CMS Final Rule Reshapes Skin Substitute Reimbursement for 2026

If you provide wound care services in an office or mobile setting, a significant payment change is on the horizon. Under the 2026 Physician Fee Schedule Final Rule, The Centers for Medicare & Medicaid Services (“CMS”) will end unbundled payment for most skin substitute products. Beginning January 1, 2026, these products will be treated as incident-to supplies, meaning the cost of the product will be included within the overall payment for the wound care procedure rather than reimbursed separately.

This change represents one of the most substantial shifts in wound care reimbursement in recent years and will have far-reaching implications for clinical and operational decision-making.

Why CMS Is Making This Change

Over the past several years, Medicare spending on skin substitutes has increased sharply — from approximately $250 million in 2019 to more than $10 billion in 2024. While utilization has grown, CMS has determined that the payment structure has contributed to this rise, rather than patient need.

The existing unbundled payment model reimburses each product separately, leading to wide variation in payment rates among similar products. CMS has concluded that this structure creates financial incentives that are not aligned with its broader goal of consistent, value-based reimbursement, and instead has created significant fraud, waste and abuse in the industry.

By shifting these products into the category of incident-to supplies, CMS aims to standardize payment, promote predictable pricing, and ensure that clinical judgment, rather than payment potential, drives product selection.

What Changes in 2026

Beginning January 1, 2026, non-biologic skin substitutes will be reimbursed based on their FDA regulatory categories: (a) products approved through the Premarket Approval (PMA) process; (b) products cleared through the 510(k) process; and (c)  tissue products registered as 361 human cell and tissue-based products (HCT/Ps).

All three categories will share one national payment rate of approximately $127 per square centimeter, before geographic adjustments. This rate will apply to the entire procedure — both the wound care service and the product itself. CMS has described this as an initial baseline rate rather than a permanent figure and plans to collect utilization and pricing data following implementation. While the Final Rule indicates that CMS may revisit or revise the payment model through future rulemaking once adequate data is available, there is no specific schedule for these updates.

What About Biologic Products?

Only true biologic products, i.e. those licensed by the FDA under Section 351 of the Public Health Service Act— will continue to be reimbursed separately under the current Average Sales Price (ASP) plus 6% methodology.

However, the agency explicitly stated that it will monitor utilization closely to identify any significant shift toward these products after implementation. If CMS determines that providers are disproportionately selecting biologics for financial rather than clinical reasons, it may reevaluate payment for biologics in future rulemaking.

In addition, biologics are significantly more expensive and may not be clinically appropriate for all wound types. Their use must remain justified by clinical evidence and properly documented to avoid audit risk, particularly as the Office of Inspector General continues its nationwide review of skin substitute billing.

Preparing for the Transition

The 2026 rule is CMS’s effort to bring uniformity and cost control to an area of rapid spending growth, but for wound care providers, it introduces a completely new reimbursement framework and compliance risk profile. The transition will require not only operational adjustments but also proactive compliance planning to ensure that documentation, coding, and product selection fully align with the new structure.

This is the time to strengthen compliance infrastructure before the rule takes effect. Taking a proactive approach now will help safeguard revenue, reduce audit exposure, and ensure a smooth transition as CMS continues to refine its reimbursement policies for skin substitutes.

At HealthWise Legal we advise wound care providers on a regular basis and provide comprehensive compliance programs, integrating regulatory analysis, audit preparedness, and operational guidance. If your wound care practice needs assistance preparing for this change or wishes to participate in HealthWise Legal’s wound care compliance program, please contact our office for more information.