US Government Changes Physician Reimbursements for Placenta Products

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

The new government guidelines are 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 that is 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

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 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 chonic 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 applciations 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 most dramatic change is that the 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 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.

Forecast

There is a great deal of discussion right now about how these new CMS guidelines will impact companies that collect placenta donations. As explained earlier, the ongoing need for allograft wound dressings has created a gold rush where a lot of new participants have jumped into placenta procurement. But many industry insiders believe that the consolidation of the wound market to a few approved products will trickle down to a consolidation of placenta suppliers, and small players in this field will be squeezed out. There are several reasons for this. When a pharma company is manufacturing an FDA-approved product, it is vital for them to maintain consistency through every step of their process. This includes how their donors are approached, what questionnaire is used for maternal consent, the mother’s medical and social history records must be maintained in a form compliant with Title 21 of the Code of Federal Regulations, and so forth. Some of the small players in placenta procurement are not even using the industry standard consent form. A big pharma company with an FDA-approved product cannot risk an entanglement with a procurement company that could jeopardize the final product. In fact, many of the established companies that manufacture placenta products have created wholly-owned subsidiaries to handle their own procurement. For example, MiMedx sponsors the website placentadonation.com.

The wild card in any discussion of placenta procurement and placenta product manufacturing is the role of “illegal” cell therapy clinics¹². These clinics are illegal in the sense that they sell unproven products, which supposedly contain viable stem cells, and which are not FDA-approved. Since these products are not eligible for insurance reimbursement, the clinics cater to patients that pay out-of-pocket. For example, the FDA has not yet approved any product containing placenta cells for injection into arthritic knees. Yet lots of clinics are selling this service to patients. There are hundreds of illegal clinics across the US¹². Utah has even passed a state law making placenta cell therapy legal (federal law supersedes state law, so this is not valid)¹³. It is possible that some of the placenta procurement companies will survive contraction of their field by supplying placentas to unregulated clinics.

As we continue to track placenta products through the rest of 2025, it seems that we are living in interesting times.

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. Knoepfler PS. Rapid Change of a Cohort of 570 Unproven Stem Cell Clinics in the USA Over 3 Years. Regenerative Medicine 2019; 14(8):735-740.
13. Verter F. Utah attempts to legalize placenta cell therapy. Parent's Guide to Cord Blood Foundation Newsletter Published 2024-04