The Watchdogs of Medicare: How We Are Leading the Fight Against Fraud, Waste, and Abuse

Healthcare fraud isn't an abstract policy problem; it’s a direct threat to patient care, provider sustainability, and the long-term viability of the Medicare program. Over the past two years, we've witnessed fraud schemes of unprecedented scale emerge in real time, targeting some of the most vulnerable patients in our healthcare system. At Pearl Health, our technology platform has positioned us at the forefront of detecting these anomalies—often months before traditional oversight mechanisms caught up.

The numbers are staggering. The National Health Care Anti-Fraud Association estimates that healthcare fraud costs the U.S. approximately $68 billion annually, while some estimates place total fraud, waste, and abuse (FWA) losses between 3% and 15% of total healthcare expenditures.¹ In June 2025, the Department of Justice announced the largest coordinated healthcare fraud takedown in history—Operation Gold Rush—involving over $14.6 billion in alleged fraudulent claims and charges against 324 defendants across 50 federal districts.²

But here's what the headlines often miss: many of these schemes were first identified not by federal investigators, but by Accountable Care Organizations analyzing claims data in real time. ACOs are uniquely positioned to detect fraud early—unlike fee-for-service Medicare, our total cost of care accountability means fraudulent billing directly erodes our benchmarks, shared savings, and ability to reinvest in patient care. That financial exposure creates powerful motivation to monitor continuously, and we often have more nimble technology and data science teams, complemented by access to primary care clinicians who can investigate specific patients. Yet we remain powerless to stop the fraud even after we detect it. Reporting to CMS is slow, often routed through industry associations rather than direct channels, while investigations drag on for years as billions continue to flow to bad actors. 

The fix is straightforward: integrate ACOs into Medicare's fraud detection infrastructure with direct reporting pathways and faster remediation. The organizations best equipped to spot fraud should be partners in stopping it—not bystanders.

The Catheter Crisis: A Case Study in Early Detection

In early 2023, Pearl’s analytics platform flagged something unusual: a dramatic spike in Medicare billing for intermittent urinary catheters. The patterns were unmistakable. Billing for HCPCS code A4353 increased by more than 5,000% compared to the previous year, while A4352 claims rose 163%.³ Medicare spending on these two codes ballooned from $153 million to over $3.1 billion in just two years.⁴

Most alarming was the disconnect between billing and clinical reality: patients weren't receiving these supplies, and physicians hadn't ordered them. The beneficiaries, many of them elderly and vulnerable, were being exploited through phone scams offering "free medical supplies" while their Medicare numbers were harvested for fraudulent billing.

ACOs across the country identified these anomalies through careful monitoring of claims data. The National Association of ACOs (NAACOS) brought these findings to CMS, providing the data and documentation that ultimately triggered federal investigation.⁵ In September 2024, CMS finalized a rule holding ACOs harmless for this significant, anomalous, and highly suspect (SAHS) billing activity. In doing so, CMS finally acknowledged that ACOs had no control over the fraudulent suppliers and no ability to stop the scheme, yet were penalized anyway by watching their shared savings disappear (or paying back losses) nonetheless.⁶

The scope of the catheter fraud scheme ultimately proved even larger than initially suspected. Operation Gold Rush, announced in June 2025, revealed that a transnational criminal organization had used foreign straw owners to purchase dozens of medical supply companies and submit over $10.6 billion in fraudulent catheter claims, exploiting the stolen identities of more than one million Americans.⁷

Wound Care: The Next Frontier of Abuse

Even as the DOJ and CMS deploy countermeasures against the catheter scheme, a new, potentially more damaging and difficult to stop scheme has unfolded in wound care, and like the catheters, it demands attention and remediation.

Medicare spending on skin substitutes (costly biologic tissue products used for wound healing) increased from $256 million in 2019 to over $10 billion in 2024, a forty-fold increase.⁸ In September 2025, the HHS Office of Inspector General published a report titled "Medicare Part B Payment Trends for Skin Substitutes Raise Major Concerns About Fraud, Waste, and Abuse," documenting explosive growth in utilization, massive gaps between Medicare Part B and Medicare Advantage spending, and fraud schemes involving tens of millions of dollars billed for small numbers of patients.⁹

The clinical picture is equally troubling. There are well publicized cases of patients receiving as much as $16 million of skin substitute applications without any corroborating medical need.¹⁰ Other cases have continued well past the recommended maximum treatment duration indefinitely, no evidence of wound improvement.¹¹ Some of these therapies, with efficacy best demonstrated in pediatric burn patients, appear to be allocated to patients with no need whatsoever–patients with minor wounds, patients who have not first tried typical evidence-based therapies, and patients on hospice for whom it is not appropriate to pursue aggressive treatments. The HHS-OIG found that from the first quarter of 2023 to the third quarter of 2024, the average amount paid per Medicare Part B enrollee who received skin substitutes grew from $40,051 to $121,501.¹²

At Pearl Health, we identified concerning wound care spending trends, deploying signaling tools built on our core technology platform to alert our clinical teams and partner practices. We've worked to educate providers about appropriate utilization, establish evidence-based wound care protocols, and coordinate care to ensure patients receive high-quality treatment rather than becoming targets for high-volume billing schemes.

Technology as the First Line of Defense

What enables Pearl to detect these patterns before traditional oversight mechanisms? The answer lies in our data and technology infrastructure.

Pearl Health's data scientists analyze claims data to identify outliers in spending patterns, provider behavior, and utilization trends. Machine learning and advanced analytics enable detection of subtle patterns that manual review would miss, the kind of early warning signals that can distinguish emerging fraud schemes from legitimate clinical variation.

This approach aligns with broader trends in fraud detection. A recent scoping review in BMC Health Services Research found that data mining and machine learning methods offer significant advantages over traditional manual audits, providing scalability and efficiency in processing vast amounts of healthcare data in real time.¹³

Advocating for Systemic Solutions

Detection is only part of the solution. ACOs have also led advocacy efforts to reform how CMS responds to fraud, waste, and abuse.

Following the catheter crisis, Pearl Health and other ACO leaders called for structural reforms: real-time integration of claims data across Medicare Administrative Contractor jurisdictions, expedited review processes for suspected fraud, and safe harbor provisions that protect ACOs when they identify and report anomalous billing.¹⁴ We've advocated for applying the SAHS framework developed for catheters to other emerging threats, including skin substitutes and diabetes supplies.

CMS has begun responding. The 2026 Medicare Physician Fee Schedule includes significant changes to skin substitute payment policy, reclassifying many products and capping reimbursement to reduce incentives for inappropriate utilization.¹⁵ In parallel, CMS has also launched the WISeR Model, which uses tech-enabled prior authorization (AI/ML plus clinical review) to curb fraud, waste, and abuse for selected services including skin substitutes.¹⁶ Additionally, this month CMS released new guidance establishing a direct pathway for ACO REACH participants to report suspected fraud, waste, and abuse to the Center for Program Integrity—a concrete step toward the kind of formalized reporting structure we've been advocating for¹⁷. The Department of Justice's new Health Care Fraud Data Fusion Center (announced alongside Operation Gold Rush) promises enhanced coordination between federal agencies using artificial intelligence and advanced analytics.¹⁸

The Path Forward

The past two years have demonstrated both the scale of fraud threatening Medicare and the critical role ACOs play in protecting program integrity. We've shown that organizations with aligned incentives and sophisticated data infrastructure can identify emerging schemes months or years before traditional enforcement mechanisms.

But significant work remains. ACOs still lack the tools that private payers possess: network restrictions, prior authorization, and strict coverage criteria. All ACOs remain financially accountable for fraudulent spending that occurs outside our control, often waiting years for investigation and restitution. The reinsurance market increasingly excludes suspected fraud hotspots, leaving ACOs exposed precisely when protection is most needed.

CMS's new FWA reporting pathway, and the related WISeR (Wasteful and Inappropriate Service Reduction) Model, are welcome steps. But to truly get ahead of the next billion-dollar scheme, we need to go further: automatic protections triggered when spending patterns signal emerging fraud, real-time benchmark adjustments while investigations are pending, and a share of recovered funds returned to the ACOs who detected the fraud and bore its financial burden.

Practices evaluating ACO partners should take into account that fraud exposure is a real and growing financial risk. Pearl has built the infrastructure to detect fraud early, has a track record of identifying schemes before they reach billion-dollar scale, and is already working with CMS through the new FWA reporting pathway to flag anomalies in its practices' patient populations. Pearl actively monitors claims data and advocates for policies that protect our partners' shared savings. As CMS formalizes ACO roles in fraud detection, Pearl is positioned to be part of the solution. Practices who work with us can be confident that someone is watching their back.

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