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 fee at no matter worth an organization chooses. After that, the company adjusts the reimbursement to mirror the precise worth paid by medical doctors after any reductions.
To avoid the reimbursement drop, some corporations merely roll out new merchandise.
In April 2023, Medicare started reimbursing $6,497 for each sq. inch of a bandage referred to 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 referred to as Impax.
Advertising and marketing supplies for the 2 merchandise use equivalent images and related language. The corporate describes each merchandise as offering “optimum wound protecting and safety through the remedy of wounds.”
Since 2022, spending on Zenith and Impax has exceeded $2.6 billion, based on Early Learn’s evaluation.
Legacy Medical Consultants didn’t reply questions concerning the advertising and marketing and pricing of these merchandise. “Legacy is following the legislation, not making the most of the system,” Dan Childs, an organization spokesman, stated in an announcement.
Physician Reductions
A cottage business of medical doctors and nurses make home calls to deal with wounds. Some pores and skin substitute corporations pitch themselves to wound care medical doctors by providing a lower 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 yr an email she obtained from an undisclosed pores and skin substitute firm. The corporate boasted that different medical doctors 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 corporations supply medical doctors a “bulk low cost” of as much as 45 p.c, based on physician interviews and contracts reviewed by The Instances. However medical doctors then acquire a Medicare reimbursement for the complete worth of the product.
Anti-kickback laws prohibit medical doctors from receiving monetary rewards from drug corporations or medical suppliers. And though Medicare does enable bulk reductions, specialists stated that the bandage rebates might have violated federal legislation as a result of they didn’t really require high-volume purchases. In some Legacy contracts reviewed by The Instances, medical doctors had to purchase solely three merchandise to qualify for a 40 or 45 p.c low cost.
“That’s not 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 may very well be used to hide a kickback.
In 2024, at the least 9 medical practices billed Medicare greater than $50 million for pores and skin substitutes, based on an evaluation finished for The Instances by the Nationwide Affiliation of Accountable Care Organizations, which represents medical teams which are incentivized to curb Medicare spending.
