CTP/Skin Substitute Medicare Payment Policies in Context: Evolution and Impact

Updated November 25, 2025

Key Clinical Summary

• CMS finalized a site-neutral payment model for cellular and tissue-based products (CTPs) across physician offices, hospital outpatient departments, and mobile clinics.

• The new methodology, effective January 1, 2026, establishes a standardized rate of about $127 per cm², ending the previous bundled payment system.

• The reform follows a 40-fold spending surge and federal investigations into fraud and misuse of CTP billing practices.

The overhaul of Medicare payment for cellular and tissue-based products (CTPs, or skin substitutes) in the final FY 2026 Physician Fee Schedule (MPFS)¹ and Hospital Outpatient Prospective Payment System (OPPS)² bring sweeping changes that have been years in the making, responding to federal fraud-prevention priorities, a “skyrocketing” Medicare spend in this category,³ and inconsistencies in the bundled payment methodology⁴ in the outpatient setting that have challenged CTP access and shifted care to non-facility settings. The new single, separate site neutral payment methodology is intended to bring consistency and predictability to reimbursement across physicians’ office, mobile clinic and hospital outpatient department settings. Wound care practices will quickly need to adapt decision making and documentation to these policies, which will be no small amount of work. 

If viewed in isolation, the 2026 CTP payment reforms may seem abrupt. But in reality, these new policies are the outgrowth of:

• CMS’s repeated attempts to solve inconsistent CTP payment across sites of care 
• a decade of access challenges in the outpatient setting stemming from the bundled payment methodology put in place there  
• increasing federal scrutiny of Medicare expenditures and fraud focused on this product category
• rising pressure to realign incentives with clinical need

Understanding how and why the payment reforms emerged may provide helpful context as providers navigate implementation.  

The Starting Point: To Bundle or Not to Bundle (2014–2024)

CMS’ last meaningful restructuring of CTP payment was put in place in 2014 in the hospital outpatient setting, when CMS bundled product cost with the payment for the application procedure. This packaged payment approach differed from the non-facility setting, where CTPs have been paid under the Average Sales Price (ASP) + 6% methodology. CMS has considered adjustments and overhauls to CTP payment across site of care settings ever since, especially as the number of products entering the market and product spend increased. Over the past decade, the Alliance has been a tenacious advocate to protect and improve CTP payment as methodology overhauls have been considered and has proactively led several educational sessions with CMS staff to enhance their understanding of wound care complexities and the potential impacts of different payment approaches.

• In one of the first seismic changes to bring consistency across sites of care, CMS looked to bring packaged payment to the non-facility physicians’ office setting. In proposed CY 2023 rulemaking,⁵ the Agency included provisions to reclassify all CTPs as “supplies incident to a physician service” and package payment into practice expense RVUs. The Alliance, joined by many other clinical organizations, vociferously opposed these proposals. CMS ultimately removed them from the final 2023 Fee Schedule, acknowledging the need for more analysis and stakeholder vetting.
• In CY 2024 and CY 2025 rulemaking,^6,7 CMS did not include substantive CTP payment changes but responded to past stakeholder inputs and  stated in both draft and final rules its intention to move forward a future proposal to achieve a consistent payment mechanism for CTPs,⁸ previewing further exploration of the “incident-to supplies” approach. Through our CTP Workgroup comprised of representatives from clinical associations, wound clinics and manufacturers, the Alliance has been in dialogue with CMS and on the record via submitted comments and recommendations through each of these policy evolutions, sharing the consensus perspectives of members.

The Tipping Point: Fraud, Misuse and a 40-Fold Surge (2025)

While concern about potential fraud and misuse of CTPs has had the attention of regulators for some years,⁹ CTP payment issues dramatically elevated in regulatory priority this year with the Justice Department’s June 2025 “Health Care Fraud Takedown” finding $1.1 billion in fraudulent CTP/skin substitute claims.¹⁰
 
Most recently, the September 2025 HHS Office of Inspector General report¹¹ focused on “skyrocketing” spend for the product category that rose from $250 million in 2019 to more than $10 billion in 2024, a “nearly 40-fold increase, while the number of patients receiving these products only doubled.” These findings made clear that the existing payment system was not only unsustainable for the Medicare Trust, but that it was also it was creating pathways and financial incentives for abuse. Instances of medically unnecessary treatments, billing for non-existent services, and kickback schemes were uncovered. 
 
The OIG called on CMS to take “urgently needed action” to rein in the massive spending increase and urged payment reforms “that address fraud, waste, and abuse in skin substitute billing” while preserving access to legitimate clinical use.

The 2026 Solution: Separate, Site-Neutral Payment

The 2026 move to a consistent, predictable and site neutral separate payment methodology is a positive evolution and improvement to CMS’ past payment proposals.
 
The final Fee Schedule and OPPS rules establish a separate “incident-to supplies” payment for most CTPs at a standardized rate of approximately $127 per cm² in 2026 across physician offices/mobile clinics ($127.28 per cm²) and hospital outpatient department ($127.14 per cm²) regardless of the specific product used.^1,2 Exempted are CTP products with a Biologics License Application (BLA), which will remain reimbursed as a biological under CMS’ existing Average Sales Price (ASP) + 6% methodology. Moving forward, the Agency has said it will set three differentiated reimbursement categories for CTPs along FDA regulatory status (see below).
 
While the Alliance does not agree with CMS’ designation of CTPs as “supplies” and has been on the record numerous times providing rationales for our dissent,¹² we do ultimately support CMS’ approach to pay for CTPs separately—without bundling or packaging.

This established consistency across HOPD, physician office and mobile clinic settings, so treatment decisions can be clinically driven regardless of site of care, which due to bundled payment methodology flaws (see below) had disincentivized treating large size wounds in the HOPD setting. Decisions can now be made based on patient need rather than site of service payment policies. The rules also bring spend predictability after years of volatility and helps prevent the unintended incentives that contributed to inappropriate utilization and skyrocketing costs.

A “Win” for Access in the Hospital Outpatient Setting

The switch to a site neutral separate payment will have a particularly positive impact in the HOPD setting, where the bundled payment system put in place in 2014 contains several methodology flaws that have challenged access to CTPs—particularly for patients with larger wounds. The Alliance has long urged policy fixes, bringing recommendations to—and receiving the endorsement of—CMS’ Advisory Panel for Hospital Outpatient Payment multiple times.¹³ In the CY 2026 rules, CMS finally addresses many of the issues elevated by the Alliance. With this win, the new payment methodology will: 

• Enable HOPDs to be reimbursed for an adequate payment of CTP products for larger wounds.
  Issue: Add-on codes packaged into the bundled rates have not allowed for adequate payment for the HOPDs to purchase the sizes of CTPs necessary to apply to larger wounds. This has forced HOPDs to either absorb the cost of additional CTP product for larger wounds/ulcers (between 25-99 cm² or over 100 cm²) or refer patients out to settings with separate payment. This restricted access to CTPs in HOPDs and ultimately shifted treatment with CTPs to physician’s offices and mobile clinics.¹⁴ Under the CY 2026 OPPS, HOPDs will have more flexibility to be able to treat patients with larger wounds as they will now be separately paid for the service and the product used.
• Equalize payment for application of CTPs on wounds/ulcers of the same size regardless of anatomic location. 
  Issue: Under the bundled payment system, application of CTPs on the feet were assigned to a lower paying Ambulatory Payment Classification group than to the same size wounds/ulcers on the legs. Inconsistent payment made it problematic for HOPDs to manage CTP costs, as the identical amount of product must be purchased for wounds of the same size regardless of anatomic location. With the shift to separate payment, CTPs will now be paid equally across all anatomic locations.

Ultimately, with the unbundling and shift to separate site neutral payment Medicare beneficiaries will have improved access to CTPs in outpatient departments regardless of the size or location of their wounds. No more underpayment for CTP treatment of large wounds in the HOPD, no more unequal payment across anatomical sites and no more site-of-service shifts driven by policy rather than patient need.

Payment Moving Forward: Transition to Regulatory-based Payment Tiers

CMS stated in its 2026 rules that for 2027 and beyond it will set three differentiated reimbursement categories for CTPs along FDA regulatory status: PMA-approved, 510(k)-cleared, and 361 HCT/Ps.^1,2 Payment rates for these new categories will be proposed in future CMS rulemaking. This is an area where the Alliance will engage in proactive pre-rulemaking conversations with CMS and mobilize the wound care community for comment submission as needed to ensure the Agency understands the real-world impact of rates on physician practices. 

What Comes Next: Educating for Implementation of New CTP Payment, Coverage, Prior Authorization, and Ongoing Oversight

Moving forward, the Alliance will be collecting insights and impacts from members and will remain in active dialogue with CMS about adjustments and improvements—particularly as the Agency begins work setting the differentiated payment rates for CTPs across FDA regulatory categories for CY 2027. 
 
Most immediately, the Alliance will focus on educating clinicians to facilitate implementation of new policies. Several other major policy changes intersect with the 2026 payment shift:

• Coverage: the Medicare Administrative Contractors’ future effective local coverage determinations on "Skin Substitute Grafts/Cellular and Tissue-Based Products for the Treatment of Diabetic Foot Ulcers and Venous Leg Ulcers”¹⁵ are also currently scheduled to go into effect on January 1, 2026 (after two delays)¹⁶ with substantive changes to the number of covered products, allowable applications, and required documentation. 
• Prior Authorization: enhanced prior authorization processes under CMS’ Wasteful and Inappropriate Service Reduction (WISeR) Model pilot will go into effect in six states for CTPs and 16 other services considered by CMA as "vulnerable to fraud, waste and abuse."¹⁷

The Alliance will work to be a resource to its members and a sounding board to CMS as these policies are implemented and, importantly, will monitor how these overlapping reforms affect real-world access. Our priority is and remains ensuring that Medicare beneficiaries with chronic wounds maintain access to high-quality, evidence-based care.
 
About the Alliance of Wound Care Stakeholders
The Alliance has served as a leading voice of wound care advocacy for the past 20+ years. The Alliance unites leading wound care organizations and experts through advocacy and educational outreach in the regulatory, legislative and public arenas to advocate on public policy issues that may create barriers to patient access to treatments or care. With a key focus on coding, coverage and reimbursement, quality measures and wound care research, the Alliance elevates the visibility and united voice of wound care providers to regulators and policymakers. For more information visit www.woundcarestakeholders.org 
 
References
1.         Final Rule (CMS-1832-F). Published November 14, 2025. Accessed November 24, 2025. Available at: https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f 
2.     Centers for Medicare & Medicaid Services. Calendar Year (CY) 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Final Rule. Published November 1, 2025. Accessed November 24, 2025. Available at: https://www.cms.gov/newsroom/fact-sheets/calendar-year-2026-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center
3.         Office of Inspector General, U.S. Department of Health and Human Services. Medicare Part B Payment Trends for Skin Substitutes Raise Major Concerns About Fraud, Waste, and Abuse. Published November 6, 2025. Accessed November 24, 2025. Available at: https://oig.hhs.gov/reports/all/2025/medicare-part-b-payment-trends-for-skin-substitutes-raise-major-concerns-about-fraud-waste-and-abuse/
4.         Alliance of Wound Care Stakeholders. Remove Patient Access Barriers by Correcting Inadequacies in CTP Payments in the 2023 Hospital Outpatient Prospective Payment System Proposed Rule, Alliance of Wound Care Stakeholders Urges CMS. Published July 18, 2022. Accessed November 24, 2025. Available at: https://www.woundcarestakeholders.org/news/news-releases/remove-patient-access-barriers-by-correcting-inadequacies-in-ctp-payments-in-the-2023-hospital-outpatient-prospective-payment-system-proposed-rule-alliance-of-wound-care-stakeholders-urges-cms
5.         Centers for Medicare & Medicaid Services. Calendar Year (CY) 2023 Medicare Physician Fee Schedule Final Rule. Published November 1, 2022. Accessed November 24, 2025. Available at: https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2023-medicare-physician-fee-schedule-final-rule
6.         Centers for Medicare & Medicaid Services. Medicare and Medicaid Programs; CY 2024 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; etc. Federal Register. August 7, 2023;88(150):53294–53894. Accessed November 24, 2025. Available at: https://www.federalregister.gov/documents/2023/08/07/2023-14624/medicare-and-medicaid-programs-cy-2024-payment-policies-under-the-physician-fee-schedule-and-other
7.         Alliance of Wound Care Stakeholders. Comments to Proposed 2025 Medicare Physician Fee Schedule. Published September 9, 2024. Accessed November 24, 2025. Available at: https://www.woundcarestakeholders.org/advocacy/submitted-comments/comments-to-proposed-2025-medicare-physician-fee-schedule
8.         Centers for Medicare & Medicaid Services. Medicare and Medicaid Programs; CY 2025 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; etc. Federal Register. December 9, 2024;89(236):98560–99120. Accessed November 24, 2025. Available at: https://www.federalregister.gov/documents/2024/12/09/2024-25382/medicare-and-medicaid-programs-cy-2025-payment-policies-under-the-physician-fee-schedule-and-other
9.         Office of Inspector General, U.S. Department of Health and Human Services. Medicare Payments for Skin Substitute Grafts: Trends and Oversight. OIG Work Plan Summary. Updated October 2024. Accessed November 24, 2025. Available at: https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000894.asp
10.  U.S. Department of Justice. National Health Care Fraud Takedown Results in 324 Defendants Charged in Connection with Over $1.46 Billion in False Billing Schemes. Published July 2, 2024. Accessed November 24, 2025. Available at: https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-324-defendants-charged-connection-over-146
11.  Office of Inspector General, U.S. Department of Health and Human Services. Medicare Part B Payment Trends for Skin Substitutes Raise Major Concerns About Fraud, Waste, and Abuse. Published November 6, 2025. Accessed November 24, 2025. Available at: https://oig.hhs.gov/reports/all/2025/medicare-part-b-payment-trends-for-skin-substitutes-raise-major-concerns-about-fraud-waste-and-abuse/
12.  Alliance of Wound Care Stakeholders. Comments to Proposed 2024 Medicare Physician Fee Schedule. Published September 11, 2023. Accessed November 24, 2025. Available at: https://www.woundcarestakeholders.org/advocacy/submitted-comments/comments-to-proposed-2024-medicare-physician-fee-schedule
13.   Alliance of Wound Care Stakeholders. Alliance Recommendations to Proposed 2024 Hospital Outpatient Prospective Payment System Endorsed by HOPPS Advisory Panel. Published September 18, 2023. Accessed November 24, 2025. Available at: https://www.woundcarestakeholders.org/advocacy/submitted-comments/alliance-recommendations-to-proposed-2024-hospital-outpatient-prospective-payment-system-endorsed-by-hopps-advisory-panel
14.   Carter MJ, DaVanzo J, Haught R, Nusgart M, Cartwright D, Fife CE. Chronic wound prevalence and the associated cost of treatment in Medicare beneficiaries: changes between 2014 and 2019. J Med Econ. 2023 Jan-Dec;26(1):894-901. doi: 10.1080/13696998.2023.2232256. PMID: 37415496.
15.   Centers for Medicare & Medicaid Services. Medicare Coverage Database: Skin Substitute Grafts/Cellular and Tissue-Based Products for the Treatment. Accessed November 24, 2025. Available at: https://www.cms.gov/medicare-coverage-database/search-results.aspx?keyword=Skin+Substitute+Grafts%2FCellular+and+Tissue-Based+Products+for+the+Treatment&keywordType=starts&areaId=all&docType=NCA,CAL,NCD,MEDCAC,TA,MCD,6,3,5,1,F,P&contractOption=all&smartSearch=N
16.   Alliance of Wound Care Stakeholders. Effective Date for CTP LCDs Postponed by CMS to January 2026. Published November 2025. Accessed November 24, 2025. Available at: https://www.woundcarestakeholders.org/news/news-releases/effective-date-for-ctp-lcds-postponed-by-cms-to-january-2026
17.   Centers for Medicare & Medicaid Services. Wasteful and Inappropriate Service Reduction (WISeR) Model. Accessed November 24, 2025. Available at: https://www.cms.gov/priorities/innovation/innovation-models/wiser

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