Firms can set such excessive costs due to a quirk in Medicare pricing guidelines, business specialists stated. For the primary six months of a brand new bandage product’s life, Medicare will set the reimbursement charge at no matter value an organization chooses. After that, the company adjusts the reimbursement to replicate the precise value paid by docs after any reductions.
To bypass the reimbursement drop, some firms merely roll out new merchandise.
In April 2023, Medicare started reimbursing $6,497 for each sq. inch of a bandage known as Zenith, bought by Legacy Medical Consultants, an organization in Fort Value, Texas. Six months later, Zenith’s reimbursement fell to $2,746.
That month, October 2023, Medicare started reimbursing $6,490 for a brand new Legacy product, a “twin layer” bandage known as Impax.
Advertising and marketing supplies for the 2 merchandise use equivalent pictures and related language. The corporate describes each merchandise as offering “optimum wound overlaying and safety throughout the remedy of wounds.”
Since 2022, spending on Zenith and Impax has exceeded $2.6 billion, in keeping with Early Learn’s evaluation.
Legacy Medical Consultants didn’t reply questions in regards to the advertising and pricing of these merchandise. “Legacy is following the regulation, not making the most of the system,” Dan Childs, an organization spokesman, stated in a press release.
Physician Reductions
A cottage business of docs and nurses make home calls to deal with wounds. Some pores and skin substitute firms pitch themselves to wound care docs by providing a reduce of the rising bandage costs.
Dr. Caroline Fife, a wound care physician from Texas who usually writes about business excesses, shared on her weblog final 12 months an e-mail she obtained from an undisclosed pores and skin substitute firm. The corporate boasted that different docs had developed “a wholesome income stream” from its bandages and {that a} patch smaller than a bank card “would generate slightly over $20,000 to your apply.”
Some firms supply docs a “bulk low cost” of as much as 45 %, in keeping with physician interviews and contracts reviewed by The Occasions. However docs then accumulate a Medicare reimbursement for the total value of the product.
Anti-kickback legal guidelines prohibit docs from receiving monetary rewards from drug firms or medical suppliers. And though Medicare does enable bulk reductions, specialists stated that the bandage rebates might have violated federal regulation as a result of they didn’t really require high-volume purchases. In some Legacy contracts reviewed by The Occasions, docs had to purchase solely three merchandise to qualify for a 40 or 45 % low cost.
“That isn’t a quantity low cost,” stated Reuben Guttman, a lawyer in Washington, D.C., who has represented many Medicare whistle-blowers. Mr. Guttman stated that such labeling might be used to hide a kickback.
In 2024, a minimum of 9 medical practices billed Medicare greater than $50 million for pores and skin substitutes, in keeping with an evaluation accomplished for The Occasions by the Nationwide Affiliation of Accountable Care Organizations, which represents medical teams which might be incentivized to curb Medicare spending.
