Medicare Overhauls Advanced Wound Care Payments: Sets New Rate Formula and Targets Top 3% of Providers for Fraud Checks

This new legislation, the Skin Substitute Access and Payment Reform Act, is shaking up how Medicare pays for advanced wound care materials—the stuff they call "skin substitute products." Starting in 2026, these products, which are crucial for healing serious wounds, are getting a new, dedicated payment system under Medicare Part B. The core change is that Medicare will calculate payment rates differently. For 2026, the rate will be based on a volume-weighted average of what was paid in 2023. After that, the payment amount simply adjusts based on the Consumer Price Index (CPI) increase, essentially tying the cost of these medical products to general inflation. If you’re a provider, this means the predictable, inflation-based payment model kicks in fast, but it also means the previous, potentially higher, payment limits are gone.

The New Payment Math

Section 2 of the Act introduces a new payment formula that could change the financial landscape for clinics and hospitals specializing in wound care. Instead of the current system, the new payment amount will be 80% of the lesser of the provider’s charge or the new Medicare rate. This move standardizes payment across the board and forces the entire industry to adjust to a single, consolidated billing code for all skin substitutes by January 1, 2026. While standardization sounds efficient—and it definitely helps Medicare streamline its paperwork—it also means that high-tech, potentially more expensive skin substitutes will be lumped in payment-wise with less complex products. For a small business owner running a specialized wound clinic, this could mean tighter margins, especially if they rely on the most advanced (and costly) products.

Targeting the Outliers: Program Integrity Gets Serious

Where this bill really gets interesting is in Section 3, which is all about program integrity—or, as most people call it, cracking down on fraud and waste. The Secretary of Health and Human Services is required to identify the top 3% of providers who receive the highest total payments for skin substitute products each year. These are the "outlier providers," and they are about to get a lot of extra attention.

If you’re one of these high-volume providers, get ready for a serious administrative headache starting in 2026. Your claims will be subject to prepayment review, meaning Medicare checks your paperwork before they pay you. Then, starting in 2027, you’ll be forced into a prior authorization system for these products. This means getting permission from Medicare before applying the treatment. While this is designed to catch bad actors who might be overbilling, it inevitably slows down the process for legitimate providers who treat a large number of complex cases. Imagine running a busy construction site and needing pre-approval for every piece of specialized equipment—it adds time and cost.

The Real-World Stakes of Denial

The consequences for those outliers who fail the authorization checks are steep. If a provider has more than 75% of their prior authorization requests denied over six consecutive months starting in 2028, the Secretary must declare them to be abusing their billing privileges and refer them to the Inspector General (OIG) for potential exclusion from all federal healthcare programs. This is the policy equivalent of a three-strikes rule, and it’s a powerful tool aimed squarely at the highest spenders. It’s a clear message: Medicare is watching its top users closely.

One small, but important, note is that for 2026, Medicare cannot deny coverage for a specific skin substitute product based on an analysis of its clinical evidence, unless there’s a safety issue like contamination. This provides a temporary shield for patient access during the transition, ensuring that necessary care isn't immediately halted while the new payment system is implemented. However, after 2026, those clinical evidence reviews can likely resume. To fund this increased oversight, the bill authorizes moving $5 million annually from the Medicare Trust Fund to CMS for program management between 2027 and 2030.