Medicare Skin Substitute Audits: Qlarant & Novitas Investigations Surge as Spending Hits $1.6B

The wound care industry faces unprecedented scrutiny as Medicare Part B expenditures for skin substitutes exceeded $1.6 billion in the fourth quarter of 2023 alone. The spending surge has triggered a wave of skin substitute fraud investigations and recoupment demands from the Centers for Medicare & Medicaid Services (CMS) and Medicare auditors like Qlarant and Novitas.

Meanwhile, CMS is overhauling* its coverage guidelines for skin substitute coverage to address concerns about the disconnect between widespread use of the products and low-quality evidence of their clinical effectiveness.

This evidence gap has created a challenging paradox for Medicare administrators. On one hand, diabetic foot ulcers (DFUs) and venous leg ulcers (VLUs) represent serious clinical conditions associated with significant morbidity, amputations, and diminished quality of life, affecting vulnerable Medicare populations who need effective treatments.

On the other hand, the current evidence base is plagued by "poor study designs, small sample sizes, lack of comparators or standardization of practices, lack of long-term efficacy and safety data, high risk of bias, inconsistent definitions and outcome measures, and lack of blinding," according to CMS.

Perhaps most troubling from CMS’s perspective is that "most studies are sponsored by manufacturers of products without independent validation of their results," raising questions about the objectivity of the evidence base supporting current coverage decisions.

It is within this landscape that CMS began reviewing its coverage guidance for skin substitute grafts.

CMS published proposed revisions to its Local Coverage Determinations (LCDs) for skin substitute grafts in April 2024. After a public comment period, the final version was scheduled to go into effect in early 2025.

However, on April 11, 2025, “as part of the transition to a new Administration,” CMS delayed the effective date of its LCD coverage policy to January 1, 2026.

*UPDATE: On December 24, 2025, CMS’ A/B Medicare Administrative Contractors (MACs) withdrew the Local Coverage Determinations (LCDs) for Skin Substitute Grafts/Cellular and Tissue-Based Products for the Treatment of Diabetic Foot Ulcers and Venous Leg Ulcers that were scheduled to become effective on January 1, 2026.

With the withdrawal of these LCDs, there are no changes to skin substitute coverage for Part B Medicare beneficiaries in 2026; however, the calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) final rule, impacting how CMS will pay for skin substitutes, remains in effect.

Protecting Against Qlarant, Novitas Audits: Best Practices for Wound Care Providers

Despite the delay in updated skin substitute coverage guidance, Qlarant and Novitas audit exposure remains high as Medicare contractors continue aggressive reviews of wound care fraud patterns.

Maintain thorough documentation under existing LCDs while preparing for future requirements. Consider these best practices:

Pretreatment:

Document the duration of the wound in weeks with the exact location on the body.
Describe any treatment approaches of the underlying disease contributing to the ulcer with the diagnosis of the patient; include any conservative treatment attempts that have failed.

Each Treatment

Document size of wound in square centimeters (with pictures)
Document size of the graft used with the product’s serial number
Document all conservative measures accompanying the treatment, such as dressing changes
Document how the wound site was prepared and how the skin substitute was fixated on the wound
Document whether this is the initial or re-application and any progression (decrease in size, depth, increase in vascularity, granulation tissue, etc.)
Use the most appropriate size available and document wastage

Responding to a Wound Care Audit or Recoupment Demand

If you receive a request for records or demand for repayment, contact an attorney immediately. A healthcare attorney can review the records requests for patterns, and assist you in preparing and presenting the requested documentation to help head off potential allegations.

Note the number of days you have to respond: CMS contractors, such as Novitas or Qlarant, typically give providers 30 days from the date of the letter to respond. Failure to respond will result in a determination that an overpayment was made.

If you receive a demand for repayment or recoupment, you can dispute the determination, but only if you act quickly. Medicare allows 120 days to request a redetermination, and with often hundreds of medical records and patient files under scrutiny, the sooner you can work with an attorney to prepare your rebuttal, the better.

Prepare for 2026 Changes: Strengthen Skin Product Documentation Now

The January 1, 2026, implementation of revised LCDs for skin substitute grafts will reshape reimbursement rules for wound care providers serving the Medicare population.

Smart providers can use this delay in the implementation of the new standards to strengthen their compliance programs:

Monitor Medicare’s local coverage determinations for changes or additional delays in the effective date.
Review which current skin substitute products will remain covered. For practices heavily invested in soon-to-be non-covered products, begin transitioning to approved alternatives. Talk to your supplier about meeting demand after the LCDs go into effect.
Develop treatment protocols that meet the 2026 standards.
Educate all team members and third-party billing contractors on the upcoming CMS guidelines to avoid claims denials and audits.

Act Now to Protect Your Wound Care Practice

Don’t risk claims denials, audit scrutiny, and recoupment demands. Strengthen documentation and prepare for new coverage criteria now, and seek legal guidance as soon as Novitas or Qlarant start asking questions.

With only 30 days to respond to records requests, early intervention is critical to protecting against potentially devastating financial exposure.

Need help with a Medicare audit or preparing for the 2026 coverage requirements? Contact our healthcare attorneystoday.