Why CMS Is Increasingly Focused on Skin Substitutes: Cost Growth, Utilization Trends, and Policy Signals

Spending on skin substitutes has grown significantly in the Medicare Fee-for-Service program. For wound care professionals, understanding the cost trajectory, utilization patterns, and federal oversight signals is essential to anticipating future reimbursement and compliance expectations.

Key Takeaways

• Spending on skin substitutes in Medicare Part B has grown substantially, attracting oversight from CMS and OIG.
• Geographic variation and documentation-related improper payments contribute to policy scrutiny.
• Ongoing attention through LCD updates, rulemaking, and integrity programs signals a sustained—not temporary—focus.

Why CMS Is Increasingly Focused on Skin Substitutes

Medicare covers advanced wound therapies under the statutory requirement that items and services be “reasonable and necessary” for diagnosis or treatment according to section 1862(a)(1)(A) of the Social Security Act.¹ In recent years, skin substitutes have drawn heightened attention from the Centers for Medicare & Medicaid Services (CMS), the Office of Inspector General (OIG), and the Medicare Payment Advisory Commission (MedPAC). The focus is not event-driven; it reflects sustained cost growth, wide geographic variation, and documentation vulnerabilities within the Medicare program.

Cost Growth: A High-Expenditure Category

Skin substitutes are among the higher-cost supplies billed in the outpatient and physician office settings.² Medicare pays separately for many of these products under the Hospital Outpatient Prospective Payment System (OPPS) and the Physician Fee Schedule (PFS), using assigned Healthcare Common Procedure Coding System (HCPCS) codes and payment methodologies established in annual rulemaking.³

Federal oversight bodies have repeatedly identified rapid growth in Medicare spending for skin substitutes. The Department of Health and Human Services (HHS) Office of Inspector General has reported substantial increases in Part B spending on these products over the past decade, highlighting concerns about billing practices, documentation, and potential overutilization.⁴ While exact figures fluctuate annually, the long-term trajectory has been upward, especially in the physician office setting.

MedPAC has similarly noted growth in spending for certain separately payable drugs and biological-type products furnished in physician offices and outpatient departments, underscoring the financial pressure these categories place on the program.⁶ Although skin substitutes are not always classified identically to drugs or biologics, they often follow similar payment dynamics under Part B.

For CMS, sustained cost growth in a concentrated therapeutic area naturally invites scrutiny.

Utilization Patterns: Volume, Variation, and Site of Service

Beyond aggregate spending, utilization patterns have raised policy questions. OIG analyses have identified geographic variation in the use of skin substitutes, with certain regions exhibiting disproportionately high billing rates.^4,5 Variation alone does not establish inappropriate use, but CMS has historically viewed unexplained regional discrepancies as potential indicators of inconsistent medical necessity standards or documentation practices. 

In addition, the site of service has shifted over time. Many skin substitutes are furnished in physician offices rather than hospital outpatient departments, where payment methodologies and beneficiary cost-sharing differ.³ Differences in reimbursement structures can influence utilization behavior, and CMS monitors these patterns through claims analysis and program integrity tools.

The CMS Comprehensive Error Rate Testing (CERT) program has also consistently found that insufficient documentation is among the leading causes of improper payments in Medicare Fee-for-Service.⁷ Although CERT reviews are not fraud investigations, documentation-intensive services—such as longitudinal wound care with advanced products—may be vulnerable to improper payment findings when records fail to demonstrate medical necessity.

Taken together, cost concentration, regional variation, and documentation sensitivity create a policy environment in which skin substitutes receive ongoing attention.

Policy Signals: Coverage, Coding, and Integrity Oversight

CMS policy signals emerge through several channels:

1. Local Coverage Determinations (LCDs)

Medicare Administrative Contractors (MACs) periodically revise LCDs governing skin substitute use. These policies often clarify documentation requirements, frequency limits, and definitions of appropriate conservative therapy. LCD revisions signal CMS’s effort to standardize medical necessity criteria within statutory authority.¹

2. Annual Payment Rulemaking

CMS updates OPPS and PFS payment policies annually through notice-and-comment rulemaking.³ Adjustments to packaging thresholds, payment groupings, or coding descriptors can directly affect how skin substitutes are reimbursed. Even technical coding changes may reflect broader cost-containment priorities.

3. OIG and Program Integrity Activity

OIG work plans and reports frequently identify areas of high expenditure growth or billing risk.⁴ Such reports do not automatically change coverage policy, but they often precede targeted audits, educational outreach, or contractor review initiatives.

4. Improper Payment Measurement

CERT findings inform CMS education and corrective actions.⁷ Persistent documentation deficiencies in high-cost categories can shape contractor scrutiny and future guidance.

Context for Wound Care Professionals

For clinicians and practice leaders, CMS’s focus on skin substitutes should be viewed through a structural lens:

• These products represent a growing share of Part B spending.
• Utilization varies geographically and by site of service.
• Documentation standards are central to payment defensibility.

Importantly, federal oversight does not imply that skin substitutes lack clinical value. Randomized controlled trials and systematic reviews demonstrate that certain advanced products can improve healing outcomes in carefully selected chronic wounds when used adjunctively with standard care.⁸ However, Medicare’s obligation is programmatic: ensuring that services billed to taxpayers meet statutory standards of reasonableness and necessity.¹

The Bottom Line

CMS’s increasing focus on skin substitutes reflects sustained cost growth, observable utilization variation, and documentation-driven improper payment risk. For wound care professionals, rigorous documentation, adherence to evidence-based sequencing of care, and awareness of evolving payment policy will be essential to maintaining compliant and sustainable practice.

References

1. Social Security Administration. Social Security Act §1862(a)(1)(A), 42 U.S.C. §1395y(a)(1)(A). Accessed March 16, 2026.https://www.ssa.gov/OP_Home/ssact/title18/1862.htm. 

2. Centers for Medicare & Medicaid Services.CMS Modernizes Payment Accuracy and Significantly Cuts Spending Waste. Accessed March 16, 2026. https://www.cms.gov/newsroom/press-releases/cms-modernizes-payment-accuracy-significantly-cuts-spending-waste.

3. Centers for Medicare & Medicaid Services. Calendar Year 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Final Rule (CMS-1834-FC). Accessed March 16, 2026. https://www.cms.gov/newsroom/fact-sheets/calendar-year-2026-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center.

4. 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. Accessed March 16, 2026. https://oig.hhs.gov/reports/all/2025/medicare-part-b-payment-trends-for-skin-substitutes-raise-major-concerns-about-fraud-waste-and-abuse/.

5. KFF. Examining the Potential Impact of Medicare’s New WISeR Model. Accessed March 18, 2026. https://www.kff.org/medicare/examining-the-potential-impact-of-medicares-new-wiser-model/.

6. Medicare Payment Advisory Commission. March 2026 Report to the Congress: Medicare Payment Policy. Accessed March 16, 2026. https://www.medpac.gov/document/march-2026-report-to-the-congress-medicare-payment-policy/.

7. Centers for Medicare & Medicaid Services. 2025 Medicare Fee-for-Service Supplemental Improper Payment Data. Accessed March 16, 2026. https://www.cms.gov/data-research/monitoring-programs/improper-payment-measurement-programs/comprehensive-error-rate-testing-cert/cert-reports/2025-medicare-fee-service-supplemental-improper-payment-data-2.

8. Vecin NM, Kirsner RS. Skin substitutes as treatment for chronic wounds: current and future directions. Front Med (Lausanne). 2023;10:1154567. Published 2023 Aug 29. doi:10.3389/fmed.2023.1154567