Major Changes Proposed for Medicare Reimbursement of Skin Substitutes
By Andrew Alder
The Centers for Medicare & Medicaid Services (CMS) has proposed significant reforms to the Medicare Part B payment methodology for skin substitute products. If adopted, the proposed changes[1] would significantly decrease the reimbursement rate for such services.
Background
Skin substitutes are advanced wound care products that help facilitate healing in chronic, non-healing wounds such as diabetic foot ulcers and venous leg ulcers. For many patients, especially those with significant diabetes or circulatory issues, skin substitutes have been a valuable tool resulting in faster healing and improved quality of life. For providers, they represent a clinically effective option in the growing field of wound care management. At the same time, some providers have seen skin substitutes as a lucrative opportunity for profit and abuses have occurred.
As a result, over the last several years, more providers have integrated these products into care protocols due to their effectiveness in promoting healing, preventing complications, reducing long-term costs associated with delayed wound recovery and high reimbursement. According to CMS, in just a five-year period between 2019 and 2024, Medicare Part B spending on skin substitutes in the non-facility (office) setting grew from $250 million to over $10 billion, while the number of patients treated with skin substitutes doubled. Due to the increased spending, CMS has sought to increase oversight and control costs.
CMS’s proposed rule addresses how Medicare proposes to pay for skin substitutes, not whether they are covered services.[2]
What is Changing?
Currently, Medicare categorizes skin substitutes as “biologicals.” Each product typically has its own billing code and payment rate, based on the Average Sales Price (ASP) reported by the manufacturer. If the product does not yet have an established ASP, reimbursement is based upon the invoice price (minus any discounts or rebates). This means providers are reimbursed separately for both the procedure to apply the product and for the product itself. According to CMS, this approach has led to wide variation in payment amounts depending on the product and has contributed to rising Medicare costs as more expensive products have entered the market.
CMS’s proposed rule seeks to reclassify most skin substitutes from being treated as biologicals under the Average Sales Price (ASP) methodology to being reimbursed as “incident-to” supplies when used in covered application procedures in the non-facility (office) setting. CMS proposes to group skin substitute products into payment categories based on their FDA regulatory pathway, which purportedly aligns payment with clinical and regulatory characteristics. For products that have obtained a biologics license under Section 351, they would continue to be paid as a biological under the ASP methodology. Section 351 licenses are issued only after showing that the product is safe, pure, and potent (i.e., effective). Such products must meet stringent pre- and post-market requirements to ensure the products’ safety and efficacy when marketed. All other products would be placed into one of three payment categories:
(1) Section 361 HCT/Ps (Human Cells, Tissues, and Cellular and Tissue-Based Products). Products regulated under Section 361 of the PHS Act do not require premarket approval but must be minimally manipulated, intended for homologous use and meet other specific conditions.
(2) Products requiring 510(k) clearance. A 510(k) is a premarket submission made to the FDA to demonstrate that the product is safe and effective by showing that it is substantially equivalent to a legally marketed product that is not subject to premarket approval.
(3) Premarket Approval (PMA). PMA requires demonstration of safety and efficacy for the intended use, which generally requires the performance of clinical studies. It is a more rigorous premarket review than what is required for 510(k) clearance.
Under the proposed rule, skin substitutes that are licensed as biologics under Section 351 would continue to be paid under the ASP-based payment methodology. All other skin substitute products (most of the products in the market) would be paid as incident-to supplies. For calendar year 2026, CMS is proposing to use a single payment rate for all categories of skin substitute products (except those licensed under Section 351) at the rate of $125.38/cm2. In future years, however, CMS intends to propose payment rates that differentiate between the three FDA regulatory categories (361 HCT/Ps, 510(k)s or PMAs).
Implications for Providers
Medical practices and providers should consider doing the following now:
· Assess which skin substitute products your practice currently uses.
o Determine the FDA classification and ASP reporting status for each product used.
o Contact product manufactures to verify how the proposed changes may impact their pricing methodology and how they anticipate responding to the proposed changes.
· Evaluate the financial impact of expected reimbursement differences under the new incident-to payment approach.
o You should analyze current margins for each skin substitute product you use (acquisition cost compared to current reimbursement rates).
o You should then estimate how those margins would be impacted under the proposed incident-to payment methodology, including the proposed rate of $125.38/cm2 for calendar year 2026.
o You should analyze how such changes may impact overall revenue per wound treatment, provider compensation models and practice viability for wound care services.
· Re-examine your clinical decision-making protocols to ensure product selection is based on clinical appropriateness, evidence of benefit and cost-effectiveness, especially when multiple products are available.
· Monitor the finalization of LCDs for skin substitutes, which will govern coverage criteria, including which products are covered, regardless of how they are paid for.
· Educate your billing and clinical staff, ensuring that they understand the proposed changes and correctly code and document procedures.
· Engage in the public comment process by submitting feedback to CMS before the Sept. 12, 2025, deadline if you believe the proposed reimbursement approach may negatively affect patient access or clinical decision-making.
[1] These proposed changes are part of the CMS’s CY 2026 Physician Fee Schedule (PFS) Proposed Rule, released on July 16, 2025.
[2] CMS has sought to address coverage issues by (1) scrutinizing the medical necessity of skin substitute services through post-payment audit initiatives; and (2) releasing proposed Local Coverage Determinations (LCDs) establishing updated coverage criteria and designating only a small number of products that are deemed to be “covered” products. The effective date of the new LCDs has been postponed and is currently scheduled to go into effect January 1, 2026.
Healthcare Providers: Are You Meeting Section 1557’s Language Access Requirements?
By J. Kevin West and Lauren Thomas*
The federal government has tasked healthcare providers with ensuring that patients with limited English proficiency (LEP) receive meaningful access to care. Under Section 1557 of the Affordable Care Act, covered providers—those receiving federal funding like Medicare or Medicaid—must take reasonable steps to provide meaningful access to overcome language barriers.
So, what does this mean in practice?
1. Free, Qualified Language Assistance
Providers must offer qualified interpreters and translation services at no cost to patients with LEP. These services must be accurate, timely and protect patient privacy. Patients may choose to have a family member or friend interpret for them, provided this choice is voluntary and appropriate for the situation.
2. Clear Notices
Section 1557 requires providers to post two specific notices to comply with federal civil rights rules:
- Notice of Nondiscrimination — This statement must explain that your practice does not discriminate based on race, color, national origin (including primary language), sex, age or disability. It must also describe the availability of accessibility services, free language assistance, how to get these services, how to file a grievance with your practice and how to file a complaint with the U.S. Department of Health & Human Services Office for Civil Rights (OCR). This notice must be posted prominently at your physical sites and on your website in at least 20-point sans serif font.
- Notice of Availability of Language Assistance — This separate notice must inform patients that free language assistance services are available. The notice must be provided in English and the top 15 non-English languages spoken by LEP individuals in each state where you operate. Providers can determine these top languages using tools based on American Community Survey data, which are available at census.gov. The Center for Medicare and Medicaid Service (CMS) has also compiled this data, which is available at CMS.gov. This notice must also be posted at your sites, on your website and included in major communications like application forms, eligibility notices and materials related to public health emergencies or medical procedures—again, in at least 20-point sans serif font.
3. Translating Other “Important Documents”
There is no blanket rule requiring that every “important document” in a practice be pre-translated into all languages. However, providers should use a four-factor test to decide which documents should be translated:
- How many LEP patients you serve
- How often they interact with you
- How vital the document is
- Your available resources
For example, if you regularly serve Spanish-speaking patients, it’s good practice to keep vital forms in Spanish ready.
Practical Tip
Regularly review your patient population and update your policies to ensure you’re meeting these obligations. Doing so protects your patients and your practice.
*Lauren Thomas is a summer associate working in Parsons Behle & Latimer’s Boise office. A second-year law student, Lauren attends the University of Idaho College of Law.
