just thank you so much for joining us today.

Dave Todd 00:24:37 Thanks for having me.

Austin Littrell 00:24:49 Once again, that was a conversation between Medical Economics senior editor Richard Payerchin and David Tawes, regional inspector general in the Office of Evaluation and An inspection is part of the Office of Inspector General at HHS.

Austin Littrell 00:24:59 My name is Austin Littrell, and on behalf of the whole medical economics and physicians practice teams, I'd like to thank you for listening to the show and ask that you please subscribe so you don't miss the next episode. Be sure to check back on Monday and Thursday mornings for the latest conversations with healthcare experts, sharing strategies, stories, and solutions for your practice. You can find us by searching off the chart wherever you get your podcasts. Also, if you'd like the best stories that Medical Economics and physicians practice, publish delivered straight to your email six days of the week. Subscribe to our newsletters at MedicalEconomics.com and PhysiciansPractice.com. Off the chart: A Business of Medicine Podcast, is executive produced by Chris Mazzolini and Keith Reynolds and produced by Austin Littrell. Medical Economics, Physicians Practice and Patient Care Online are all members of the MJH Life Sciences family. Thank you.