The United States Department of Justice (DOJ) has significantly increased its enforcement efforts targeting fraud in the wound care sector, with a particular focus on business models involving third-party management companies and aggressive financial arrangements. Recent high-profile prosecutions underscore the government’s commitment to rooting out schemes that violate federal fraud and abuse laws, including the Anti-Kickback Statute (AKS) and the False Claims Act (FCA). These developments serve as a critical warning to healthcare providers and organizations: arrangements designed to maximize reimbursement without strict adherence to legal and ethical standards can result in devastating civil and criminal liability.
Recent Enforcement Actions: Kickbacks at the Center of Wound Care Fraud
A recent DOJ case illustrates the government’s aggressive approach. In January 2025, the DOJ announced guilty pleas from Alexandra Gehrke and Jeffrey King, who orchestrated a nationwide skin graft fraud scheme that generated over $1.2 billion in false claims to federal healthcare programs. Central to this scheme was a sophisticated kickback arrangement. Gehrke, through her controlled entities, engaged a network of sales representatives who were paid commissions to identify elderly patients with chronic wounds and facilitate the placement of medically unnecessary orders for amniotic skin grafts. These sales representatives, who were not licensed clinicians, influenced clinical decision-making and steered orders to a specific distributor.
In exchange for the high volume and frequency of these orders, the distributor paid Gehrke over $279 million in illegal kickbacks. Gehrke then funneled tens of millions of dollars to the sales representatives as part of this unlawful arrangement.
The patients were referred to King’s company, which contracted with nurse practitioners to perform the grafting procedures and submit claims for reimbursement. The DOJ’s filings make clear that these financial incentives—commissions, kickbacks, and volume-based payments—were designed to drive utilization and maximize reimbursement, rather than to serve legitimate clinical needs.
The AKS prohibits offering, paying, soliciting, or receiving any remuneration to induce or reward referrals or generate federal healthcare program business. The arrangements in this case including commission-based payments to sales representatives, kickbacks from the distributor, and downstream payments to clinicians squarely triggered AKS liability. The government’s aggressive pursuit of restitution, asset forfeiture, and criminal penalties (including up to 20-year prison sentences) demonstrates the severe consequences of violating these laws.
In a more recent action, the government filed a complaint against a wound care management company and its owner for allegedly creating software to upcode debridement procedures, hiring inadequately trained physicians, and establishing (and pressuring providers to meet) revenue-driven targets for surgical procedures. As a result, the government claims the company caused the submission of medically unnecessary claims for surgical debridement and engaged in “upcoding,” which is the practice of using billing codes for more complex procedures than were actually performed.
With Medicare and other payors reimbursing skin substitutes at rates exceeding $1,000 per square centimeter, the financial incentives for abuse are substantial. The DOJ has made clear that it will aggressively pursue any arrangement that appears to prioritize financial gain over patient care and compliance with federal law.
Compliance Needs and Proactive Legal Review
These enforcement actions are a stark reminder that any financial arrangement in the wound care space, especially those involving commissions, volume-based payments, or third-party management, must be carefully structured to comply with the AKS, FCA, and related federal and state laws. Even well-intentioned providers can inadvertently run afoul of these complex regulations, exposing themselves to crippling financial penalties, exclusion from federal programs, and even criminal prosecution.
Healthcare organizations and providers should not wait for an investigation or enforcement action to review their business models. Proactive legal review by experienced healthcare counsel is essential to identify and mitigate risk, ensure compliance, and protect your organization’s reputation and viability. Our firm’s regulatory attorneys are available to conduct comprehensive assessments of your current or proposed arrangements, review financial relationships, and provide practical guidance tailored to the evolving enforcement landscape.
If your organization participates in wound care arrangements or is considering new business models, contact Frier Levitt to ensure your operations are fully compliant and to safeguard against the significant risks posed by federal enforcement.
