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The Antikickback Statute (AKS), Skin Substitute Pricing & “Selling the Spread” – Guest Blog by David Traskey

by | Sep 26, 2025 | Cellular / Tissue-Based Products, CTP / Skin Substitutes | 0 comments

The Antikickback Statute (AKS), Skin Substitute Pricing & “Selling the Spread” – Guest Blog by David Traskey

For the past 3 years I have been watching the “skin substitute” industry and asking what I thought were simple questions about pricing, payments, and the legality of things like “selling the spread.” I have been worried about the possibility that unwary practitioners could end up facing criminal charges under the Antikickback Statute (AKS) for the profits they are making on the sale of Cellular and/or Tissue-based Products (CTPs), aka “skin substitutes.”

These are legal questions and since I am not a lawyer, I asked attorney David Traskey to explain the AKS in relation to skin substitutes. Mr. Traskey recently explained the way in which contractual agreements with manufacturers or distributors could put practitioners at risk under the AKS. He’s the right person to discuss these issues since he previously served as Senior Counsel with the U.S. Department of Health & Human Services, Office of Inspector General (OIG). As he explains in this post, the AKS applies both to those who offer or pay remuneration and those who solicit or receive remuneration, and that each party’s intent is a key element of their liability under the AKS.

Mr. Traskey is now a Partner and the co-head of Garfunkel Wild’s Washington, D.C. office, where he advises individuals and entities involved in government investigations, guides clients on corporate compliance and governance matters, and litigates civil and white-collar health care fraud cases.  You can reach David at (202) 844-3256 or dtraskey@garfunkelwild.com. You will want to read this guest blog very carefully.

–Caroline

Increased Scrutiny of Skin Substitute Invoices

By: David Traskey, Partner
Garfunkel Wild, P.C.

Government regulators have been requesting copies of invoices from providers more frequently during audits and investigations of skin substitutes – Cellular, Acellular, and Matrix-like Products (CAMPs).  Why?  These documents may hold important clues regarding: (1) potential kickbacks; and/or (2) (in)accurate price reporting.  Here are three hypothetical examples that illustrate these points:

Example #1:

  • The provider purchases 10 square centimeters of skin substitute product from the manufacturer, distributor, or wholesaler (MDW). This product appears on the Average Sales Price (ASP) pricing file and is reimbursed at $2,000 per square centimeter.  The provider pays $1,000 per square centimeter and the MDW invoices the provider for the total cost – $10,000 (1,000 x 10).
  • The provider submits a reimbursement claim based on the ASP price. CMS reimburses the provider $20,000 based on the ASP price (2,000 x 10).   
  • The provider keeps the “spread” which is $10,000, meaning, the difference between what he or she received in reimbursement from CMS vs. what he or she paid for the product (20,000 – 10,000 = $10,000)

This situation occurs because CMS sets the ASP prices based on pricing information the MDW reports quarterly and not on what the provider pays for the product.  This payment methodology potentially incentivizes providers to choose products that provide the greatest “spread.”

TAKEAWAY #1: Government regulators may request invoices from providers in an effort to reconcile the quarterly ASP data the MDW reported.  Similarly, a provider’s use of a product(s) with a large spread or routinely switching products to chase a larger spread, may be scrutinized on medical necessity grounds.  As such, providers must be prepared to justify the products they are using, particularly if they are using a more expensive product when a comparable, less expensive product is available.[1]   

Example #2:

  • The provider purchases 10 square centimeters of skin substitute product from the MDW. This product does not appear on the ASP pricing file and reimbursement is calculated in this jurisdiction by the Medicare Administrative Contractor (MAC) based on invoices.  The provider pays $1,000 per square centimeter and the MDW invoices the provider for the total cost – $10,000 (1,000 x 10).
  • The MDW creates a second invoice for the same transaction that it also sends to the provider. According to that invoice, the provider purchased 10 square centimeters of the same product for the same transaction but allegedly paid $1,500 per square centimeter.  The total cost listed on the invoice is $15,000 (1,500 x 10).
  • The provider now has a choice to make when submitting a claim for reimbursement. He or she can submit the true invoice showing a total cost of $10,000 or submit the second invoice of $15,000 and pocket a much larger amount of money from the CMS payment. 
  • Here, submission of the second invoice, if done, may expose both the provider and the MDW to potential liability under the Anti-Kickback Statute because (1) the second invoice does not reflect what the provider paid for the product; and (2) government regulators may view the additional $5,000 in the second invoice as a kickback to induce the provider to continue using the MDW’s product.      

Medicare Administrative Contractor (MACs) manually price products that do not appear on the ASP pricing file by using the published wholesale acquisition cost (WAC) or actual invoices.  The reimbursement for these non-ASP skin substitute products is typically higher because (1) WACs generally reflect the manufacturer’s list price without any discounts; and (2) many invoices do not show post-purchase rebates that may be offered on skin substitute products. 

TAKEAWAY #2: Government regulators may request invoices because they are looking to uncover this type of scheme which involves having more than one invoice for the same transaction.  Here, both the MDW’s and the provider’s conduct creates potential liability under the Anti-Kickback Statute (AKS). 

Example #3:

The provider purchases 10 square centimeters of skin substitute product from the MDW. This product is listed on the ASP pricing file and is reimbursed at $1,000 per square centimeter.  The provider pays $1,000 per square centimeter and the MDW invoices the provider for the total cost – $10,000 (1,000 x 10).

  • The MDW reports this information to CMS as part of its quarterly reporting requirements. However, the price above does not include the discount that the MDW gave to this particular provider in the amount of $250 per square centimeter.  Including the discount, the total cost that provider paid is $7,500 (750 x 10).  

Among other things, manufacturers must deduct price concessions to properly calculate the ASP.  Concessions include the following types of transactions and items: (1) volume discounts,
(2) prompt pay discounts, (3) cash discounts, (4) free goods that are contingent on any purchase requirement, and (5) chargebacks and rebates (other than rebates under the Medicaid program).[2]  CMS reimburses providers at ASP + 6% for using these products.  See, 42 CFR § 414.804.

TAKEAWAY #3: Government regulators may request invoices to look for evidence of discounts or rebates that the MDW or provider failed to report.   In addition to requesting invoices, regulators may also request contracts as well as any communications or correspondence between the MDW and the provider.  Remember, both the provider and the MDW may have potential liability under the AKS.  As such, it is critically important that providers and MDW’s consult with qualified legal counsel to ensure that any proposed arrangements do not run afoul of the AKS. 

Intent Matters under the Anti-Kickback Statute

The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs.  42 USC § 1320a-7b(b).  Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs.

The AKS applies to those who offer or pay remuneration AND those who solicit or receive remuneration.  Each party’s intent is a key element of their liability under the AKS.[3]  The term “knowing” includes actual knowledge as well as circumstances in which a person acts in deliberate ignorance or reckless disregard of the truth or falsity of the information.  Remuneration includes anything of value, including cash, cash equivalents, and rebates or discounts, among others.[4] 

Safe harbors protect certain payments or arrangements that would otherwise implicate the AKS, provided that all of the safe harbor elements are met.  An arrangement is not per se illegal if it does not satisfy all of the elements of a safe harbor.  Instead, regulators will conduct a facts and circumstances inquiry in those instances to determine any potential AKS liability. 

Requesting invoices is another tool in regulators’ arsenals to prevent and detect fraud involving skin substitute products.  It is essential that your invoices are true and accurate given this reality. 

Skin substitutes are expensive. Providers must track the product lifecycle from benefit verification, to purchase order, to packing slip, to invoice, to actual product application on a particular patient.  This requires extensive and meticulous recordkeeping. 

And, like anything, if it seems too good to be true, it probably is.  As a result, it is vitally important to have a team of attorneys, medical necessity experts, and billing, coding, and documentation specialists in your CAMP to assist you at each step to reduce the likelihood of future problems. 

Read more about how to build your team here:

https://garfunkelwild.com/insights/forming-the-right-skin-substitute-team/       

[1] Scientific journal articles or objective studies, along with patient needs and a provider’s skill, judgment, and expertise, may support the use of particular products.  Providers should exercise caution when relying on MDW representations, white papers, or paid studies.    

[2] Bona fide services fees are not considered price concessions. Bona fide service fees, as defined in 42 CFR § 414.802, are fees paid by a manufacturer to an entity, that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement, and that are not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug.

[3] AKS violations may also give rise to potential liability under the False Claims Act and the Civil Monetary Penalties Law. 

[4] The Government does not need to prove patient harm or financial loss to the Federal health care programs to demonstrate an AKS violation.  Likewise, a provider can be guilty of violating the AKS even if he or she actually rendered the service and the service was medically reasonable, necessary, and appropriate.

Additional Resources:

The opinions, comments, and content expressed or implied in my statements are solely my own and do not necessarily reflect the position or views of Intellicure or any of the boards on which I serve.

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