Article Summary: Skin substitutes and biologic implants have become one of the fastest-growing cost drivers for health plans, with Medicare spending increasing more than 50-fold in six years and projected to exceed $13 billion. As utilization expands across outpatient settings, complex billing rules, percent-of-charge carve-outs, unit variability, and contract misalignment are driving hidden payment risk. This article explains how claim-level analytics, clinical validation, and contract-aware auditing help health plans identify overpayments, manage emerging risk, and maintain reimbursement accuracy as this category continues to grow.

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By: Skyler Young, Vice President of Datamining & Technology and Rita Johnson, RHIA, CCS-P, Director of Outpatient & Professional Audits

Biologic implants and skin substitutes have quietly become one of the fastest-growing cost drivers in both commercial and government health plans. Once considered niche therapies reserved for complex wounds or specialized procedures, these products are now widely used across outpatient hospital settings. Utilization has grown fast and so have costs.

Medicare spending on skin substitutes has increased more than 50-fold in just over six years, with total spend projected to exceed $13 billion this year. Commercial plans are seeing similar patterns as new products enter the market.

But growth has outpaced transparency. Billing, coding, and reimbursement rules for these products remain highly complex, and frequently misapplied. The combination of high growth, high cost, and high complexity is creating a perfect storm for payment errors, hidden leakage, and overlooked recoveries.

Here’s what health plans need to pay attention to now.

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Skin Substitute & Implant Claims: Rising Costs and Hidden Risks for Health Plans

Implants, including skin substitutes, are not inherently problematic. They serve an important clinical purpose: supporting wound healing, reducing complications, and improving outcomes for patients with chronic or complex wounds. But rapid growth has outpaced the industry’s ability to manage billing and payment variation.

Government watchdogs, including the OIG, have flagged widespread concerns around fraud, waste, and abuse, but they also highlight something else: Most payment errors are not intentional.  

They stem from:

• New products hitting the market faster than billing teams can adapt

• Providers using outdated charge masters

• Misalignment between clinical documentation and units billed

• Carve-out payment methodologies that magnify small discrepancies into large reimbursements

• Percent of charge reimbursement models that can be inflated and difficult to validate.

And in a world where biologics are billed per square centimeter and reimbursed as a percent of charge, even clinically appropriate services can become financial pressure points. Small billing varianceses can turn into outsized payments, making accuracy and oversight essential.

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Health Plans: Unit Variability in Skin Substitutes Signals Significant Billing Risk

In a proof of concept with a national commercial health plan, Penstock uncovered billing inconsistencies for a skin substitute used in wound care. Across consecutive weekly visits for the same wound, billed units swung sharply: 21 → 21 → 21 → 70 → 11 → 3 units.  

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Clinically, wound size should remain stable or improve gradually, so dramatic week-to-week swings in billed units are highly atypical—and the kind of fluctuation that only becomes visible through claim-by-claim analysis across the patient’s entire episode of care. With a percent-of-charge carve-out in place, any change in billed units directly affected payment. In this case, unit swings led to payment variability that didn’t align with typical wound-care progression and warranted closer review.

Emerging industry patterns suggest this is not an isolated event. Unit volatility, when left unchecked, may be quietly driving cost growth across many plans.

To make matters more complex, implant claims often introduce their own billing challenges. When revenue code mapping at the provider level doesn’t match intended contract language at the plan level, carve-out dollars can be triggered unintentionally, creating a second avenue for overpayment. Together with unit variation, these dynamics create the “perfect storm” most health plans never see until a deep audit reveals it.

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What Health Plans Should Do—Now

Skin substitutes and implantable devices are evolving faster than most oversight programs. The goal isn’t to overcorrect or slow clinical innovation. It’s to make sure reimbursement keeps pace with complexity. The following steps can help plans strengthen accuracy and reduce unnecessary spend.

1. Look beyond traditional edits into deeper analytics
   Edits alone won’t catch issues in this category. Plans need visibility into serial claim patterns, unit progression, provider-level habits, HCPCS assignment, revenue code alignment, and expected clinical outcomes. These patterns only surface through deeper data review.

2. Validate units and pricing against real-world benchmarks
   Market-wide pricing databases, like those used by Penstock to conduct implant analytics, help reveal when a provider’s billed amount or unit count is far outside national norms. This is essential for products billed per square centimeter or reimbursed as a percent of charge.

3. Re-examine how provider contracts trigger implant payments
   Many overpayments aren’t coding errors. They’re contract configuration errors. If a contract pays supplemental amounts when an implant appears on a specific revenue code, a single mapping mistake can trigger unintended carve-outs across many claims. Contract rules should be reviewed with this risk in mind.

4. Require item-level validation for high-cost categories
   For biologics, implants, and skin substitutes, plans should require supporting documentation, itemized bills, invoices, or surgical notes, when needed. Claim lines alone rarely provide enough detail to confirm accurate billing or appropriate unit reporting.

5. Ensure your PI partner brings clinical, pricing, and contract expertise
   The most meaningful findings in this space come from combining coding analysis with clinical insight, pricing validation, and contract interpretation. Health plans should look for partners who understand all four domains and can connect the dots across them, not just apply edits.  Penstock pairs decades of clinical, coding and billing expertise with advanced analytics to deliver actionable insights and accurate recoveries across each of these domains.

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The Bottom Line: This Category Is Growing Fast and the Risk Grows With It

Skin substitutes and biologic implants can deliver real clinical value. They accelerate healing, expand options for complex cases, and are becoming a larger part of today’s care. But with new products come new billing patterns, new pricing structures, and new vulnerabilities that many PI approaches aren’t built to catch. Health plans that treat this category like routine outpatient billing will miss exposure. Those that approach it as an emerging specialty, supported by partners who can mine data deeply, interpret clinical context, and audit claim-by-claim rather than chasing low-hanging fruit—will stay ahead of risk while supporting appropriate care.

If your plan is seeing rising spend or unexplained variation in skin substitutes or implant claims, Penstock can help you evaluate where the risk is—and where recoveries may be hiding. Our team specializes in the kind of deep claim-level auditing and clinical validation these categories demand. Contact us to start the conversation.

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