Cracking Down on Alleged Wound Care Fraud: A New Era of DOJ and HHS Enforcement

In the last year, the U.S. Department of Justice (DOJ), U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), and Centers for Medicare & Medicaid Services (CMS) have targeted wound care practices nationwide for potential Medicare fraud and abuse through a mix of enforcement and regulatory actions. Two recent False Claims Act (FCA) settlements highlight the ongoing federal scrutiny of this medical specialty and its associated services and supplies.

Last month, DOJ announced that Arizona wound graft marketing company Apex Medical, LLC (Apex) and its owners agreed to pay $309 million to resolve FCA liability, following the owners’ fraud-related pleas and sentencing, based on still-sealed qui tam allegations of false Medicare claims for unnecessary amniotic wound allografts and various kickback arrangements. And in November 2025, DOJ announced a $45 million settlement with the principal owner of Physicians Management LLC (Vohra), one of the nation’s largest providers of bedside specialty wound care for nursing home and skilled nursing facility patients, to resolve the United States’ original FCA allegations of unnecessary surgical debridement procedures and related upcoding. These FCA settlements came on the heels of a September 2025 HHS-OIG report that deemed skin substitutes “particularly vulnerable to questionable billing and fraud schemes,” Medicare’s closely watched October 2025 revisions to its skin substitute payment rates, and CMS Administrator Mehmet Oz’s November 2025 pledge to crack down on skin substitute billing fraud.

The Vohra Matter

In April 2025, the United States filed its original FCA complaint against Vohra and its owner in the Southern District of Florida, alleging the submission of false claims to Medicare (and other federal payors) for upcoded and medically unnecessary surgical debridement procedures, driven in part by corporate quotas that were allegedly set to pressure physicians to maximize profits. The complaint also alleged that Vohra created false medical documentation by programming its electronic health record (EHR) and billing software to ensure it always billed Medicare for higher-reimbursed products. The government further alleged that Vohra’s automated EHR used pre-programmed features that restricted physicians’ clinical decisions and minimized clinical documentation. Notably, the United States filed its complaint without a relator, highlighting DOJ’s willingness to pursue alleged skin substitute fraud on its own.

On November 21, 2025, DOJ announced the $45 million settlement with Vohra, which also entered into a five-year Corporate Integrity Agreement (CIA) with HHS-OIG. The CIA also introduced a novel oversight provision designed to aggressively monitor Vohra’s health information technology (HIT) systems for compliance. Specifically, Vohra agreed to an Independent Review Organization’s assessment of its HIT systems’ functionality, including its EHR systems and “any other software or system for treatment or payment.” The CIA also requires Vohra’s chief technology officer and EHR directors to provide OIG with certifications of the EHR’s functionality. Such oversight over EHR systems implements a key priority that the DOJ-HHS FCA Working Group announced in July 2025: enforcement of the “[m]anipulation of Electronic Health Records systems to drive inappropriate utilization of Medicare covered products and services.”

The Apex Matter

On December 12, 2025, the DOJ announced the criminal sentencing of and related civil FCA settlement by Apex’s owners, Alexandra Gehrke and Jeffrey King. The two had already pleaded guilty in late 2024 and early 2025 to conspiracy to commit healthcare fraud and wire fraud after causing over $1 billion in false claims for unnecessary amniotic wound allografts used to treat hospice patients and others. Based on the admissions in their plea documents, the Apex owners received hundreds of millions of dollars in kickbacks from a wholesale graft distributor, often in the form of non-compliant rebates, in exchange for ordering graft products that they then billed to Medicare. Through two of their companies, Gehrke and King paid sales representatives millions of dollars to identify elderly patients with wounds of any size and then order unnecessarily large skin substitute grafts. Gehrke and King then referred these patients to two of their other companies, which contracted with nurse practitioners to apply grafts to the patients, and then billed Medicare and other payors for the services.

Both of Apex’s owners were sentenced to over 14 years’ imprisonment and were ordered to pay over $1 billion in restitution to the affected payors. Their subsequent $309 million FCA settlement resolved allegations that had originally been brought by qui tam relators. DOJ’s press release noted that those allegations remain under seal because the government continues to investigate other parties.

Regulatory Activity by HHS-OIG and CMS

In September 2025, HHS-OIG released a report titled “Medicare Part B Payment Trends for Skin Substitutes Raise Major Concerns About Fraud, Waste, and Abuse,” which summarized OIG’s review of Medicare billing data for skin substitute products. The report emphasized that Medicare spending on skin substitutes rapidly grew from just under $400 million in 2022 to over $10 billion in 2024, driven by high utilization and high reimbursement rates. The report also flagged certain utilization patterns and potential outlier billings associated with fraud risk, such as the consistent use of skin substitutes on a patient’s first visit without any prior attempt at conservative treatment; the products’ use for non-approved conditions or at excessive quantities for a given condition; and the four-fold increase in spending for home care patients compared to those treated in an office setting. Ultimately, OIG encouraged policymakers to revise skin substitute pricing to eliminate the incentive for improper or fraudulent billing, while ensuring that Medicare enrollees who need treatment continue to receive appropriate care.

Soon after, in October 2025, CMS issued its final rule for Medicare Part B’s 2026 Physician Fee Schedule. Among other things, the final rule changed the payment methodology for skin substitutes used in the office-based and hospital outpatient settings. As of January 1, 2026, the new fee schedule now classifies most skin substitutes as “incident-to” supplies, to be reimbursed at a standardized flat rate (around $127 per square centimeter), rather than as “biologicals” to be reimbursed at the (typically higher) rate of 106% of average sales price. Also beginning in 2026, CMS will implement a multi-year prepayment review model for skin substitutes in six states, using “utilization management and artificial intelligence technologies to implement and streamline prior authorization for potentially fraudulent, wasteful, or harmful high-cost services in Medicare Part B.”

Finally, in November 2025, just two weeks before the DOJ announced the Vohra settlement, CMS Administrator Mehmet Oz claimed that skin substitute billing was “massively inflating” Medicare spending. He credited accountable care organizations for flagging supposedly “inappropriate charging” and “cheating” in the skin substitute industry, and announced that a forthcoming Medicare fraud crackdown would focus on skin substitutes.

Takeaways

DOJ’s recent FCA wound care settlements, coupled with the late 2025 skin substitute pronouncements by HHS-OIG and CMS, signal that these settlements are the first of potentially many more enforcement actions targeting skin-substitute and wound-care providers who bill under Medicare Part B. These enforcement and regulatory actions reflect a broader enforcement trajectory that couples DOJ’s litigation authority with HHS-OIG’s data-driven oversight. The Vohra settlement’s EHR-related CIA provisions are also further evidence that the DOJ-HHS FCA Working Group’s enforcement priorities are alive and well. For healthcare providers, suppliers, and investors operating in wound care or other high-cost product lines, proactive compliance programs, robust auditing, and appropriate use of health information technology are essential to mitigate risk in this era of heightened scrutiny. 

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.