Recent FCA Enforcement Illustrates DOJ’s Focus on Wound Care

False Claims Act (FCA) enforcement is at an all-time high, and it shows no signs of slowing. The surge in enforcement activity is not random but rather reflects intentional focus on high-risk activities by the U.S. Department of Justice (DOJ), which reported a record-breaking $6.8 billion in FCA settlements and judgments for 2025. Recent enforcement actions and public statements make clear that wound care (including skin substitutes, bioengineered materials used to cover and treat wounds) is, and is likely to remain, a top priority for DOJ.

DOJ’s FY25 Wound Care Enforcement Efforts

DOJ’s FY25 FCA fact sheet identified medically unnecessary care as one of three major areas of focus for healthcare fraud enforcement, alongside managed care and prescription drugs.

The fact sheet highlights two cases involving wound care services, reflecting the government’s view that the wound care space presents significant fraud risk. As discussed in this alert, recent enforcement actions have targeted a range of alleged misconduct, including the use of allegedly medically unnecessary skin substitute products, improper billing practices, and kickback arrangements between product manufacturers, distributors, and healthcare providers. And these new cases build on years of similar efforts by the government to tackle what it views as an area ripe for potential fraud, given higher historic reimbursement of wound care products and the high demand for such services.

In one of the most significant wound care enforcement actions to date, the owners of several wound graft companies pled guilty to causing the submission of more than $1.2 billion in false claims by directing nurse practitioners to apply medically unnecessary skin substitutes and accepting nearly $300 million in kickbacks from a wholesale product distributor. The owners and their marketing company also agreed to pay $309 million to resolve civil allegations related to at least two FCA qui tam complaints. This resolution underscores DOJ’s willingness to pursue both civil and criminal remedies in wound care fraud matters and signals the potential for significant financial exposure for companies operating in this space. It also is a reminder of the government’s focus on the role of physician-owned businesses in ordering or prescribing products and devices reimbursable through federal programs, as well as the government’s continued focus on the appropriateness of sales and marketing functions.

In another notable matter, DOJ reached a $45 million settlement with a wound care physician management company and its physician owner to resolve allegations that they violated the FCA by pressuring physicians to perform medically unnecessary debridement procedures to generate higher reimbursement. Among other issues, DOJ focused on the physician’s use of preprogrammed billing rules and the lack of patient-specific treatment determinations as reflected in available documentation. The settlement highlights DOJ’s focus not only on the product manufacturers and distributors but also the healthcare providers involved in delivering wound care services.

DOJ’s Continued Focus on Wound Care in FY26

Halfway through 2026, there is no indication that DOJ’s focus on wound care and skin substitutes will slow. In her January 28, 2026, remarks at the American Conference Institute’s Advanced Forum on False Claims and Qui Tam Enforcement, Deputy Assistant Attorney General (DAAG) Brenna Jenny noted DOJ’s growing number of FCA skin substitute cases, stating that “a lot more skin substitute cases [are] in the pipeline.” Consistent with DAAG Jenny’s comments, DOJ’s 2026 National Health Care Fraud Takedown, announced on June 23, 2026, included charges against 11 defendants in the wound care space. These allegedly “fraudulent wound care schemes” were the first cases that DOJ highlighted in its press release covering the takedown, again signaling that wound care is a priority for the recently established National Fraud Enforcement Division.

Growth of the Skin Substitute Industry and Regulatory Concerns

DOJ’s focus on wound care reflects the rapid growth of the skin substitute industry. According to Centers for Medicare & Medicaid Services (CMS) Medicare Part B claims data, spending on skin substitute products exceeded $10 billion in 2024, up from $256 million in 2019.

This dramatic increase in spending has drawn scrutiny from federal regulators, who have expressed concern that the pace of industry expansion has outgrown existing compliance safeguards and created opportunities for fraud, waste, and abuse. In September 2025, the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) issued a report titled “Medicare Part B Payment Trends for Skin Substitutes Raise Major Concerns About Fraud, Waste, and Abuse.” Noting that Medicare Part B spending on skin substitutes increased by 640% from 2022 to 2024, HHS-OIG flagged that under the then-current payment system, Medicare “often [paid] providers for skin substitutes at amounts much higher than the providers’ purchase prices, and providers [kept] the ‘spread.’” The report called on policymakers to “rein in the massive increases” in skin substitute spending and remove “incentives for inappropriate and even fraudulent billing.”

CMS’s Reimbursement Changes

Acting on these concerns in a final rule that went into effect on January 1, 2026, CMS reclassified skin substitutes from billable biologicals to “incident-to” supplies and overhauled the relevant reimbursement model. Previously, Medicare reimbursed skin substitutes in outpatient settings at 106% of the average sales price (ASP), a model that allowed providers to profit by purchasing products below the ASP while receiving reimbursement at the higher rate. Under the new framework, CMS reimburses skin substitutes at a flat rate per square centimeter. In a press release announcing the change, CMS estimated that this change “will reduce gross fee-for-service program spending [on] skin substitute services by $19.6 billion in 2026.”

Key Takeaways

DOJ’s continued enforcement efforts and public statements make clear that healthcare fraud in the wound care space is a top priority for the government. In light of this heightened scrutiny, companies involved in the manufacture, distribution, and sale of skin substitute products, as well as healthcare providers that offer wound care services, should carefully review and, where appropriate, strengthen their compliance programs. Areas of particular focus should include medical necessity documentation, billing and coding practices, and arrangements that could implicate the federal Anti-Kickback Statute.

The significant changes to CMS’s skin substitute reimbursement framework that took effect on January 1, 2026, also present new compliance considerations. Companies should ensure that their billing practices are fully aligned with the new reimbursement framework and staff and business partners are appropriately trained on the updated requirements.

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The Goodwin Healthcare team will continue to monitor developments in the wound care services and FCA spaces. For more information on the issues discussed in this alert, please contact the authors or reach out to Goodwin’s False Claims Act group or the Goodwin lawyer whom you typically consult.

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