Follow the money: Medicare spending on skin substitutes

In the last few years, data collected by accountable care organizations began showing spending patterns in traditional Medicare. The federal health insurance program had a massive spike in payments for skin substitutes used in wound care for beneficiaries, with “very minimal clinical evidence” that the treatments were needed. Accountable for Health CEO Mara McDermott, JD, discusses the trend.

Medical Economics: Accountable for health has published extensively about Medicare spending in recent years on skin substitutes for wound care. At first glance, it might not appear that those issues really go together with accountable care. But can you explain that connection, how that emerged?

Mara McDermott, JD: A couple of years ago, many of our accountable care organizations started ringing the alarm around skin substitutes, and what they were able to observe in their data were massive spikes in spending on skin substitutes over time. What has emerged is a pattern across all of traditional Medicare of massive, really unnecessary growth in spend and utilization. We have a single patient in Texas who had $10 million of skin substitute spend in one month, in the month of May. That patient subsequently passed away in early July. We have many patients who have experienced skin substitutes being applied to their bodies while they are on hospice at the end of their lives with no real clinical evidence behind these products. We have ACOs in their benchmarks now, skin substitute spending is going to be over 5% of medical spend, so really enormous amounts of spending. And then at the national level, what we've seen is the spend for traditional Medicare on skin substitutes has grown from about $250 million with an M, million dollars in 2019 to over $15 billion, with a B, in 2025. So you see the curve on that just dramatically spiking upwards, and again, with very minimal clinical evidence to support that type of utilization. The other thing that our ACOs were able to see is that in Medicare Advantage, for patients in Medicare Advantage, there is almost no utilization of skin substitutes, and you do not see this same type of growth because the plans are providing oversight and offering other treatments first and more appropriately managing wound care. So those were all the patterns that our ACOs were observing. The challenge with the ACO model, which is also one of its great strengths, is that ACOs cannot restrict network. One of the promises of the traditional Medicare program in terms of accountable care organizations, is that that patient, that original Medicare beneficiary, retains the right to see any Medicare provider. But the ACO is on the hook, accountable for the spend associated with that beneficiary. So there are strong incentives for ACOs to try to keep beneficiaries within the ACOs network, to refer them to high-value specialists and high-value skilled nursing facilities, things like that. Skin substitutes, really exposed a vulnerability, which is that our ACOs could see that patients were being treated by providers not affiliated with the ACO, that those patients were receiving massive amounts of skin substitutes that were likely inappropriate, and the ACO was unable to turn off those claims or to really control that spend in any way. So it became an acute issue for accountable care organizations, in a way that it's not really an issue for other fee-for-service providers, because the accountable care organizations are financially responsible for that $10 million patient or this $2 million patient, even when that's not supporting better health outcomes. So that is where the two issues converged, and why we became so active because of both the massive amounts of money. We haven't talked extensively about patient harm, but there is extensive patient harm, including patients who have passed away as a result of inappropriate skin substitute application. And then the added financial accountability that the ACOs have.