Wound care providers using skin grafts and skin substitutes have faced intense scrutiny from CMS over the past 18 months. As audits continue at a feverish pace, each bringing on average millions of dollars in potential exposure, the increased scrutiny is also generating federal civil and criminal actions.
Recently, the Department of Justice prosecuted the owners of multiple Arizona wound graft companies who were convicted in connection with a large‑scale fraud scheme that caused more than $1.2 billion in false and fraudulent claims to be submitted to Medicare for medically unnecessary wound grafts.
The defendants received lengthy prison sentences of more than 14 years each and were ordered to pay substantial restitution, including over $309 million to resolve related civil liability under the False Claims Act. This enforcement action underscores the increased scrutiny on wound care providers nationwide and is yet another example of what begins as an audit can evolve into civil and criminal exposure.
What often begins as a routine administrative matter can quickly escalate if not handled appropriately. High error rates, repeated audit failures, or large overpayment findings can trigger civil referrals, False Claims Act exposure, and involvement by federal investigators.
Advanced Wound Care’s Unique Situation
CMS regularly audits practices, providers, laboratories, and any business receiving CMS payments to ensure compliance and root out fraud, waste, and abuse. Wound care services, however, are a unicorn and have become a focal point for CMS contractors and enforcement agencies for several reasons.
The most obvious reason skin grafting has become such a hot topic is the high cost associated with advanced wound care products. Prior to January 1, 2026, the pricing of wound care products was the average sales price plus 6%, which led to reimbursements for single beneficiaries that could be in the high six figures to seven figures.
Many of these denials are not driven by fraud, particularly at the outset. Instead, they arise from a provider being identified as an outlier compared to peers, allegations of overutilization, complex and highly technical documentation requirements, evolving coverage policies, and aggressive contractor interpretations that extend well beyond what CMS requires. When these denials accumulate across multiple audits, the consequences can quickly become serious.
Adding fuel to the auditing fire is the fact that many wound care providers failed to have their documentation independently reviewed by certified professional coders or did not work with consultants to ensure their documentation met all CMS requirements. CMS knows that minor documentation lapses can yield large recoupments, so the return on investment for these audits makes would care an easy target for contractors working on contingency.
Administrative Audits Can Turn into Payment Suspensions or Civil Liability
A critical misconception among providers is that audit activity remains administrative or educational in nature. In reality, repeated adverse findings can open the door to extrapolated overpayment demands, referrals to Unified Program Integrity Contractors (UPICs), other federal agencies, and law enforcement.
For providers who do not fight an audit and decide to repay the overpayment without a fight, they risk a potential CMS payment suspension, being added to the CMS Preclusion List, having their CMS participation terminated, or risk civil prosecution under the False Claims Act. In egregious cases, criminal liability can follow, as demonstrated in the case of the Arizona providers.
Once an administrative matter crosses the line into civil or criminal exposure, the cost, liability, and disruption to a practice increase dramatically.
Frier Levitt’s Focused Experience in Wound Care Defense
Frier Levitt has built a national reputation representing wound care providers in CMS and enforcement matters. The firm understands the clinical, regulatory, and operational realities of wound care and how auditors approach these cases.
Our team works closely with forensic expert certified professional coders who analyze documentation at a granular level. We do not provide generic responses to CMS overpayment demands, instead, we deliver claim-by-claim analysis and rebuttals. Our appeals address the specific deficiencies alleged by contractors and tie the documentation back to CMS manuals, local coverage determinations, and governing policy.
When auditors challenge medical necessity or label products as investigational or experimental, we respond with substance, leveraging our working relationships with product manufacturers and distributors.
Frier Levitt’s wound care defense strategies are shaped by continuous analysis of CMS policy shifts, contractor behavior, and enforcement trends as they develop in real time. Ongoing examination of issues such as the nationwide audit of Medicare skin substitute payments¹ and the firm’s success obtaining multiple favorable Administrative Law Judge decisions overturning CMS overpayment demands for wound care products² informs how audit responses are structured, how medical necessity arguments are supported, and how escalation risk is mitigated for providers facing active audits and investigations.
Act Early to Protect Your Practice
The most effective CMS audit defense begins early. Waiting until an audit has escalated limits strategic options and increases risk.
If your wound care practice is facing CMS audits, denials, or overpayment demands, experienced counsel can make the difference between resolution and referral.
Frier Levitt stands ready to help providers navigate audits, rebut improper findings, and protect their practices from escalating enforcement risk.
Footnotes
1. Provider Alert: OIG Launches Nationwide Audit of Medicare Skin Substitute Payments by Guillermo J. Beades, Esq. and Phoebe A. Nelson, Esq. – Frier Levitt (Sept 25, 2025). http://frierlevitt.com/articles/provider-alert-oig-launches-nationwide-audit-of-medicare-skin-substitute-payments/
2. Frier Levitt Obtains 12 Favorable ALJ Decisions Overturning CMS Overpayment Demands for Wound Care Products by Guillermo J. Beades, Esq. and Phoebe A. Nelson, Esq. – Frier Levitt (Aug 4, 2025). https://www.frierlevitt.com/articles/recent-results/frier-levitt-obtains-12-favorable-alj-decisions-overturning-cms-overpayment-demands-for-wound-care-products/
Frequently Asked Questions About CMS Wound Care Audits
Why Are CMS Wound Care Audits Increasing?
CMS wound care audits have intensified due to:
- High reimbursement rates for skin grafts and skin substitutes
- Complex Medicare documentation requirements
- Outlier billing patterns identified through data analytics
- Increased federal enforcement priorities
Advanced wound care historically generated significant per-beneficiary reimbursement, making it a high-value audit target.
Can a CMS Audit Lead to Civil or Criminal Liability?
Yes. While many audits begin as administrative reviews, repeated adverse findings, high error rates, or substantial extrapolated overpayments may lead to referrals to Unified Program Integrity Contractors (UPICs) or federal investigators. In certain cases, matters may escalate to civil enforcement under the False Claims Act. In egregious situations involving intentional misconduct, criminal liability is possible. Early and strategic audit response significantly reduces the risk of escalation.
Should providers repay an overpayment demand without appeal?
Repayment without strategic analysis can carry unintended consequences. Adverse audit findings may contribute to broader enforcement exposure, including payment suspension, preclusion list placement, or civil/criminal referral. Providers should carefully evaluate their audit response strategy, including appeal rights and documentation support, before making repayment decisions.
What is the most effective way to respond to a CMS wound care audit?
Effective defense requires a disciplined, claim-by-claim review of documentation, alignment with CMS manuals and applicable LCDs, engagement of certified professional coders, and a structured strategy designed to mitigate escalation risk. Acting early — before findings accumulate — preserves options and strengthens the provider’s position.
If you are under audit or concerned about your risk profile, contact our team to evaluate your position before the situation escalates.
