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Medicare Pricing Anomaly Leads to Elevated Bandage Costs
Industry experts suggest that pricing regulations within Medicare enable companies to inflate costs for advanced wound care dressings. A peculiarity in Medicare’s reimbursement structure allows manufacturers to set initial prices for new bandage products at their discretion for the first six months. Subsequently, the agency revises reimbursement rates to reflect actual physician costs after discounts.
To bypass this subsequent reduction in reimbursement, some firms are reportedly introducing novel, yet similar, products to maintain high pricing.
Strategic Product Rollouts and Reimbursement Practices
Illustrating this practice, in April 2023, Medicare began reimbursing $6,497 per square inch for Zenith, a bandage marketed by Legacy Medical Consultants, a Texas-based company. However, six months later, Zenith’s reimbursement decreased to $2,746.
Coincidentally, in October 2023, the same month as the Zenith reimbursement adjustment, Medicare commenced reimbursements of $6,490 for Impax, a newly launched product from Legacy Medical Consultants.
Marketing and Product Similarity
Marketing materials for both Zenith and Impax utilize virtually identical visuals and descriptions, differing primarily in brand nomenclature. Legacy Medical Consultants promotes both as delivering “optimal wound covering and protection during the treatment of wounds.”
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Significant Spending on Wound Care Products
Analysis indicates that expenditures on Zenith and Impax have surpassed $2.6 billion since 2022, according to data compiled by Early Read.
Legacy Medical Consultants did not respond to inquiries regarding the marketing and pricing strategies for these products. However, a company spokesperson, Dan Childs, asserted in a statement, “Legacy is following the law, not taking advantage of the system.”
Concerns Over Doctor Incentives and Discount Practices
A sector of physicians and nurses specializing in at-home wound treatment has emerged. Some skin substitute manufacturers are reportedly enticing wound care physicians by offering a portion of the elevated bandage revenues.
Financial Inducements to Physicians
Dr. Caroline Fife, a wound care physician from Texas and frequent commentator on industry overreach, recounted on her blog receiving an email from an unnamed skin substitute company. The company purportedly highlighted how other clinicians had established a “robust revenue stream” from their bandages, suggesting a patch smaller than a credit card could “generate slightly over $20,000 for your practice.”
Questionable Discount Structures
According to physician interviews and contract documentation reviewed, certain companies provide physicians with “bulk discounts” reaching up to 45 percent. Crucially, doctors subsequently seek Medicare reimbursement for the product’s full, undiscounted price.
Potential Regulatory Violations
Anti-kickback statutes prohibit doctors from accepting financial incentives from pharmaceutical or medical supply companies. While Medicare permits legitimate bulk discounts, experts suggest these bandage rebates could potentially contravene federal law as they did not mandate substantial purchase volumes. Select Legacy contracts reviewed indicated physicians needed to purchase as few as three items to qualify for a 40 or 45 percent discount.
Expert Commentary on Discount Practices
“That is not a volume discount,” stated Reuben Guttman, a Washington, D.C.-based attorney specializing in Medicare whistleblower cases. Mr. Guttman posited that such labeling could serve to mask an illegal kickback arrangement.
Rising Costs and Medicare Billing Trends
In 2024, at least nine medical practices billed Medicare exceeding $50 million for skin substitutes. This data is based on an analysis conducted for The Times by the National Association of Accountable Care Organizations, an organization representing medical groups incentivized to control Medicare spending.