Medicare Fixed the Obvious Billing Problems. Spending Still Grew Elsewhere.

The administration deserves credit for acting on two highly visible billing problems.

CMS identified significant, anomalous, and highly suspect catheter billing and excluded it from certain ACO financial calculations. [1] OIG later documented improper catheter payments, [2] while federal enforcement pursued large DME and catheter schemes. [3]

Skin-substitute products, often marketed as “skin grafts,” drew a similar response. OIG documented the rapid spending growth and related fraud, waste, and abuse concerns, [4] and CMS proposed a new payment approach for 2026. [5]

We have followed both stories: the urinary-catheter spike and its impact on ACOs, [6] and the relationship between skin-substitute billing and skilled-nursing care. [7]

The 2026 Q2 data show the result. Across four illustrative Carrier codes—A4353, Q4280, Q4316, and Q4341—allowed amount fell by almost $510 million from the prior year. Nearly all of the decline came from the three skin-substitute codes.

That is a meaningful program-integrity result. Yet total Medicare Part B Carrier allowed amount still increased by $835 million, from $27.7 billion to $28.5 billion. Outside those four codes, allowed amount grew by $1.345 billion.

The pattern resembles the balloon effect: squeeze one side of a balloon and another side expands. In public policy, pressure on one activity can shift behavior elsewhere without reducing the whole. [8]

Healthcare billing can behave the same way. Close one profitable route and opportunistic actors have an incentive to find another. I have called this an arms race before: the people defending Medicare learn, and the people exploiting it learn too. [9]

But this is an analogy, not a conclusion. The data do not show that the same actors moved the same dollars into other codes. Nor do they show that the remaining growth is improper. They show that targeted reductions did not bring down total spending. So where did the broader growth appear?

Common services grew—and that may be appropriate

Some of the largest increases appeared in services that Medicare beneficiaries use every day:

• 99214, established office visits: +$366.9 million and +1.31 million services
• 99309, subsequent nursing-facility care: +$82.6 million and +903,000 services
• G2211, the visit-complexity add-on: +$64.0 million and +3.20 million services
• 97530, therapeutic activities: +$51.7 million and +1.47 million services
• 97112, neuromuscular reeducation: +$36.3 million and +1.17 million services

Some of this growth may be desirable. More office visits can mean better access and follow-up. CMS introduced G2211 to recognize the complexity of longitudinal care. [10] More therapy or nursing-facility visits may reflect real patient needs.

National totals cannot distinguish those explanations from more services delivered to the same patients or more aggressive efforts to monetize each encounter. They do show that the growth was widespread. G2211 was billed by more than 165,000 NPIs, and 99214 by more than 386,000. Across these common services, the top 10 NPIs accounted for only 0.14% to 1.08% of volume.

This is not one supplier creating a national spike. The better questions are who drove the growth, which patients received the services, how often, and why.

Specialty totals can hide offsetting service lines

A specialty can also look stable while its service lines move sharply in opposite directions.

Nurse-practitioner billing grew in established office visits and nursing-home visits while declining in “other drugs.” Physician-assistant billing showed a similar pattern. Radiation therapy grew within radiation oncology, but declines elsewhere muted the specialty's net change.

A code ranking or specialty ranking alone can therefore mislead. The intersection of what was billed and which specialty billed it is more useful.

The harder question is medical necessity

Payment-integrity systems are good at finding one explosive code, a small group of suppliers, or an extreme outlier. Widely distributed growth raises a harder question: did patients receive more necessary care, did practices capture legitimate revenue more completely, or did overuse increase?

All three can occur at once. Aggregate data cannot determine medical necessity, but they point to questions that patient- and claim-level data can answer:

• Are more beneficiaries receiving the service, or are the same beneficiaries receiving it more often?
• Are therapy increases driven by more patients, more treatment days, or more units per episode?
• Do visit frequency, add-on codes, and code combinations align with the patient's clinical needs?
• Which specialties, geographies, and provider peer groups depart from clinically comparable patterns?

Distributed overuse needs distributed detection

If overuse is scattered across thousands of providers, a national top-10 list will miss it. Detection has to move closer to the patient and the episode of care.

That means comparing clinically similar providers, tracking services per patient and per episode, and examining repeat frequency and code combinations. Results should then be tested against coverage policy, clinical evidence, and medical records. When warranted, teams can use structured provider outreach. [11]

The goal is not to declare a common service suspicious. It is to identify when ordinary billing stops looking ordinary in the context of the patient, the provider's peers, and the care delivered.

The targeted categories fell sharply while the broader spending curve continued to rise. That does not diminish the enforcement result. It defines the next challenge: detecting medically unnecessary care when the pattern is dispersed, individually modest, and hidden inside everyday billing.

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Analysis uses national Medicare Carrier PSPS records for 2025 Q2 and 2026 Q2. Amounts are allowed amounts, not paid amounts. The four-code correction group is illustrative, not exhaustive. Aggregate billing patterns are screening signals; clinical records, claim lifecycle, code history, and payment policy are required before concluding fraud, waste, or overpayment.

References

1. CMS, “Mitigating the Impact of Significant, Anomalous, and Highly Suspect Billing Activity on Medicare Shared Savings Program Financial Calculations in Calendar Year 2023,” 2024.
2. HHS OIG, “Medicare Improperly Paid Suppliers for Intermittent Urinary Catheters,” 2025.
3. U.S. Department of Justice, “National Health Care Fraud Takedown Results in 324 Defendants Charged,” 2025.
4. HHS OIG, “Medicare Part B Payment Trends for Skin Substitutes Raise Major Concerns About Fraud, Waste, and Abuse,” 2025.
5. CMS, “Calendar Year 2026 Medicare Physician Fee Schedule Proposed Rule,” 2025.
6. Falcon Health, “Anomalous Urinary Catheter Billing and the ACO Exposure,” 2026.
7. Falcon Health, “A Map of Medicine Hidden in Billing Data,” 2026.
8. Wikipedia, “Balloon effect.”
9. Falcon Health, “Set a Thief to Catch a Thief,” 2025.
10. CMS, “How to Use the Office and Outpatient Evaluation and Management Visit Complexity Add-on Code G2211,” 2024.
11. Falcon Health, “How ACOs Should Approach FWA Campaigns: The Case for Structured Outreach,” 2026.