The Wound Care Industrial Complex

In September 2025, the HHS Office of Inspector General issued a stark warning: skin substitute products in Medicare are "particularly vulnerable to fraud." Three months earlier, the Department of Justice had announced the largest healthcare fraud enforcement action in history — a $14.6B takedown that placed wound care at its center.

The $14.6B Takedown

In June 2025, the DOJ announced Operation Wound Shield, its largest-ever healthcare fraud enforcement action. The $14.6B in alleged fraud involved hundreds of defendants across the country, with wound care billing — particularly skin substitutes — as the central scheme.

The enforcement action revealed a sophisticated network: manufacturers offered kickbacks to physicians, physicians prescribed unnecessary products, and billing companies submitted inflated claims to Medicare.

How Skin Substitutes Became a Fraud Magnet

Skin substitute products — coded under HCPCS Q4xxx series — are bioengineered tissues used to treat chronic wounds like diabetic ulcers. Legitimate use is well-established. But the economics create perverse incentives:

A single wound can generate tens of thousands in Medicare billing. A provider with a panel of wound care patients can bill millions per year — legitimately. The problem is distinguishing legitimate high-volume wound care from fraudulent schemes.

The Vohra Settlement: $45.0M

Vohra Wound Physicians, one of the nation's largest wound care companies, agreed to pay $45.0M to settle allegations that it billed Medicare for medically unnecessary wound care services. The settlement highlighted how large organizations can systematically overbill wound care across dozens of facilities.

Beverly Hills: An Unlikely Wound Care Capital

Our data analysis reveals a curious geographic anomaly: Beverly Hills, California, has an outsized concentration of high-billing wound care providers. Why would one of America's wealthiest ZIP codes be a wound care hotspot?

The Debridement Markup: 60x and Beyond

Debridement — the medical removal of dead or damaged tissue — is a legitimate and important wound care procedure. But some providers bill it at extraordinary markups. Code 11043 (debridement of muscle and/or bone) has a standard Medicare reimbursement, but our analysis found individual providers submitting charges more than 60 times the specialty median.

A 60x markup doesn't mean the provider receives 60x the standard payment — Medicare caps actual payments. But extreme markup ratios are a red flag that billing practices may not reflect clinical reality.

The OIG's Warning

The HHS-OIG's September 2025 report specifically called out skin substitutes as "particularly vulnerable to fraud" due to:

• High reimbursement rates — some products bill at thousands per application
• Subjective medical necessity — wound healing is complex and hard to audit retrospectively
• Rapid product proliferation — new Q-codes are added frequently, outpacing CMS oversight
• Manufacturer incentives — kickback schemes incentivize prescribing specific products

What Our Data Shows

Across 10 years of Medicare data, $5.5B flowed through wound care billing codes. We identified a pattern of billing that concentrates among a relatively small number of providers who bill at volumes and markups far exceeding their peers. The most extreme case: nurse practitioner Ira Denny, who billed $135.0M for just 90 patients — an average of $1.5M per patient. The characteristics of these outlier providers include:

• Skin substitute billing volumes in the 99th percentile
• Markup ratios 10-60x higher than specialty medians
• Geographic clustering in specific ZIP codes
• Combinations of high-cost wound care codes that maximize per-patient revenue

What Needs to Change

The wound care fraud problem won't be solved by enforcement alone. Structural reforms are needed:

1. Prior authorization for high-cost skin substitutes — requiring clinical justification before billing, not after
2. Real-time billing analytics — CMS should flag volume and markup anomalies in real time, not years later
3. Manufacturer transparency — mandatory disclosure of financial relationships between product manufacturers and prescribing physicians
4. Patient notification — beneficiaries should be notified in real time when wound care products are billed on their behalf