The 2026 Medicare Physician Fee Schedule marks a watershed moment for wound care and skin substitutes

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Earlier this year, the Centers for Medicare & Medicaid Services (CMS) reported that it spent more than $10 billion on skin substitutes in 2024, more than double the $4.4 billion spent in 2023 and nearly 10 times the 2022 figure of $1.5 billion. This unprecedented spike has triggered increased scrutiny from lawmakers and administrators at CMS.

Under the current Medicare Physician Fee Schedule (MPFS), many skin substitute products are reimbursed at average sales price (ASP) plus 6%, with some products costing thousands of dollars per square inch. In response to this trend, and to curb spending, CMS Administrator Mehmet Oz, MD, MBA, announced that the agency would be cracking down on skin substitutes that are driving up costs.

In the proposed 2026 MPFS, CMS is taking a definitive step to achieve cost containment in the field of wound care, with skin substitutes front and center. While some of the proposed changes were anticipated, the finalization of certain policies signals a stronger push toward utilization oversight and billing standardization.

Guillermo J. Beades, JD
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The primary objective is cost reduction. CMS is proposing to pay for skin substitutes as incident to supplies with a flat fee of approximately $800 per square inch, which is estimated to result in a 90% reduction in spending. These changes send a clear message: Skin substitutes are moving away from being treated as carve-outs and toward a value-based supply, with greater scrutiny on clinical justification and utilization patterns.

For many physician practices, skin substitute applications have become an important revenue stream. But with flat-fee reimbursement replacing ASP plus 6%, the financial viability of in-office wound care programs will be affected. As CMS intensifies scrutiny and audits skin substitute services, many physicians may decide that it is not financially sustainable to continue to provide this service under the new model. This raises concerns about access to care issues for CMS beneficiaries, particularly in rural areas, where the number of available providers for these services may decline significantly.

Historically, when CMS discovers after the fact that it has paid billions for a particular procedure, it tends to overreact with increased audits and enforcement actions years later. While the proposed rule does not explicitly outline specific new auditing protocols, the rationale for the changes, combined with the emphasis on documentation and the potential for reduced reimbursement, implicitly suggests an increased likelihood of scrutiny and audits for wound care clinicians, particularly those using skin substitute products. CMS’ Fraud Defense Operations Center and the Department of Justice have already identified improper payments for skin substitutes, pursued criminal prosecutions for fraudulent conduct and issued large recoupments, highlighting the government’s commitment to combating fraud, waste and abuse in this area.

Contractors such as Unified Program Integrity Contractors, Recovery Audit Contractors and Medicare Administrative Contractors typically target outlier practices with unusually high usage of high-cost skin substitutes. When auditors are actively looking for fraud, waste and abuse, they tend to find something to grab onto and rarely give providers the benefit of the doubt if something is lacking in the documentation. For physicians and practices, this means that documentation lapses, such as insufficient wound measurements, missing prior care data or use of skin substitutes without adequate conservative care, can lead to seven-figure overpayment demands. Providers who have been actively engaged in wound care with skin substitutes over the past few years can expect to see a rise in audits, overpayment demands and recoupments.

The 2026 MPFS represents a turning point in the regulation of wound care services and the reimbursement of skin substitutes. These are not merely policy shifts or reimbursement updates but rather signals of heightened scrutiny and increased enforcement. Physicians who fail to adapt to the new documentation, coding and clinical justification standards are likely to find themselves in the crosshairs of audit contractors and integrity units. The policy shift signals more than reimbursement changes; it is an indication of future audits, and providers cannot wait to respond.

Guillermo J. Beades, JD, is a partner in Frier Levitt’s Healthcare Litigation Department and co-chairs the firm’s Insurance Defense Group.