Countdown to changes in payments for placenta wound dressings

Original story from January 2025

The United States CMS (Centers for Medicare & Medicaid Services) announced in November 2024 that, effective 12 February 2025, they were changing their guidelines for how physicians are reimbursed by health insurance providers when using skin substitutes to treat diabetic wounds¹.

The new government guidelines were focused specifically on skin allografts as well as cellular and tissue-based products (CTP) that are used as wound dressings for the treatment of Diabetic Foot Ulcers (DFU) and Venous Leg Ulcers (VLU)¹. We have previously reported that chronic wounds to the legs and feet of diabetic patients constitute the biggest market for placenta products, and the need for wound dressings has been outstripping the supply of donated placentas². From a business perspective, this unmet medical need has created a bit of a gold rush. Many hospitals have recently launched placenta procurement programs, either by partnering with third party companies or by developing in-house programs. In some cases, hospitals have ended long-term relationships collecting donations for public cord blood banks, to instead collect donations for placenta procurement companies, which allegedly offer the hospitals more financially lucrative relationships.

Established Regulatory Landscape

Under the health insurance system in the United States, whenever a patient receives any type of service, there is a Current Procedure Terminology code, or CPT code, which is recorded in the patient’s chart and then submitted to the patient’s insurance provider for reimbursement³. These CPT codes are curated by the American Medical Association, a professional society of physicians⁴. The CPT codes that describe the use of placenta allograft products to cover wounds are 15271 through 15278.

While physicians define the CPT codes, it is the federal government which decides the Physician Fee Schedule or PFS⁵. The PFS is the financial reimbursement that a physician’s practice will receive for each CPT code. There are numerous ways to look up the reimbursement rates, either using a free web search from CMS or using various apps that can be licensed from the American Medical Association^6,7.

Technically, the federal agency CMS only determines the physician fee schedule paid for US patients that are enrolled in government-run insurance programs; these include Medicare, Medicaid, the Children's Health Insurance Program, and the Health Insurance Marketplace. Collectively, these programs currently provide health insurance coverage to more than 100 million people⁸. In practice, private insurance companies such as UnitedHealthCare, CareFirst, etc., tend to follow the PFS rates from CMS as a baseline. Studies have shown that private insurance companies typically reimburse about twice as much as the CMS payment^9,10.

New Guidelines Proposed for February 2025

The Latest Coverage Determination, or simply the new CMS guidelines, was issued 14 November 2024 and will be effective 12 February 2025. The regulatory changes proposed for skin substitutes in 2025 are two-fold. First, physicians will be subject to more regulations on when and how they use allografts on ulcers^1,11. To comply with those regulations, physicians must maintain detailed documentation of their patients’ care. Before treating a chronic wound with a graft, they must document that they first tried the standard of care for four weeks. The standard of care includes debridement, offloading for DFUs or compression therapy for VLUs, infection control, and exudate management. The patient history must show that the patient is under the care of a qualified provider for management of their underlying condition (for example, this could be diabetes or venous insufficiency). Upon applying an allograft, the physician must document the progress of the ulcer from week to week and must maintain the standard of care throughout the course of therapy. The skin graft applied must be the smallest size that will work and only a single layer can be applied. The physician must document that the ulcer is responding to the graft before applying another graft. The data compiled by CMS indicates that the mean number of graft applications required for complete wound healing is four, but if the wound is closing the physician can keep going up to a maximum of eight applications over a period of 12-16 weeks. If these rules are not followed, the graft application will be deemed not reasonable and necessary, or in other words the insurance claim will be denied.

The second and most dramatic change is that the proposed new CMS guideline only approves 17 skin substitute products for the treatment of DFUs, and 5 of those 17 products for the treatment of VLUs¹. We have prepared a table below which lists these approved products, and their manufacturers, with links to their relevant web pages. What these products all have in common is a high level of evidence for efficacy; they have all been tested in randomized controlled clinical trials (RCT) which yielded statistically significant results. The CMS declined to cover products which did not have RCTs. These include products for which there was no literature identified, or which had “insufficient evidence” from case reports, observational studies, retrospective comparative studies, or small RCTs with weak results. Also, the CMS ruled that fluid or gel preparations do not qualify as grafts.

The skin substitute products in the table below are not all amniotic membrane grafts. Several products are acellular, one is intact fish skin, and another is made of fetal bovine collagen. Following their list of approved products, the CMS guideline provides a list naming over a hundred skin substitute products which are not approved at this time, and reviews the status of their evidence. It must be emphasized that the products which are currently not approved are not “bad”, they simply need to provide more evidence of efficacy as a treatment for DFU and/or VLU before they can move to the approved list.

The manufacturers of the 17 approved products are all well-established pharma companies. It is notable that the 17 products come from only 9 companies, as many have more than one approved product. Basically, these are companies that could afford to run RCTs, and because they provided high-quality evidence that their products have efficacy, they are being rewarded with a position on the short list of products that can be reimbursed under government guidelines.

Financial Stakes

A lot of money is at stake, because close to 17% of Medicare beneficiaries have chronic wounds¹². According to SmartTRAK Business Intelligence, total revenue for amniotic membrane skin substitutes has grown from just over $1 billion in 2022 to an estimated $5.5 billion in 2024¹². Another analysis from actuarial firm Early Read finds that Medicare spending on all forms of skin substitutes has soared from $1.6 billion in 2022 to $10 billion in 2024¹³.

The current Medicare rules for reimbursing skin substitutes have loopholes that allow unscrupulous medical practices to “profiteer”¹². Medicare allows physician practices to buy placenta allografts at a discount but get reimbursed for the full price. This discount only lasts for the first six months of a new product, but there is no rule to stop a company from repeatedly launching the same product. There is also no rule, unless the Latest Coverage Determination (LCV) goes into effect, to stop physicians from purchasing large sheets of skin substitute for small wounds.

Manufacturers of the roughly one hundred skin substitute products that did not make the CMS short list have protested the new CMS policies. Processing companies argue that all unmanipulated placenta allografts are essentially the same thing, regardless of whether the product has been through a randomized controlled clinical trial. They also point out that restrictions on products could cause supply chain issues in the short term.

An industry trade group has been formed by a few companies to lobby against the rule changes. The group is called Medicare Access to Skin Substitutes Coalition, or MASS Coalition, and they have a website at the URL saveourwoundcare.org¹⁴. Although the MASS coalition displays a high level of public relations management, there is no public-facing list revealing which companies are members of this coalition. The company Extremity Care is widely reported to be a founding member of the MASS coalition¹³. The OpenSecrets website tracks the lobbying expenditures of the MASS coalition.

Update February 2025

The new CMS reimbursement guidelines that were supposed to roll out on 12 Feb. 2025 have been put on hold for at least 60 days (until 14 April) by President Trump’s executive order to freeze all federal regulations¹⁵.

Update April 2025

After critical remarks by President Trump, CMS announced on April 11 that the new reimbursement guidelines would be delayed until at least January 1, 2026¹³.

Update August 2025

On August 4, the Substack blog Popular Information broke the story that the company Extremity Care donated $5 million to MAGA Inc. just days before President Trump started criticizing the pending CMS policy on skin substitutes¹⁶. The record of this donation was not released until July 31. Our foundation gained some insights into this industry by interviewing the leader of another company that produces placenta dressings for wounds¹⁷: We learned that Extremity Care does not even manufacture the placenta products that they sell. We also learned that Extremity Care is billing CMS over $100 million per quarter and that the leaders of Extremity Care travel via private jets.

Meanwhile, on July 14, CMS released a new proposed rule for the Medicare Physician Fee Schedule (PFS) that will take effect at the start of 2026¹⁸. One element of the proposed changes is to move skin substitutes out of the category of biologic drugs and into the category of incidental medical supplies used by physician practices. The changed categorization of skin substitutes would subject them to a reimbursement price cap. The price cap would be $806 per square inch, which corresponds to $125 per square centimeter. Currently, the prices of skin substitutes vary by more than a factor of ten, with the average price being $5,089 per square inch^13,16,19.

Update December 2025

As we approach the end of 2025, we have not seen any last minute changes (yet) to the cap on the reimbursement price of skin substitutes that will be imposed by CMS in 2026.

Extremity Care has continued to lobby for removal of the price caps. It has emerged that Extremity Care secretly donated $2.5 million to the construction of a new White House ballroom^20,21. This donation was a “secret” because the Trump administration allowed some donors to remain incognito. However, many of those donors were recognized when they attended an exclusive White House dinner with President Trump to which only big ballroom donors were invited^20,21. Subsequently, the watchdog organization Public Citizen utilized lobbying disclosures to identify ballroom donors, including Extremity Care²².

Advocacy organizations such as Accountable for Health have stressed that the chronic over-billing for wound care “is not a victimless crime”^23,24. Investigations have revealed numerous instances where aggressive, presumably profit-driven, wound care has contributed to the suffering and death of elderly patients. In multiple case histories, patients near the end of life were subjected to frequent dressing changes that generated huge revenues in their final weeks.

CMS released its final rule for the 2026 physician fee schedule on November 5²⁵. The full document is 2375 pages, and section K. covers Payment for Skin Substitutes. Simultaneously, CMS released another Local Coverage Determination²⁶. In these documents, the regulatory landscape has been mostly reset to where we were at the beginning of 2025. Once again, only the 17 products that have passed randomized controlled clinical trials (RCT) are approved as skin substitutes for the treatment of Diabetic Foot Ulcers (DFU), and 5 of these 17 are also approved for Venous Leg Ulcers (VLU)²⁶. These approved products are the same ones listed in the table above. However, other skin substitute products that do not have RCTs may continue to be used for other medical indications. Starting in 2026, only skin substitute products that are licensed by the FDA as biologics (FDA BLA license) will receive individual CPT codes for reimbursement. All of the remaining skin substitute products, including unmanipulated placenta products, will be treated as “incident-to-supplies” in order to “ensure a consistent payment approach”²⁵. The uniform reimbursement rate will be $127.28 per sq cm. Furthermore, CMS issued a payment schedule for ambulatory surgical centers on November 21 which follows the same reimbursement rules²⁷.

The extravagant spending of Medicare money on skin substitutes has also caught the attention of Congress. Bipartisan bills have been introduced in both the House and Senate that propose to set caps on reimbursements^28,29. However, some legal analysts warn that the bills in Congress are wolves in sheep’s clothing³⁰. In other words, they may really be designed to benefit companies that have lobbied Congress to help them avoid the CMS rules. The price caps proposed by the bills would be based on weighted averages of past prices, which would skew significantly higher than the reimbursement proposed by CMS.

Gossip in the industry suggests that many companies making placenta products expect the CMS rules to stick this time. During the first half of 2025, Medicare spending on skin substitutes was up 55% over 2024, which many attribute to a rush of healthcare providers seeking to cash in while they can²³. At the same time, we have heard of manufacturers of placenta products that are shutting down or slowing down in expectation of decreased demand. It remains to be seen if we can make it into 2026 without a last-ditch lobbying campaign for regulatory changes that will benefit the profiteers.

References

1. CMS.gov Skin Substitute Grafts/Cellular and Tissue-Based Products for the Treatment of Diabetic Foot Ulcers and Venous Leg Ulcers. Local Coverage Determination 39828. Notice released 2024-11-14
2. Tibbot T, Verter F. What do they do with all those placenta donations? Parent's Guide to Cord Blood Foundation Newsletter Published 2023-12
3. CMS.gov List of CPT/HCPCS Codes. Effective 2025-01-01 Published 2024-11-26
4. American Medical Association. CPT® Codes. CPT® is a registered trademark of the American Medical Association.
5. CMS.gov Physician Fee Schedule. Last modified 2024-09-10
6. CMS.gov PFS Look-up Tool Overview. Last modified 2024-12-11
7. American Medical Association. Need coding resources?
8. CMS.gov Data & Research. Accessed 2025-01-13
9. Copeland L. New Study Finds that Private Plans Pay Hospitals More Than Medicare for Inpatient and Outpatient Services. Medicare Rights. Published 2022-05-19
10. Lopez E, Neuman T, Jacobson G, Levitt L. How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature. Kaiser Family Foundation. Published 2020-04-15
11. Alder A. Medicare Finalizes Skin Substitute Graft Policies: Changes Effective February 2025. Parsons Behle & Latimer Insights Published 2024-11-19
12. Firth S. Experts Sound the Alarm on Pricey Skin Substitutes in Wound Care Industry. Medpage Published 2025-03-18
13. Kliff S, Thomas K. Trump Administration Delays Plan to Limit Pricey Bandages. NYTimes. Published 2025-04-11
14. Medicare Access to Skin Substitutes Coalition (MASS Coalition). MASS Coalition Welcomes Trump Order Freezing Skin Substitute LCDs. Globe Newswire. Published 2025-01-27
15. Presidential Actions. Regulatory Freeze Pending Review. Executive Order. Signed 2025-01-20
16. Legum J. Days after $5 million donation to MAGA Inc., Trump freezes Medicare waste crackdown. Popular Information. Published 2025-08-04
17. Anonymous. Ethical Placental Tissue Company Speaks Out. Parent's Guide to Cord Blood Foundation Newsletter Published 2025-09
18. CMS.gov CMS Proposes Physician Payment Rule to Significantly Cut Spending Waste, Enhance Quality Measures, and Improve Chronic Disease Management for People with Medicare. Press release 2025-07-14
19. Kliff S, Thomas K. Trump Administration Will Limit Medicare Spending on Pricey Bandages. NYTimes. Published 2025-07-15
20. Vogel KP. Trump’s Team Offers to Keep Some Ballroom Donors Incognito. NYTimes. Published 2025-11-01
21. Legum J. UPDATE: Medicare freeze beneficiary secretly donates $2.5 million to Trump ballroom. Popular Information. Published 2025-11-04
22. Public Citizen. Three of D.C.’s Biggest Lobbyists Represent Two-Thirds of the Corporate Donors to Trump’s White House Ballroom. Public Citizen. Published 2025-11-19
23. Firth S. Medicare to Spend $15B on Treatment Linked to Fraud, Patient Harm. MedPage. Published 2025-10-27
24. Accountable for Health. Medicare’s Skin Substitute Crisis. Patient Stories. Published 2025
25. CMS.gov Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program. Federal Register. Published 2025-1105.
26. CMS.gov Skin Substitute Grafts/Cellular and Tissue-Based Products for the Treatment of Diabetic Foot Ulcers and Venous Leg Ulcers. Local Coverage Determination 39865. Notice released 2025-11-05
27. CMS.gov Calendar Year 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Final Rule (CMS-1834-FC). Fact Sheet. Published 2025-11-21
28. Congress.gov Skin Substitute Access and Payment Reform Act of 2025. HR5768 Introduced 2025-10-17
29. Congress.gov Skin Substitute Access and Payment Reform Act of 2025. S.2561 Introduced 2025-07-31
30. Christian Bible. Matthew 7:15-23 (New International Version)