CTP Regulatory Reform: Understanding the Shift and Historic Context

Disclaimer: On December 24, 2025, CMS withdrew the final LCDs for certain skin substitutes. This content was created prior to that announcement and may reference policies that are no longer active. Much of the information remains applicable under other current or future regulations. Always consult your local MAC or payor policies for the most up-to-date guidance.

• Medicare spending on skin substitute products soared from approximately $250 million in 2019 to over $10 billion in 2024, prompting regulatory action.  
• The Centers for Medicare & Medicaid Services (CMS) Final Rule for the 2026 Physician Fee Schedule authorizes a flat-rate payment (~$127.28 per cm²) for most skin substitutes beginning January 1, 2026.  
• Coverage and documentation standards are being tightened (at time of publication) by MACs via future effective Local Coverage Determinations (LCDs) for skin substitutes used in chronic wounds. 
• Initiatives to curb fraud, waste, and abuse are also underway and will go into effect at the start of the new year. 

Estimates state that chronic wounds impact 10.5 million Medicare beneficiaries, amounting to approximately one in six in this population.¹ Managing such wounds, oftentimes in complex patient scenarios, and in the context of multiple comorbid conditions, is itself a multifaceted and complex process. Remaining compliant with payer, regional, and federal regulations, however, is yet another layer for both wound care providers and the industry that develops and manufactures the products that serve these patients.  

Healthcare professionals and wound care stakeholders now face a major regulatory pivot as CMS finalizes sweeping updates to how skin substitute products are reimbursed. According to CMS, the reforms stem from “dramatic” increases in spending and utilization of skin substitute grafts in the last several years.² Understanding the reasons behind the regulatory shift, and  historic milestones that have occurred leading up to these changes, is critical for wound care clinicians, coders, practice administrators, and anyone with a stake in wound management. Multiple initiatives are converging at once as the new year approaches, along with responses and counteractions, and there is benefit in examining the “why” and “how” behind the current situation.  

It is important to note that several factors contributed to the impetus to enact these reforms. Concerns surrounding costs, pricing, available evidence, possible overuse or misuse, and calls for deeper oversight have all led to multiple initiatives that are slated to come to fruition January 1, 2026. 

Spending and Utilization Escalation. Over recent years, Medicare Part B payments for skin substitutes increased at a breakneck pace that CMS deems unsustainable — jumping from approximately $250 million in 2019 to over $10 billion in 2024.² The surge outpaced growth in patient volume, triggering red flags around cost-driven utilization rather than strictly clinical need. Questions arose about volume and circumstances of usage, along with striking variations in product costs.   

Payment Methodology Concerns. Historically, in non-facility (physician office) settings, skin substitutes were reimbursed under an Average Sales Price (ASP) + 6% model — treating them akin to biologics — while hospital outpatient settings often bundled these products into procedure payments.² CMS cited this segmentation and lack of uniformity as a driver of the reform. 

Regulatory & Enforcement Pressure. In tandem with spending concerns, the Office of Inspector General (OIG) and the Department of Justice (DOJ) have increased scrutiny of and audits related to skin-substitute related fraud, waste, and abuse.³ This environment intensified calls for consistent regulation, stricter coverage criteria and vendor accountability. 

Unified Payment Model. The changes, published in the CY 2026 Medicare Physician Fee Schedule Final Rule, will reshape reimbursement for wound-care skin substitute products under Medicare Part B. Under the CY 2026 final rule, most skin substitutes that are not biologics licensed under Section 351 of the Public Health Service Act will be reimbursed under a single national flat rate of ~$127.28 per cm², treating them as “incident-to supplies,” rather than separate high-priced biologic reimbursements.⁴ Biologic products remain reimbursed under ASP + 6% if Section 351-licensed.³ 

Coverage & Documentation Tightening. At the time of this publication, future effective LCDs from all of the Medicare Administrative Contractors (MACs) are set to go into effect January 1, 2026, setting clearer criteria for skin substitute use in patients with diabetic foot ulcers (DFUs) or venous leg ulcers (VLUs). Select skin substitutes will be covered only after documented failure of standard-of-care measures (such as debridement, offloading, compression) for at least four weeks. The proposed LCDs (for example, LCD L39764) lay out stringent requirements for evidence, applicability and documentation.⁵ However, these LCDs had two previous effective dates, both of which ultimately resulted in announcements of a delay. 

Prior Authorization in Select Regions. Under the new Wasteful and Inappropriate Service Reduction (WISeR) model, providers in six states will be required to pursue prior authorization for select outpatient service categories, including for skin substitutes.⁶ 

Although the developments in the latter part of 2025 have been voluminous, these events have been in motion and evolving for quite some time. The context that this history provides can shed light on the current scenario and viewpoints within the field.  

Historically, CMS coverage of skin substitute products, often clinically referred to as cellular, acellular, and matrix-like products (CAMPs) or cellular and tissue-based products (CTPs), has been based on the “reasonable and necessary” standard under Title XVIII of the Social Security Act (Section 1862(a)(1)(A)).⁷ In April 2024, CMS publicized a proposed LCD for skin substitutes used in DFUs and VLUs, encouraging stakeholder comments through June 2024.⁸  

On November 14, 2024, all seven MACs issued final LCD drafts for skin substitutes for DFUs/VLUs. Initially an effective date of February or April 2025 was planned, but CMS issued a press statement on April 11, 2025 announcing that implementation would be postponed until January 1, 2026, citing the need for additional evidence review.⁹ The current future-effective LCDs will cover skin substitute graft/CTP products only when specified criteria are met: chronic non-infected DFUs or VLUs unresponsive to ≥4 weeks standard of care; documented >50% ulcer area reduction threshold; adherence to standard care; maximum of eight applications over 12–16 weeks unless additional justification.^5,8  

In parallel, the accompanying Billing & Coding Article (A59691) provides detailed coding expectations: appropriate HCPCS codes, product name, size, wasted amount, attestation via -KX modifier when using more than four applications or extending beyond limits.¹⁰ 

For wound care clinicians, reimbursement specialists and device manufacturers, these LCD changes mark a shift toward greater evidentiary demand, narrower eligible product lists, and stricter documentation. Failure to meet the criteria may lead to claim denials or audits—recently flagged by CMS and the OIG for skin substitute billing trends.³ The new policies emphasize that skin substitute use is adjunctive, not first-line. 

Clinicians will need to revisit product selection, documentation workflows and coding practices — especially to justify medical necessity under more rigorous scrutiny and standardized payment. Inventory management may become more critical as margin pressures emerge given the flat-rate reimbursement model. 

From an industry perspective, manufacturers must demonstrate comparative clinical evidence and cost-effectiveness to remain in formularies or ensure inclusion under Medicare coverage. Payers and wound care programs will need to reassess protocols and utilization pathways to align with CMS’s goals of value-based care and avoid audit risk. For patients, the changes aim to direct choices to clinically effective skin-substitute products while curbing low-value or excessive use, although debates have emerged over whether these changes stifle innovation, whether they actually reduce access, and on how CMS is delineating covered products. 

In sum, the “why” behind the skin substitute regulation update is grounded in soaring costs, inconsistent reimbursement structures and heightened regulatory scrutiny. CMS estimates the payment reform may reduce gross fee-for-service spending for skin substitute services by approximately $19.6 billion in 2026.² As these evolving policy changes loom prior to the January 1, 2026, effective date, wound-care professionals and stakeholders must proactively adapt clinical, documentation, and operational practices to align with the new regulatory landscape. While individuals and groups are mounting responses to these rapidly approaching changes,¹¹ at present, understanding and preparing for these evolving changes are leading goals for all impacted parties. ​​​​​​

1. Sen CK. Human Wound and Its Burden: Updated 2025 Compendium of Estimates. Adv Wound Care (New Rochelle). 2025 Sep;14(9):429-438. doi: 10.1177/21621918251359554. Epub 2025 Jul 14. PMID: 40660772. 

2. Centers for Medicare & Medicaid Services. CMS Modernizes Payment Accuracy, Significantly Cuts Spending Waste. Published 2025. Accessed November 14, 2025. Available at: https://www.cms.gov/newsroom/press-releases/cms-modernizes-payment-accuracy-significantly-cuts-spending-waste 

3. CMS Finalizes Sweeping Reforms to Skin Substitute Payments Amid Rising Costs. National Law Review. Published 2025. Accessed November 14, 2025. Available at: https://natlawreview.com/article/cms-finalizes-sweeping-reforms-skin-substitute-payments-amid-rising-costs-and 

4. Centers for Medicare & Medicaid Services. Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS–1832–F). Published 2025. Accessed November 14, 2025. Available at: https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f 

5. Centers for Medicare & Medicaid Services. Local Coverage Determination (LCD): Skin Substitute Grafts (L39764). Accessed November 14, 2025. Available at: https://www.cms.gov/medicare-coverage-database/view/lcd.aspx?lcdid=39764 

6. Centers for Medicare & Medicaid Services. Wasteful and Inappropriate Service Reduction (WISeR) Model: Provider and Supplier Operational Guide. Updated October 10, 2025. Accessed November 14, 2025. Available at: https://www.cms.gov/files/document/wiser-provider-supplier-guide.pdf 

7. Centers for Medicare & Medicaid Services. Local Coverage Determination (LCD): Skin Substitute Grafts (L35041). Accessed November 4, 2025. Available at: https://www.cms.gov/medicare-coverage-database/view/lcd.aspx?LCDId=35041 

8. Centers for Medicare & Medicaid Services. CMS Statement: Proposed Local Coverage Determination (LCD) for Skin Substitute Grafts/Cellular and Tissue-Based Products. Published 2025. Accessed November 14, 2025. Available at: https://www.cms.gov/newsroom/press-releases/cms-statement-proposed-local-coverage-determination-lcd-skin-substitute-grafts/cellular-and-tissue 

9. Centers for Medicare & Medicaid Services. CMS Statement: Local Coverage Determination for Certain Skin Substitute Grafts. Published 2025. Accessed November 14, 2025. Available at: https://www.cms.gov/newsroom/press-releases/cms-statement-local-coverage-determination-certain-skin-substitute-grafts 

10. Centers for Medicare & Medicaid Services. Article (A59691): Skin Substitute Grafts. Accessed November 14, 2025. Available at: https://www.cms.gov/medicare-coverage-database/view/article.aspx?articleId=59691 

11. Mass Coalition Condemns Harmful Skin Substitute Payment Rates in CMS Proposed Physician Fee Schedule Rule. PR Newswire. Published 2025. Accessed November 14, 2025. Available at: https://www.prnewswire.com/news-releases/mass-coalition-condemns-harmful-skin-substitute-payment-rates-in-cms-proposed-physician-fee-schedule-rule-302505629.html