Why the Next 12 Months Will Decide the Future of Skin Substitutes
Most of the industry already understands what happened. The payment restructuring is in effect. The LCDs were withdrawn without explanation or a replacement timeline. Reimbursement dropped by more than 80%. Companies are restructuring, folding, or looking for exits.
What is less settled is what comes next, specifically what CMS does with the evidence question, and whether the manufacturers still standing will have the data required to compete in the reimbursement environment that’s being built for 2027 and beyond. That is the conversation worth having right now.
The Framework CMS Is Building Toward
The CY 2026 Physician Fee Schedule Final Rule did more than cut reimbursement. It set up a classification architecture that CMS intends to use as the basis for differentiated payment going forward.
CMS finalized alignment of skin substitute categorization consistent with FDA regulatory status, establishing three payment groups: 361 HCT/Ps, 510(k) cleared devices, and PMA-approved products. CMS stated that grouping products based on relevant product characteristics, consistent with FDA regulatory status, recognizes clinical and resource differences in product types and would incentivize competition to create more innovative products.¹
For 2026, every product in all three categories gets paid the same $127.28 per square centimeter. CMS chose to start with a single rate to allow the market to stabilize under the new grouped payment system before setting differentiated rates. Separate rates for the three FDA categories are expected for 2027 and beyond.²
That timeline matters. In future years, CMS intends to set different payment rates for each category based on pricing data it collects from manufacturers and hospitals.³ The groundwork being laid in 2026 is not temporary. It is the foundation of a payment model where your FDA pathway determines your reimbursement ceiling. Companies that have not thought through what that means for their product are already behind.
The Evidence Debate Is Real, and It Is Not Resolved
The three-tier framework makes a logical argument: products that went through more rigorous regulatory review should be paid more than those that didn’t. Whether that argument holds up in clinical practice is a different question, and it’s one that a significant portion of the industry is pushing back on.
PMA products tend to be intended to go beyond a simple wound cover to provide some type of direct treatment effect, and must demonstrate safety and efficacy for the intended use, which generally requires the performance of clinical studies.⁴ That is a genuine distinction.
But a PMA designation does not tell you whether that product performs better in a wound than a well-manufactured 361 HCT/P. And many of the 361 products on the market, particularly the birth tissue category, are competing largely on proprietary processing claims that have never been tested head-to-head against each other, let alone against a control arm in a properly designed trial. As one stakeholder comment submitted directly to CMS put it, any future payment differential for skin substitutes should be patient-driven, with products assigned to higher payment categories required to demonstrate higher rates of efficacy and fewer reapplications.⁵
That is a reasonable standard. The problem is that most of the market, across all three regulatory categories, cannot currently meet it.
CMS itself acknowledged in prior rulemaking that FDA approval pathways are not necessarily appropriate for Medicare payment policy decisions, and that payment should be determined according to criteria of clinical and resource homogeneity rather than FDA regulatory status.⁵ The fact that CMS is now moving in the opposite direction represents a significant policy shift, and one that stakeholders have not uniformly embraced.
Why the Evidence Investment Isn’t Happening Fast
The natural response to a payment system that rewards clinical evidence would be for manufacturers to invest in trials. That response has been slow, and for understandable reasons.
Running a randomized controlled trial in wound care is expensive and operationally demanding. Multi-site enrollment, long follow-up windows, and regulatory coordination all require capital that most mid-sized wound care manufacturers do not have in abundance, particularly after a reimbursement cut that took effect January 1.
More importantly, CMS has not given the industry sufficient policy stability to justify that level of investment. The coverage framework that was supposed to create a hard evidence requirement was withdrawn on December 24, 2025, with no explanation and no replacement timeline. With the withdrawal of the LCDs, there are no changes to skin substitute coverage for Part B Medicare beneficiaries. The payment changes finalized in the CY 2026 Medicare Physician Fee Schedule final rule remain in effect, but coverage policy remains unchanged.⁶
That split decision is the core of the problem. The LCD withdrawal avoided terms like delayed or postponed, signaling a full withdrawal rather than a temporary pause. No replacement timeline or revised policies have been outlined, leaving the program in a holding pattern.⁷
What this means practically is that CMS has told the industry evidence will matter to payment starting in 2027, while simultaneously withdrawing the specific coverage mechanism that would have required it. For a manufacturer sitting on limited capital trying to decide whether to fund a clinical trial, that is not a sufficient signal. CMS saying it intends to differentiate rates by FDA pathway is meaningful. CMS having reversed, delayed, or withdrawn its own policies multiple times in eighteen months is also meaningful. Both things are true, and they pull in opposite directions.
What the 2027 Timeline Actually Demands
The differentiated rate structure CMS is building toward is not hypothetical. CMS has stated that FDA classifications will be used to establish distinct reimbursement rates starting in 2027, with 2026 used to observe utilization trends before implementing differentiated pricing.⁸
That means the window for manufacturers to build, submit, and have evidence considered in the 2027 rulemaking cycle is not wide. Proposed rules for 2027 will be published mid-2026. Public comment periods close before the final rule drops in late 2026. Companies that are not actively generating peer-reviewed data, submitting to journals, and engaging with the rulemaking process now are operating on a compressed timeline that may already be closing.
The stakeholder comment record submitted to CMS reflects a clear message: payment differentiation tied strictly to FDA pathway, without clinical outcome requirements attached, risks perpetuating the same dynamic where financial incentives rather than clinical results drive product selection.⁵ If that argument gains traction in the 2027 rulemaking, the landscape shifts again. Companies betting entirely on their PMA or BLA status without building a clinical evidence base may find that status is necessary but no longer sufficient.
What This Means for Physicians and Practices
The current environment, lower reimbursement, no national coverage standard, and differentiated rates coming in 2027, does not call for paralysis. It calls for deliberate decision-making about who you work with and how you operate.
Medicare claims for skin substitute treatments will continue to be evaluated on a case-by-case basis under existing LCDs and medical necessity standards. Documentation requirements remain unchanged and continue to be critical for compliance and reimbursement. Some distributors may suggest that nothing has changed due to the LCD withdrawal. Providers and wound care clinics should conduct their own due diligence.⁹
Work with partners who understand the regulatory landscape at a policy level, not just the product level. The companies and distributors worth working with right now are the ones who are engaged with what’s coming in 2027, not just reacting to what happened in 2026. That distinction is visible if you ask the right questions.
If you have a stake in how this policy gets built, engage with it. The public comment process, congressional offices, and direct evidence submission to CMS are all open channels. A revised LCD is expected in early 2027.¹⁰ The shape of that document will reflect, at least in part, what the clinical community and the manufacturing community put in front of CMS between now and then. Waiting to see what happens is itself a choice, and it is not a neutral one.
At Bionavix, our focus stays on helping the physicians and partners we work with operate in the environment that actually exists, not the one that was expected a year ago. The policy landscape will keep moving. The practices that stay informed and engaged will be in a better position to absorb what comes next.
Sources
¹ CMS.gov. “Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F).” October 31, 2025. cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f
² HCH Lawyers. “CMS Reclassifies Skin Substitutes for 2026: Key Changes.” December 2025. hchlawyers.com/blog/2025/december/cms-fundamentally-restructures-skin-substitute-p/
³ National Law Review. “CMS Finalizes Flat-Rate Rule for Skin Substitutes.” November 2025. natlawreview.com
⁴ Reed Smith LLP. “CMS Reclassifies Certain Skin Substitutes and Dramatically Cuts Payment Under Medicare Part B.” November 2025. reedsmith.com
⁵ CMS Regulations.gov Stakeholder Comment. CMS-2025-0306-2115. September 2024. downloads.regulations.gov/CMS-2025-0306-2115/attachment_1.pdf
⁶ APMA. “CMS Withdraws Skin Substitute LCDs Scheduled for 2026.” December 2025. apma.org
⁷ Florida Healthcare Law Firm. “CMS Withdraws Controversial Skin Substitute LCDs: A Win for Access, But Uncertainties Linger.” December 2025. floridahealthcarelawfirm.com
⁸ 24/7 Medical Billing Services. “CMS 2026 Skin Substitute Payment Changes: What Wound Care Providers Must Know.” January 2026.
⁹ BDO Healthcare Advisory. “CMS Withdraws Prominent LCD for Skin Substitutes: What Healthcare Providers Need to Know.” January 2026. bdo.com
¹⁰ HME News. “Revised LCD Expected in Early 2027.” 2025. hmenews.com