Defining Fraud, Waste and Abuse in Medicare: CMS Clarifies Standards for Skin Substitute Reform

• The Centers for Medicare & Medicaid Services (CMS) defines fraud as intentional misrepresentation or deception for improper Medicare benefit/payment; waste as over-use or misuse of resources without intent; and abuse as practices inconsistent with sound fiscal, business, or medical practices.¹
• CMS identifies mounting concerns of fraud, waste, and abuse in the wound-care skin substitute market, noting Medicare Part B spending rose to over $10 billion annually in 2024.²
• In response, CMS is reforming payment policy for skin substitutes (effective Jan 1 2026) and launching the voluntary Wasteful and Inappropriate Service Reduction Model (WISeR) to reduce misuse of high-risk services.³

Healthcare providers and wound care stakeholders should note that CMS has clarified and reinforced its definitions of fraud, waste, and abuse—in particular in the context of advanced wound care technologies such as skin substitutes—via regulatory, audit, and payment-policy actions. The definitions stem from official CMS and HHS OIG guidance.¹

CMS Definitions of Fraud, Waste, and Abuse 

Fraud occurs when a provider knowingly submits false claims, falsifies records, solicits or pays kickbacks, or knowingly orders medically unnecessary services to obtain payment from Medicare.¹ Waste is generally defined as over-utilization or misuse of resources that results in unnecessary costs to the Medicare program, and typically is not associated with criminal intent.⁴ Abuse involves practices that, while not necessarily intentional deception, are inconsistent with sound business or medical practices and result in unnecessary cost or services.⁵ 

Context: Skin Substitute Policy Reform 

In its recent review, the U.S. Department of Health & Human Services Office of Inspector General (HHS-OIG) flagged the skin substitute market under Medicare Part B as vulnerable to fraud, waste, and abuse. The report found “skyrocketing” spending—over $10 billion annually by the end of 2024—and noted providers treating home care patients incurred costs four times those in office settings.² 

As a response, CMS issued a final rule to be implemented starting January 2026 that will shift payment for most skin substitutes from the average sales price (ASP) plus 6% model to a flat standardized rate (eg, ~$127.28/ sq cm) and reclassify skin substitutes under the Physician Fee Schedule as “incident-to” supplies.^6,7 

CMS is also launching the WISeR model starting January 1, 2026 (for states including TX, AZ, OK, OH, NJ, and WA) to test enhanced prior-authorization and review processes for items at risk of fraud/waste/abuse—including skin substitutes.⁸

Implications 

For wound-care clinicians, coders, suppliers, and healthcare administrators, these clarified definitions and policy changes carry direct implications. Clear understanding of fraud, waste, and abuse shapes compliance programs, documentation practices, and billing oversight. The skin substitute reforms mean providers must carefully assess medical necessity, maintain thorough documentation, and adjust to reduced reimbursement rates. Payers and manufacturers face pressure to align product use with evidence-based care. The regulatory emphasis signals that Medicare will scrutinize high-cost technologies, limiting therapeutic back-doors enabled by inflated pricing or lack of clinical justification. 

By defining fraud, waste, and abuse in concrete terms and linking them to the wound care skin substitute category, CMS is tightening the compliance framework for Medicare reimbursement. Clinical and business stakeholders should prepare now for the January 2026 payment shift and strengthened review regimes. 

1.  Centers for Medicare & Medicaid Services (CMS). Medicare Learning Network: Fraud & Abuse Booklet. Accessed Nov 2025. https://www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/fraud-abuse-mln4649244.pdf 
2. U.S. Department of Health and Human Services, Office of Inspector General (OIG). OIG Evaluation Report: OEI-BL-24-00420. Accessed Nov 2025. https://oig.hhs.gov/documents/evaluation/10939/OEI-BL-24-00420.pdf 
3. Centers for Medicare & Medicaid Services (CMS). CMS Launches New Model to Target Wasteful, Inappropriate Services in Original Medicare. Published June 2024. Accessed Nov 2025. https://www.cms.gov/newsroom/press-releases/cms-launches-new-model-target-wasteful-inappropriate-services-original-medicare 
4. Centers for Medicare & Medicaid Services (CMS). Overview: Fraud, Waste, and Abuse for Providers. Accessed Nov 2025. https://www.cms.gov/files/document/overviewfwaprovidersbooklet072616pdf 
5. Sitecore Content Hub. Medicare and Medicaid Fraud, Waste, and Abuse Prevention—CMS. Accessed Nov 2025. https://shc-p-001.sitecorecontenthub.cloud/api/public/content/provider-medicare-medicaid-fraud-waste-abuse-prevention-cms.pdf 
6. Centers for Medicare & Medicaid Services (CMS). CY 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F). Accessed Nov 2025. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f 
7. Centers for Medicare & Medicaid Services (CMS). Average Sales Price (ASP) for Medicare Part B Drugs. Accessed Nov 2025. https://www.cms.gov/medicare/payment/fee-for-service-providers/part-b-drugs/average-drug-sales-price 
8. Centers for Medicare & Medicaid Services (CMS). Wiser – Innovation Model Overview. Accessed Nov 2025. https://www.cms.gov/priorities/innovation/innovation-models/wiser