Medicare bleeds billions in expensive bandages and doctors take a cut

Companies can set such high prices due to the temperament of Medicare pricing rules, industry experts said. For the first six months of the life of a new bandage, Medicare will set a return rate at any price a company chooses. After that, the Agency adjusts the compensation to reflect the actual price paid by doctors after any discounts.

To bypass the decline in compensation, some companies are simply developing new products.

In April 2023, Medicare began returning $ 6,497 for every square inch of a bandage called Zenith, sold by Legacy Medical Consultants, a company in Fort Worth, Texas. Six months later, Zenith’s compensation decreased to $ 2,746.

This month, October 2023, Medicare began to return $ 6,490 for a new inheritance product, a “double layer” bandage called Impax.

Marketing materials for both products use identical photographs and similar language. The company describes both products as “optimal wounds and protection in the treatment of wounds”.

By 2022, expenditure on Zenith and Impax exceeded $ 2.6 billion, according to Early Read’s analysis.

Legacy Medical Consultants did not answer questions about the marketing and pricing of these products. “The legacy follows the law, it does not exploit the system,” said Dan Childs, a company spokesman.

Discounts

A cottage industry and nurses make calls at home to treat wounds. Some skin substitute companies attract wound care doctors, offering a cut of rising bandage prices.

Dr. Caroline Fife, a Texas wound care doctor, who often writes about industry exaggerations, shared an email in his blog last year received from a non -announced skin substitute company. The company occupied that other doctors had developed “a healthy flow of revenue” from its bandages and that a patch smaller than a credit card “would create just over $ 20,000 for your practice”.

Some companies offer doctors with a “bulk discount” of up to 45 %, according to interviews and doctor contracts examined by the Times. But doctors then collect a Medicare return for the full price of the product.

Kickback laws prohibit doctors from receiving financial rewards from drug companies or medical suppliers. And although Medicare allows bulk discounts, experts said that the bandage discounts could violate federal law because they did not really require large volume purchases. In some inheritance contracts examined by the Times, doctors had to buy only three products to qualify for a 40 or 45 %discount.

“This is not a volume deduction,” said Reuben Guttman, a lawyer in Washington, DC, who represented many Medicare whistle-numbers. Mr Guttman said that such a label could be used to hide a kickback.

In 2024, at least nine medical practices charged Medicare more than $ 50 million for skin substitutes, according to an analysis for the Times by the National Association of Compulsory Care Organizations, which represent medical groups encouraged to limit Medicare costs.