Ethics Issue No. 1: When Home Health Offloads Wound Care

Sep 22

How PDGM, separately billable physician services, and advanced wound care can create misaligned incentives

Medicare pays home health agencies to care for patients with wounds. At the same time, Medicare can separately pay physicians and other practitioners for services delivered to those same patients. That can be clinically appropriate and entirely legitimate. But when the economics reward a home health agency for shifting meaningful portions of wound care to another Medicare biller, the incentives deserve scrutiny.

This is not an argument against mobile wound care or home health agencies. Some patients need specialist evaluation and advanced intervention during a home health agency episode. The ethical problem arises when escalation is driven by the opportunity to reduce one provider’s workload or cost rather than by the patient’s medical need.

1. Medicare pays home health agencies to manage wound patients

Under the Patient-Driven Groupings Model (PDGM), Medicare pays home health agencies for 30-day periods of care. For CY 2026, the national standardized 30-day payment rate is $2,038.22 before the individual period’s case-mix and geographic wage adjustments. Non-routine supply payment is built into the standardized 30-day rate (CMS’s 2026 Home Health PPS rate update) .

Wound patients are assigned to wound-specific PDGM groups with different case-mix weights based on admission source, timing, functional level, and comorbidity. In the final CY 2026 PDGM case-mix table, wound weights range from approximately 1.00 to 1.96. At the national standardized rate, that is roughly $2,050 to $3,990 for a non-LUPA 30-day period before geographic adjustment and other payment adjustments. Many wound group combinations therefore land in the roughly $2,500-$3,500 range.

There is an important nuance. Medicare home health consolidated billing does not mean every service furnished to a home health patient must be billed by the home health agency. CMS’s Medicare Benefit Policy Manual states that physician and nurse practitioner services paid under the Physician Fee Schedule are not included in the home health PPS rate, and supplies incident to a physician service are not subject to home health consolidated billing. In other words, there are completely legitimate circumstances in which a home health patient also receives separately billable physician wound care.

That distinction is exactly why the incentive problem matters.

2. Offloading wound care can be financially attractive

Over the last several years, mobile wound practices have had an economically compelling proposition for home health agencies: let the mobile practice take on some of the wound-care workload and, when appropriate, furnish separately billable practitioner services and advanced therapies.

For a home health agency, that can translate into:

• fewer skilled nursing visits devoted to the wound;

• less supply expense in situations where supplies are properly furnished incident to a separately billable practitioner service;

• less pressure to build deep internal wound-care expertise; and

• the ability to retain the agency’s PDGM payment while another provider assumes part of the clinical workload.

There are cases where this is exactly what should happen. A patient may have a wound that is not progressing, a diagnostic question, infection or ischemia risk, or a need for a procedure outside the home health agency’s scope. External wound expertise can be valuable and necessary. This is a very small minority of cases.

One sophisticated, multi-state home health agency that has invested heavily in wound care expertise estimates that only 1 in 100 cases requires an advanced intervention if the home health agency is appropriately knowledgeable about wounds. The Wound Company’s data is in agreement with this claim. The vast majority of wounded patients receiving home health care do not need an advanced intervention, much less a series of advanced interventions by a wound care clinic (mobile or outpatient).

The ethical concern is the decision rule. If an external referral occurs because the wound needs escalation, the system is working. If the referral occurs primarily because moving the wound elsewhere reduces the home health agency’s cost, the clinical and financial incentives have separated.

3. The explosion in advanced wound spending shows why this matters

The broader Medicare data are extraordinary. CMS reports that Medicare Part B spending on skin substitute products in non-facility settings rose from roughly $252 million in 2019 to more than $10 billion in 2024, ~40x. (CMS’s CY 2026 Physician Fee Schedule final rule fact sheet describes that increase as nearly forty-fold).

The trend continued in 2025. MedPAC’s July 2026 Data Book reported Medicare fee-for-service claims showing approximately $18.4 billion in skin-substitute spending in 2025, with average spending of about $270,000 per user.

HHS-OIG separately found that, among Medicare enrollees with a skin-substitute claim, costs for people reportedly treated at home were four times as high as costs for those treated in an office setting. OIG attributed the overall spending increase to both utilization and price growth and highlighted financial incentives, including spread pricing, as a major concern. Read the HHS-OIG report.

But these reports missed an interesting point: how did these mobile wound practices gain access to patients so quickly across every geography in the United States? Of course, multiple forces were involved, including pricing, product selection, questionable billing, and fraud. But the data do show that advanced wound care in the home became an extraordinarily high-cost area of Medicare and that this spending was concurrent with home health episodes. That makes the interfaces between home health, mobile wound practices, and separately billable Part B services worth examining carefully.

CMS responded by fundamentally changing Medicare payment for skin substitutes beginning in 2026, moving away from the prior product-specific ASP-based model in the non-facility setting and paying these products as incident-to supplies under a new methodology. That reform addresses one major incentive. It does not eliminate the broader question of how and why patients are escalated out of bundled home health episode care unnecessarily.

In my view, the 2026 payment reform addresses a major product-pricing incentive but does not fully address the referral and care-fragmentation incentives that can arise during a home-health episode.

4. Anti-Kickback Statute (AKS) Issues

The federal Anti-Kickback Statute (AKS) is an intent-based criminal law. HHS-OIG explains that it prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or reward referrals or other federal health care program business. Remuneration can include anything of value, not only cash. HHS-OIG’s fraud and abuse guidance provides the basic framework.

That does not mean that every referral that saves a home health agency money is automatically an illegal kickback. AKS analysis is fact-specific. Intent matters. Contract structure matters. Applicable statutory exceptions and regulatory safe harbors matter. Medical necessity and independent clinical judgment matter.

But when a commercial relationship between a mobile wound practice and home health agency is explicitly sold on the premise that “if you send us these patients, you can reduce your own visits or supply expense,” the arrangement deserves serious compliance review. Avoided costs are economically meaningful. The more directly those savings are linked to generating reimbursable referrals for another provider, the more important it becomes for counsel and compliance leadership to evaluate the structure rather than assuming that the absence of a cash payment resolves the issue.

Some organizations may attempt to create more distance from the referral decision by asking a primary care provider to place the order or by “educating” the patient about an outside practice and encouraging the patient to call. Those procedural steps may matter legally. They do not answer the underlying ethical question: Was the patient escalated because the wound required it, or because transferring responsibility improved someone’s economics?

5. What an ethical home health wound-care model looks like

The answer is not to isolate home health agencies or insist that they manage every wound alone. The answer is to make internal wound competence the default and external escalation a clinically governed pathway.

A strong model should include:

• Internal wound expertise. Home health teams need access to clinicians who can assess wounds, standardize treatment plans, select appropriate supplies, and coach frontline staff (FWIW, by The Wound Company’s estimates, <5% of home health agencies today have certified staff to meet this criteria).

• Defined escalation criteria. External specialists should be used when the wound is not progressing as expected, the diagnosis is uncertain, advanced diagnostics or procedures are needed, or other clinical red flags are present.

• Independent medical-necessity review. The decision to escalate should be documented clinically and should not be controlled by a vendor whose revenue depends on the referral.

• Real coordination with the treating primary care provider. Primary care involvement should be substantive, not a rubber stamp used to create distance from the referral.

• Financial neutrality around referrals. No party should be rewarded for driving volume to separately reimbursed advanced wound services.

• Measurement across benefit silos. Agencies, ACOs, and health plans should track healing, hospitalization, visit utilization, supply use, external referrals, and concurrent Part B wound spending together.

A mobile wound specialist can be an excellent part of this model. The specialist should function as escalation capacity for patients who need it — not as an outsourcing channel that allows routine wound-care responsibility to migrate to the highest-paying part of Medicare.

6. Policy opportunities for greater accountability

Medicare’s benefit silos make it possible for one provider’s cost reduction to become another part of Medicare’s spending increase.

At the most basic level, policymakers and risk-bearing organizations should examine concurrent home health and advanced wound-care utilization as a single episode of care, not as unrelated claims streams. That means looking for unusually high rates of external wound referral during home health episodes, rapid escalation to advanced therapies without documented standard care, repeated high-cost applications, and patterns in which the same outside practices receive large volumes of patients from the same agencies. These signals do not establish wrongdoing. They identify where clinical and compliance review is warranted. And these reviews should be initiated by CMS.

A multi-faceted change in payment policy may also be warranted given the scale of fraud, waste and abuse in wound care. For example, CMS should consider deducting the wound care clinical grouping PDGM payment for home health agencies for advanced wound care procedures happening within the episode above a certain threshold. The deduction should be proportional to the level of external intervention, consider the type of external intervention (e.g. exclude evaluation and management visits) and capped at a certain limit. For example, some single skin substitute applications can cost $12,700 or more, which is vastly more than the entire PDGM 30-day payment. This payment policy change requires thoughtful modeling.

If advanced wound therapies are being done concurrent with a home health episode, reimbursement for the advanced therapies should also receive a downward adjustment. The financial consequence should not be one-sided against only the home health agency. The penalty for either side does not need to be that high for this change to have its intended effect; I believe home health agency behavior nationwide would change immediately.

CMS should also reassess the PDGM wound care payment level itself with this payment policy assumption in place, fully modeled, and consider increasing the baseline PDGM payments for wound care accordingly, otherwise this deduction policy executed against lower, historical PDGM payments will be too strenuous for home health agencies. Increasing the PDGM payment for wound care also sends a clear signal: we want home health agencies to rise up and take ownership; we believe home health agencies are central to high-quality, cost-effective wound care.

The ethical question is not whether advanced wound care procedures should exist during a home health episode.

The question is whether the patient is being escalated because the wound medically requires advanced care — or because transferring responsibility improves someone’s margin.

At The Wound Company, we believe specialized wound expertise should increase clinical accountability, not fragment it. We support home health agencies by doing medically appropriate assessments, continuously updating their orders, aligning supply recommendations to their formularies, calibrating visit frequency in new orders to wound progression, allowing for timely discharge into our longitudinal skin integrity programs, and providing ongoing education and support about wound care practices. Taken together, this allows the home health agency staff to practice at the top of their license and take ownership of wound care. The Wound Company’s in-person care teams provide advanced treatments such as debridement in the home only when medically necessary and no patient is automatically enrolled in a series of advanced therapies, a common pattern seen with fee-for-service practices. Advanced therapies at The Wound Company are done very methodically, assessing and reassessing the efficacy of the intervention before further advanced interventions are recommended or scheduled for the patient. If partnered with an ethical actor like The Wound Company, home health agencies would not suffer financial harm, retaining the higher PDGM payments recommended.