(August 14, 2024): For almost a century, health care providers have used amniotic tissues / amniotic membranes in the care and treatment of wounds.[1] In recent years, health care providers have greatly expanded the scope of therapeutic applications employing amniotic tissues / amniotic membranes in wound care procedures. These developments have led to increased scrutiny by health care payors and regulators. It is therefore imperative that health care providers carefully monitor their utilization of amniotic tissue to ensure that all statutory, regulatory, and contractual obligations are met. This article examines the current enforcement landscape facing providers, focusing specifically on the specific risks (coverage, medical necessity, coding and billing practices) associated with amniotic tissue, umbilical cord, skin substitute, and other wound care products. It also serves to familiarize providers who perform off-label, unapproved amniotic tissue, umbilical cord, and wound care products about the possible administrative, civil and / or criminal charges that they may face.
I. What is the Role of Amniotic Tissue in Patient Care?
Fresh amniotic fluid, tissues and membranes have extraordinary applications. They contain stem cells[2], the purported therapeutic uses and advantages of which are constantly being touted by promoters and marketing representatives around the country. As researchers have found:
“Stem cells are unspecialized cells of the human body. They are able to differentiate into any cell of an organism and have the ability of self-renewal.” [3]
While the potential therapeutic benefits of stem cells appear to be endless, only a handful of treatment uses have been fully researched. To date, most of the uses being promoted have not been cited as an approved-use by the U.S. Food and Drug Administration (FDA). Off-label uses of these amniotic product-based stem cells have been widespread, despite the fact that these off-label treatments have not been established as safe and effective.
An Overview of Amniotic Fluid and Tissue.
Amniotic fluid is the fluid that surrounds the fetus in the amniotic sac during pregnancy and serves a number of crucial functions. It protects the fetus, regulates the temperature of the fetus and allows the fetus to move within the womb.[4] The amniotic fluid surrounding the fetus is comprised of multiple components, such as growth factors, cytokines, and stem cells.
Amniotic tissues surround and contain the amniotic fluid in the womb. Amniotic tissues constitute the innermost layer of the placenta. This layer is broken down into the amnion and chorion membranes. The amnion is a thin, innermost membrane that lines the amniotic cavity, while the chorion is the outermost membrane. Both the amnion and chorion membranes have regenerative properties that are used in the development of amniotic tissue products used in wound care. Amniotic tissues and membranes are used for wound healing (as skin substitutes), to reduce scarring and inflammation.[5] Amniotic tissue and umbilical cord products are also utilized, albeit in an off-label, unapproved fashion, for intraarticular injections and interventional pain management procedures.
II. Regulatory and Administrative Oversight and Coverage of Amniotic-Tissue Products:
Regulatory Oversight of Amniotic Tissue Usage.
The FDA is responsible for the regulation of regenerative medicine products such as placental-based products, including amniotic fluid, tissues, and membranes. Not surprisingly, the FDA has repeatedly expressed concerns regarding the broad marketing of regenerative medicine products (such as umbilical cord blood stem cells, amniotic fluid, etc.) for unapproved purposes. The FDA has received reports of blindness, tumor formations, and infections from the use of these unapproved products.[6] It is important to keep in mind that even if the FDA has approved an amniotic product to be marketed to providers and consumers for certain medical conditions, that doesn’t mean that the product qualifies for coverage and payment by Medicare, Medicaid, and private payors. This lack of coverage can even extend to amniotic and placental-derived products have been alleged to be beneficial in the treatment of musculoskeletal conditions, chronic pain, dental conditions, and alopecia.[7]
Coverage and Payment of Amniotic Products by the Centers for Medicare and Medicaid Services (CMS).
Both the FDA and Centers for Medicare and Medicaid Services (CMS) fall under the U.S. Department of Health and Human Services (HHS). Nevertheless, these agencies play very different roles in the approval, marketing, coverage, and payment of tissue-based products. CMS has contracted with geographically assigned Medicare Administrative Contractors (MACs) that are responsible for processing Medicare claims and making coverage and payment decisions. MACs are also responsible for issuing medical necessity, coverage, coding, and billing guidance for many of the services and medical products billed to the Medicare program by health care providers. Providers must review this guidance when billing Medicare for amniotic-tissue products. Several MACs have issued Local Coverage Determination (LCD) guidance covering the coverage and payment of these medical products.
Unfortunately, there is a significant history of sales representatives and marketers of amniotic tissue and umbilical cord products incorrectly advising health care providers that these products qualify for coverage by Medicare and private payors when used for intraarticular injections and interventional pain management procedures.[8]
III. Recent Administrative, Civil and Criminal Enforcement Actions Taken:
In recent years, government audits and investigations of amniotic tissue and skin substitute products have been expanding. Depending on the facts, both suppliers and providers may be subject to administrative review, civil, and / or criminal liability. Examples of these matters are outlined below:
Warning Letters Issued to Suppliers by the FDA.
Whenever the FDA identifies significant potential violations FD&C statutory and / or regulatory provisions, the agency will send notification of the alleged violation(s) to the targeted company or individual. This notification is referred to as a "Warning Letter". The FDA’s Warning Letter typically sets out the agency’s concerns and sets a timeframe for receiving a response from the company or individual. In recent years, a number of companies engaged in the manufacture or marketing of amniotic tissue and related wound care products have been sent Warning Letters from the FDA. Examples of several Warning Letters sent to companies are listed below:
Arizona. In this August 2024 matter, the FDA sent a Warning Letter to an Arizona-based company that was alleged to be marketing a variety of creams and vitamin-related products on its website that the agency considered to be "unapproved new drugs introduced or delivered for introduction into interstate commerce in violation of sections 505(a) and 301(d) of the Federal Food, Drug, and Cosmetic Act (FD&C Act), 21 U.S.C. 355(a) and 331(d)." The FDA further claims that several of the products being marketed would be considered to be "misbranded drugs under section 502 of the FD&C Act, 21 U.S.C. 352, introduced or delivered for introduction into interstate commerce in violation of section 301(a) of the FD&C Act, 21 U.S.C. 331(a)." Several of the products being marketed were presented as possibly assisting in wound healing.
Florida. Earlier this year, the FDA issued a Warning Letter to a Florida-based company manufacturing products derived from human amniotic fluid and umbilical cord-derived products. The FDA alleged that the products were intended for allogenic[9] use and were sold and distributed directly to third-party distributors, medical centers, pain clinics, wellness centers, and physicians.
Utah. In this matter, the FDA issued a Warning Letter to a Utah-based company after reviewing the company’s website and social media accounts and found that the company was allegedly promoting an umbilical cord product to “mitigate, prevent, treat, diagnose and / or cure COVID-19 in people.” The FDA stated that the product at issue qualified as an “unapproved new drug under section 505 of the FD&C Act, 21 U.S.C. §355.” The FDA further alleged that the products being marketed were “misbranded”. The FDA required the company to notify the agency of steps it was taking to correct these violations within 48 hours.
While FDA Warning Letters are initially administrative, should the targeting company fail to satisfy the agency’s concerns OR the alleged infractions rise to a level where civil or criminal enforcement is needed, the FDA may refer a matter to the DOJ for review and prosecution. Enforcement measures pursued may include court-ordered injunctive relief, fines, penalties, and in egregious cases, criminal prosecution. The abovementioned matters illustrate the health and business risks of manufacturing, marketing, and misbranding of unapproved amniotic tissue and wound care products.
CMS Contractor Audits of Amniotic Fluid, Placental Derived Products and Skin Substitute Products.
A number of CMS contractors (Medicare Administrative Contractors (MACs)[10], Unified Program Integrity Contractors (UPICs) and the Supplemental Medical Review Contractor (SMRC)[11] are actively conducting administrative audits of amniotic tissue, placental and skin substitute products. They are denying coverage and payment for claims associated with these products as “not medically reasonable or necessary” for several reasons, including:
Not Aligning with LCD Guidelines. Where an LCD outlines the coverage and payment guidelines for a specific amniotic product, CMS contractors will deny a claim when the documentation does not align with those LCD guidelines.
Homologous Use. The FDA has approved some amniotic products for homologous use.[12] However, CMS contractors are alleging that providers are applying amniotic products for wound healing and treatment and not merely as a cover or barrier for the wound. When the amniotic product is used for wound healing or treatment, it is considered non-homologous use in the recipient. This use would require separate FDA approval and additional evidence of safety and efficacy for wound treatment.[13]
Insufficient Evidence. The non-homologous use of certain amniotic products is considered investigational and, therefore, not reasonable and necessary for wound treatment. CMS contractors are also alleging that there is insufficient evidence-based literature to support the products’ use for wound treatment. Without evidence-based peer-reviewed literature supporting the use of amniotic products for wound treatment and/or healing to be an accepted standard of medical practice, CMS cannot approve the product for non-homologous use.
Not Beneficiary-Specific. When documenting the treatment and plan for a wound, the plan/treatment should be specific to the patient and the wound. However, CMS contractors are alleging that providers’ choice of amniotic products does not appear to be individualized to the specific beneficiary. This denial raises further concerns associated with document cloning.
Other Wound Care Options. Amniotic wound care products can be expensive. CMS contractors are alleging that providers are not documenting what other treatment options were considered and why they were dismissed. Even when providers are documenting reasons for utilizing amniotic products versus conservative wound care (such as second intention healing, traditional dressings, local skin flaps, and/or closure with sutures), CMS contractors have alleged that these reasons are generic or insufficient.
Lack of Documentation For the Amount of Product Used and/or Wasted. CMS contractors have denied claims based on allegations that providers have failed to document the exact amount of product used and any wastage.
Civil False Claims Act Cases Brought by the U.S. Department of Justice (DOJ).
It is important to remember that CMS program integrity contractors (such as UPICs) are required to refer evidence of fraud to the HHS, Office of Inspector General (OIG) and / or DOJ for their review and consideration. Upon receipt of a referral, DOJ collaborates closely with regulatory agencies such as the FDA, the OIG, and CMS. These agencies provide critical expertise and investigative support, ensuring that enforcement actions are grounded in a thorough understanding of regulatory requirements applicable during the time period in question. In recent years, DOJ has pursued numerous cases against entities and individuals engaged in amniotic tissue / skin substitute fraud. Under the Civil False Claims Act, a provider may be held liable for up to treble damages and significant penalties, per false claim.
In recent years, many providers have first learned of the existence of a False Claims Act investigation after receiving a Civil Inspective Demand (CID)[14] from the DOJ Trial Attorney or Assistant U.S. Attorney (AUSA) responsible for handling the case. It is imperative that you contact experienced health law counsel for assistance should you receive a CID. You should also keep in mind that any evidence obtained through the issuance of a CID by an AUSA working on a Civil False Act matter can be shared with a Criminal prosecutor (if the facts reflect that criminal culpability may be present).
Criminal Cases Brought by DOJ.
There are a wide variety of criminal statutes that may arise in an amniotic tissue, stem cell, or skin substitute case. Examples of recent criminal prosecutions are briefly discussed below.
Missouri. In this case, a physician assistant was found guilty of various fraud schemes and was sentenced to more than six years in prison for her actions. One of the alleged crimes committed involved the false marketing of stem cell treatments. According to the government, the defendant “. . . marketed a stem cell treatment that actually utilized amniotic fluid that did not contain any stem cells”. More specifically, the amniotic fluid marketed by the defendant did not contain mesenchymal stem cells, or any other stem cells. Despite being told by the University of Utah that the university’s amniotic fluid allograft was “acellular” and did not contain mesenchymal stem cells, the defendant “. . . continued to tell her patients and the public that the amniotic fluid allograft contained stem cells”.
Texas. Earlier this year, a Texas-based physician assistant was convicted of conspiracy to commit health care fraud and twelve counts of health care fraud in connection with his utilization of amniotic fluid treatments.
IV. Problematic Manufacturing, Marketing and Billing Practices Involving Amniotic Tissues, Umbilical Cord Products and Skin Substitutes:
The wide-ranging potential treatment uses of amniotic tissues,[15] umbilical cord products, and skin substitutes, coupled with the potential high profitability of using these products, has resulted in a wide range of off-label, unapproved uses of these products. As CMS has noted:
“A skin substitute’s commercial availability is not a reflection of its legal status. Manufacturers self-determine whether their human cells, tissues, or cellular or tissue-based product (HCT/P) can be marketed without FDA preapproval and often misunderstand or mischaracterize the criteria they must meet for the product to be regulated solely for communicable disease risk.” [16] (Emphasis added).
Broadly speaking, problematic marketing and billing schemes identified by regulators and prosecutors have included:
Mislabeling, Misrepresentation and Improper Marketing Claims.
"Our Amniotic Product Contains LIVE Stem Cells.” Really? Exercise care before believing the hype. There have been instances when marketing representatives and / or medical providers have made assertions (either unknowingly or on purpose) that their particular product contains live stem cells when, in fact, upon testing, that has not been substantiated.
“Our Amniotic Product based Skin Substitute Has Been Approved by the FDA for the Treatment of “XXXXXXX.” Providers should always conduct their own due diligence. Don’t just accept representations from marketing representatives that a product has been approved by the FDA for a specific purpose. Moreover, don’t assume that a product that product contains stem cells when, in fact, it does not. Finally, beware of exaggerated therapeutic benefits touted by sales representatives (where there is no scientific evidence to support such an assertion).
Failure to Meet Regulatory Requirements Regarding Manufacturing and Distribution.
Improper Coding and Billing Practices.
“Use Our Preferred Billing Company!” Is a sales representative advising you to only use their “preferred” third-party billing company to code and bill for amniotic tissue and skin substitute products he / she is marketing? This should serve a RED FLAG. To the extent that an amniotic tissue or skin tissue product qualifies for coverage and payment by Medicare, Medicaid, or a private payor, the coding and billing practices to be used when submitting these claims should be known by any experienced and qualified third-party billing company.
“We Purchase Our Amniotic Tissue / Skin Substitute Products from Reliable Services.” When a civil or criminal investigation of a provider’s use of amniotic tissue products is initiated, one of the first steps that they will take is to determine whether the provider actually purchased sufficient stocks of the product to perform the number of procedures billed to Medicare, Medicaid, and other payors.
“We Were Told that We Did Not Have to Report any Rebates.” Wrong. Your purchase agreement covering amniotic tissue and skin substitute products may provide for the payment of rebates by the supplier. The marketing salesperson representing the supplier may (or may not) have properly advised you of your obligation to report any rebates received when billing Medicare, Medicaid and other Federal payors when billing for these supplies and related claims. The failure to properly disclose a rebate could expose you and your practice to civil False Claims Act (and, in some instances, criminal Anti-Kickback) liability. Be careful.
V. How Should You Respond if Your Practice or Company is Audited?
Should you receive notice of an amniotic tissue or skin substitute audit or investigation, we recommend that you call a health law attorney who is experienced in handling these specific types of cases. Liles Parker attorneys have extensive experience representing health care providers and their practices in administrative, civil and criminal cases of this type.
Is your practice being audited or under investigation by the government? For a complimentary consultation regarding your case, please give us a call at: 1 (800) 475-1906
Robert Saltaformaggio is Senior Counsel at Liles Parker. He is an experienced health care attorney. Robert also holds certifications as a Certified Professional Coder (CPC) and a Certified Medical Compliance Officer (CMCO). Robert’s practice is concentrated exclusively on health care law and particularly on the appeal of claim denials, regulatory guidance, and compliance planning. Over the last two years, Robert has represented a number of providers in connection with administrative and False Claims Act investigations of amniotic tissue and skin substitute audits. Are you being audited? Call an attorney who regularly handles these types of appeals. Give Robert a call at (202) 298-8750 or e-mail him at rsalt@lilesparker.com.
- [1] Laurie Sweeney, “Amniotic Membrane Explained: What it is and How it is Used in Wound Care". Wound Care Learning Network. (August 19, 2015).
- [2] A more extensive discussion of stem cell therapies using amniotic fluid / amniotic membrane tissue products is discussed in our article titled "Amniotic Membrane Tissue Audits, Investigations and Prosecutions are Continuing to Climb in 2022". (August 4, 2022).
- [3] Zakrzewski W, Dobrzynski M, Szymonowicz M, Rybak Z. "Stem Cells: Past, Present, and Future." Stem Cell Research & Therapy 2019 10:68. doi:10.1186/s13287-019-1165-5
- [4] Human Cellular and Tissue-Based Products (HCT/Ps) defined at 21 C.F.R. §1271.3(d) as "articles containing or consisting of human cells or tissues that are intended for implantation, transplantation, infusion, or transfer into a human recipient". As set out in 21 C.F.R. §1271.3(d)(3), the definition of HCT/P expressly excludes "[s]excreted or extracted human products, such as milk, collagen, and cell factors, except that semen is considered an HCT/P." The FDA has taken the position that amniotic fluids (secreted body fluids), are generally not considered HCT/Ps and are therefore NOT subject to 21 C.F.R. Part 1271. Although not an HCT/P, as a general matter, amniotic fluid intended to treat diseases or conditions in humans would be regulated as a drug and biological product under Section 351 of the Public Health Service (PHS) Act which defines a biologic product as "virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, … applicable to the prevention, treatment, or cure of a disease or condition of human beings."
- [5] U.S. Food and Drug Administration. "Regulatory considerations for human cells, tissues, and cellular and tissue-based products: minimal manipulation and homologous use." (July 2020).
- [6] U.S. Food and Drug Administration. "Important Patient and Consumer Information About Regenerative Medicine Therapies." (June 3, 2021).
- [7] Local Coverage Determination, “Amniotic and Placental-Derived Product Injections and/or Applications for Musculoskeletal Indications, Non-Wound.” L39128 (For services performed on or after 04/30/23).
- [8] The American Board of Interventional Pain Physicians (ABIPP) notified its members of this improper marketing conduct in late 2020.
- [9] The term “Allogeneic” means “the treatment of a patient with human cells derived from a donor other than the patient, where such donor is genetically non-identical. “Allogeneic” does not include the treatment of a patient with human cells derived from such patient’s own cells (autologous treatment).” See “Allogeneic” definition of Law Insider.
- [10] Nationwide, virtually all MACs are scrutinizing amniotic tissue and skin substitute claims. Within the last year, CGS Administrators, LLC, issued Local Coverage Determination (LCD) L39575, titled “Amniotic and Placental Derived Product Injections and/or Applications for Musculoskeletal Indications, Non-Wound.” (For services performed on or after 12/10/23). As this LCD reflects:
“This is a NON-coverage policy for all amniotic membrane, amniotic fluid or other placental derived product injections and/or applications as a means of managing musculoskeletal injuries, joint conditions, and all other conditions not stated below. . . This guidance does NOT include discussion on burns, wounds or ophthalmic conditions.” (Emphasis added).
The phraseology used in this LCD is unusual and reflects the fact that many of the current therapeutic uses of these products do not qualify for coverage and payment.
- [11] Noridian is currently engaged by CMS to function as Medicare’s nationwide Supplemental Review Contractor (SMRC). A recent project focusing on "Mohs Surgery" resulted in a significant number of audits of skin substitute products.
- [12] Homologous use is defined in 21 C.F.R. 1271.3(c) as the repair, reconstruction, replacement, or supplementation of a recipient’s cells or tissues with an HCT/P [human cells, tissues, or cellular and tissue-based products] that perform the same basic function or functions in the recipient as in the donor.
- [13] See CFR Sections 1271.1 to 1271.2.
- [14] For an extensive discussion of the purpose and scope of Civil Investigative Demands (CID), see our article titled "Civil Investigative Demands (CIDs) & Collateral Enforcement Risks: A Review".
- [15] A wide variety of amniotic tissue and membrane products currently available in the United States are considered by the FDA to be “skin substitutes.” CMS Agency for Healthcare Research and Quality (AHRQ), Technical Brief, Project ID: WNDT0818, "Skin Substitutes for Treating Chronic Wounds." See Table 2, pages 9-13. (February 2, 2020).
- [16] Ibid. Page iii.