The New Risk Landscape for Skin Substitutes: Audits, Medical Necessity, and 2026 Compliance Challenges

• Increased Audit Risk: Skin substitutes are flagged more frequently due to rising Medicare costs, high-dollar claims, and evolving CMS and FDA payment rules, placing providers at greater risk for audits. 
• Stricter Documentation Requirements: Medical necessity must be clearly demonstrated with detailed documentation of wound duration, response to conservative care, and stability of underlying conditions before advanced treatments are initiated. 
• Major Reimbursement Changes (2026): CMS now reimburses a flat rate of $127.14/cm² and has eliminated payment for waste, requiring providers to carefully assess the financial viability of products being marketed or used. 
• Proactive Compliance Strategy: Clinicians must independently verify reimbursement alignment before purchasing or applying grafts and stay vigilant against industry practices (eg, oversized grafts) that could lead to audit exposure. 

Medicare audits targeting skin substitute use are on the rise due to increased reimbursement rates, shifting CMS payment models, and evolving FDA classification rules. In this interview, Stephanie Allard, CPC, CEMA, RHIT, explores why wound care practices are being flagged—and what providers need to know to stay compliant.

This is directly related to the cost of the skin substitutes and rise in reimbursement. Practices using skin substitutes are being flagged more frequently because Medicare spending and reimbursement for these products have increased at a significant rate, placing them in a high-risk category for program integrity review. Centers for Medicare & Medicaid Services (CMS) has significantly changed how skin substitutes are paid, including new “incident to” supply frameworks and flat-rate methodologies, while Food and Drug Administration (FDA) classification and coverage requirements now play a much larger role in payment accuracy. UPICs are responding to this combination of high-dollar claims, rapid utilization growth, and documentation and billing practices that often haven’t kept pace with regulatory change. As a result, even well-intentioned providers who are billing correctly are being audited because small errors in medical necessity, product selection, or billing can quickly translate into large overpayments. 

You have to document the background of each patient and wound prior to moving past conservative treatment. There is a large emphasis on the duration of the wounds and the response to that conservative care. In addition to that, the stability of any underlying conditions the patient has needs to be clearly identified in the initial evaluation. 

Finally, looking toward 2026 and beyond, with CMS continuing to focus on this treatment modality, how do you see the audit environment evolving? What should wound care providers and stakeholders be planning now to stay ahead of the curve rather than reacting?  

CMS has forced a change by drastically reducing the rate of reimbursement to $127.28 per sq cm and no longer allowing reimbursement of waste. It is imperative that physicians are doing their own research and ensuring that they can be reimbursed for what they are being sold by manufacturers and distributors. There are rumblings in the industry on LinkedIn from those that sell these products that the manufacturers will just increase the size of grafts to make up for the lost revenue for a smaller wound, but this would directly impact a physician if they purchase that. There are so many changes that have taken place as of January 1, 2026; it can be really hard to stay current. It is crucial to remain diligent and make informed decisions with objective insight, not just blindly following what someone is selling.  

Stephanie Allard, CPC, CEMA, RHIT is a seasoned healthcare compliance and medical coding expert with over 20 years of experience helping organizations navigate complex coding, billing, reimbursement, and compliance challenges. She is the founder and CEO of Stephanie Allard Consulting, LLC, where she provides multi‑specialty auditing, revenue cycle reviews, education, and strategic solutions to reduce risk and improve performance, and she also shares insights through her Auditing Antics podcast and professional resources.