The bankruptcy of Flowood's Wound Management Specialists brought to light a battle being waged at Medicare. Medicare is cracking down on companies providing skin substitutes after it discovered a loophole created a gravy train. Such tightening apparently caused Wound Management's finances to crash, leaving it owing between $100 million and $500 million to creditors while revenue fell by 80% in one year.
The Inspector General reported a year ago Medicare spending on wound care products such as skin substitutes skyrocketed to nearly $10 billion. In just two years alone, such spending increased 640%, rising from $389 million per quarter to nearly $3 billion per quarter. The amount paid per Medicare Part B patient tripled from $40,000 to $121,000.
Health care providers made a mint providing such products in a home setting. Home care enrolled doubled in two years while office treatment was cut in half. The home care patients received 2 1/2 times the units of skin substitutes as those treated in the office. The cost per home patients was - get this - $240,000 compared to $57,000 for a patient treated in the office. Ouch.
The National Institute of Health described the problem:
Between 2019 and 2024, annual Medicare Part B spending on these products increased more than 40-fold, from $250 million to more than $10 billion. Prior to the recent reform, CMS reimbursed clinicians for skin substitutes administered in nonfacility settings (eg, physician offices and patient homes) at a rate of an average sales price (ASP) of +6%. However, skin substitute manufacturers were omitted from federal ASP reporting requirements. Some manufacturers and clinicians exploited this exemption to enter spread pricing arrangements, whereby clinicians profited on substantial differences between Medicare reimbursement (calculated based on undiscounted list prices) and actual acquisition costs. NIH website
NIH cut the payola, establishing a new rate of $127/cm2 for skin substitutes. Medicare was paying up to $2,000 per unit in 2024. So the new guidelines affected a few bottom lines.
The bankruptcy filings do not state the new rates are responsible for the loss of revenue but coincidences are rarely coincidences, are they?
The Trump administration took notice. The New York Times reported in July 2025:
Medicare plans to slash payments for expensive and untested skin bandages that have cost the federal government billions of dollars, the Trump administration announced Monday. The new proposed limit is an about-face for the administration, which twice delayed Biden-era rules to reduce spending on the bandages, known as skin substitutes. President Trump, who previously defended the payments on social media, received a large campaign donation last year from a leading bandage seller. Spending on skin substitutes has increased fortyfold in the past five years, surpassing $10 billion in 2024. That sharp increase is one of the largest examples of Medicare waste in the program’s history, according to data analysts and industry experts. Medicare, the government insurance plan for seniors, spent more last year on the bandages than on ambulance rides or anesthesia, despite limited evidence that they work. The bandages are made from dried bits of placenta and are used on wounds that won’t heal.For years, lax Medicare rules have allowed makers of the bandage to essentially set their own prices. Companies have brought more than 100 new versions to market since 2023, some costing Medicare more than $21,000 per square inch. The new Medicare policy proposes setting a flat payment of $806 per square inch. The lower fee is likely to stamp out a lucrative scheme that The New York Times reported on this year: Doctors can buy the coverings at large discounts and then charge Medicare the full sticker price, pocketing the difference. Some doctors have earned tens of millions of dollars for relatively simple procedures that involve making house calls to apply the bandages. “We’re making it easier for seniors to access preventive services, incentivizing health care providers to deliver real results and cracking down on abuse that drives up costs,” Dr. Mehmet Oz, the Medicare and Medicaid administrator, said in a statement. Article
Medicare is testing requiring pre-authorization for the use of such products in several states. The article ended with a little warning for those who might have gouged Medicare:
Last month, the Department of Justice announced that it was prosecuting multiple doctors for improper use of the products. Prosecutors charged two Texas podiatrists with billing Medicare for $90 million worth of unnecessary bandages between 2022 and 2024, in some cases using them on patients who had no wounds. They spent the money on “expensive jewelry and vehicles, and private jet travel,” the government wrote in a June court filing. Both men have pleaded not guilty.
Stay tuned.
26 comments:
Patient care stops being the goal when you make it a regular practice to drop your bucket down a money well. When they find that one drug or procedure that Medicare pays exceedingly well on, you'd be surprised how many of their patients suddenly "need" that drug/procedure.
I posted yesterday that I smelled fraud-
Which physicians were involved in this Flowood business?
now crack down on rest of the medical sucklings on the Gov teat. Healthcare in tertiary now.
Isn't a lot of that "wound care" just taking care of diabetics' rotting feet and legs?
What are the details on the entity allegedly owed $77.9 million (see JJ post of Sept 23, 2026) by Wound Management Specialists?
1. What is the complete name of the entity alleged owed $77.9 million?
2. What services and or products did this entity allegedly provide for $77.9 million?
3. Was this entity manufacturing the skin substitute for Wound Managemnt Specialists? Or were they simply some sort of middlemen in the Wound Management Specialist supply chain?
4. Is this alleged creditor in the amount of $77.9 million also a local entity?
5. Do the alleged $77.9 creditor and the alleged $77.9 million debtor share (according to the MS SOS website business search) the same registered agent at times?
6. Are there any other filings concerning this $77.9 million debt? (UCC etc)
"They spent the money on “expensive jewelry and vehicles, and private jet travel,” the government wrote in a June court filing."
Ruh Roh. In totally unrelated news there are probably some fancy cars and private jets for sale if anyone is in the local market.
Pigs get fat. Hogs get slaughtered.
There is a pattern here: Medicare lets something slip through the cracks at a much higher reimbursement rate than is appropriate, providers figure it out and start using, overusing and then ultimately some fraudulently using that particular product/service and the whole thing spins out of control. This happened several years ago with compounded pain creams (if I recall, there were some Mississippi docs, pharmacists and others involved with that as well). This wound product is the latest iteration. DOJ just busted an optometrist in Brentwood (yes, an eye-care specialist) for overbilling $7M for these wound care products.
Thanks Biden.
Fact: were the US to cut out med and military fraud, we could balance the budget and cut income taxes in half. Just can't be done if Dumbocrats are elected.
Sounds about like the Jackson Area Federal Credit Union fiasco.
4:34 — you must not read very well:
“ The new proposed limit is an about-face for the [Trump] administration, which twice delayed Biden-era rules to reduce spending on the bandages, known as skin substitutes. President Trump, who previously defended the payments on social media, received a large campaign donation last year from a leading bandage seller.”
Biden was trying to reduce the payments while Trump (with typical corrupt payola) delayed the Biden reductions
what a maron!
I was unlucky enough to spend a week in a hospital in Jackson. I bet I took a bushel of pills during that week. You know the kind of pills. The ones that cost the hospital about 30 cents to buy and they charge a couple of hundred for tham.
Fraud.
Fellas, neither party, and very few politicians in general, care anything about reducing government spending, nor making your life better. They are all in on making their lives better though.
How does anyone start a local business and take it to almost $400 million in yearly revenue in a few years and yet somehow they were ignored by local media and politicians eager to tout every economic development success story?
It probably smells funny if all the politicians stay away!
How much government money is stolen by fraudsters. It's a good thing we don't have to pay for that
All sites are down that are/were associated with these companies.
Chater 11 or Chapter 7?
Anybody else notice that the medical doctors associated with this business will not be identified? Nor will the names of the grifting skin grafters.
IANAL but there should already be a filing on the BK docket listing all the members of the Wound Management Specialists LLC.
Maybe the KF can include the details of that filing in one of this weeks reports on this topic. Some people will be to see how many members this LLC has.
Clawbacks can be a thing.
SWAG: This LLC might have lots of members with a 5% or smaller share. If you know what that might mean!
What does that mean 11:01 a.m.?
King fish, this was very well written article. Thank you for sharing.
If you want to understand how corrupt a company is just look at their share holders and their list of creditors. It’s always interesting when the shareholders are on both lists. Not to mention 77 million dollars owed to an entity that shares the same address as the bankruptcy filer
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