Skin substitute and wound graft fraud

What it is

Skin substitutes are expensive wound coverings that Medicare pays for under conditions. The fraud described in these cases bills Medicare and other insurers for them when they were not medically necessary, and in the Arizona case, with an elaborate sales structure around them: representatives who found patients, a distributor that paid for orders, and clinicians who applied the grafts. The Justice Department described the Arizona patients as elderly and terminally ill, including hospice patients.

How it actually works

1. The product

   Skin substitutes, which the New York Times describes as bandages manufactured from dehydrated placentas, cost thousands of dollars per square inch. Medicare pays for them when they are medically necessary.

2. The sales representative

   Gehrke’s companies hired sales representatives with no medical training to find elderly patients with wounds, including hospice patients. According to the indictment as Courthouse News reported it, she told representatives to target hospice facilities because that was where the most money was.

   Where it could have stopped

   The Utah indictment says Medicare billing of a skin substitute is permissible only if it is medically necessary and basic wound care has been administered to the wound for the previous 30 days. A patient or relative can ask the clinic what the product is, why it is needed and who ordered it.

3. The oversized order

   Representatives were told to order grafts of 4x6 centimeters or larger even for much smaller wounds, and were financially incentivized to do so, which the Justice Department says maximized reimbursement.

4. The application

   Nurse practitioners were directed to apply every ordered graft and set aside their own medical judgment. The release says grafts were applied to infected wounds, wounds that had already healed and wounds that did not respond to treatment.

5. The copayment that is never collected

   The Utah indictment alleges the defendants routinely did not pursue Medicare copayments from beneficiaries, which at times would have been thousands of dollars owed by a beneficiary. That is an allegation.

6. The bill and the kickback

   The treating company bills Medicare, TRICARE, CHAMPVA and private insurers. In the Arizona case the distributor paid Gehrke’s companies more than $279 million in kickbacks. In the Nevada charges, the Justice Department alleges that the invoices sent to Medicare did not reflect a 40% kickback.

7. The money and the crackdown

   In the Arizona case, nearly $100 million in assets were seized and the defendants were sentenced in October 2025. According to the New York Times, Medicare paid nearly $15 billion for skin substitutes in 2025, and the administration then sharply cut reimbursement rates. Charges against doctors in Utah and Nevada followed in 2026.

Why it works

The product costs thousands per square inch. The New York Times describes skin substitutes as costing thousands of dollars per square inch while not having been found to help most wounds heal better than regular bandages.

Size drives the bill. In the Arizona case, orders were sized 4x6 centimeters or larger even for smaller wounds, because larger grafts maximize reimbursement.

The patients described are elderly and often terminally ill. The Justice Department describes elderly and terminally ill patients, including hospice patients, and Gehrke told sales representatives to target hospice facilities, according to the indictment as reported.

The copayment can disappear. The Utah indictment alleges the copayments owed by patients were routinely not pursued.

Kickbacks can be hidden. In the Nevada charges the Justice Department alleges sham invoices that did not reflect a 40% kickback.

Where it comes from

Entirely domestic: Medicare’s payments for the products, and the companies that billed them.

The scale was visible in Medicare’s own data. According to figures the administration released and Fox 9 reported, skin substitute claims rose from $200 million in 2019 to $14.4 billion in 2025, a 7,100 percent increase. CMS said it identified 4,200 suspicious claims totalling $224 million through May.

Cases span Arizona, Utah and Nevada. The Arizona couple were sentenced in October 2025. The Utah and Nevada cases were charged in May and August 2026. Charges are allegations, the people charged are presumed innocent unless convicted, and this page does not say how the charged cases ended.

Real cases

Red flags

• A sales representative with no medical role who identifies patients with wounds, especially in hospice or nursing settings.
• Wound coverings much larger than the wound.
• A skin substitute applied to a wound that is infected, already healed or not responding to treatment.
• Repeated applications where basic wound care has not been given for the previous 30 days.
• A clinic that does not collect copayments for an expensive product.
• Medicare Summary Notices listing skin substitute products that you or your relative do not remember being applied.

If it’s happening to you

If you or a relative has had a skin substitute applied, or you suspect a billing problem:

1. Ask the clinic what the product was, why it was needed and who ordered it.
2. Ask whether basic wound care was given first. The Utah indictment treats 30 days of it as a billing condition.
3. Review the Medicare Summary Notice for skin substitute claims you do not recognise.
4. Note whether copayments are collected. The Utah indictment alleges copayments were routinely not pursued.
5. Report suspected fraud to the HHS Office of Inspector General. See where to report.

Where the money goes

Entirely domestic: from Medicare and other insurers to the billing company, then on to sales representatives and the defendants’ own spending.

In the Arizona case, the insurers paid $614,990,420 on $1.2 billion in claims. Gehrke’s companies received over $279 million in kickbacks from the distributor, and tens of millions of dollars went on to sales representatives. Nearly $100 million in assets were seized, including over $68 million in bank balances, four luxury vehicles, $22 million in life insurance annuities, and jewelry and precious metals. The Justice Department alleges that the Nevada doctor used his Medicare earnings to finance multimillion-dollar yachts.

By the numbers

No published dataset breaks this scheme out as its own category yet, so there is no chart to show. The data page explains which agency categories exist and why some schemes are invisible in official statistics.