CMS Reverses Skin Substitute Rule, Averting Crisis in Wound Care

POMPANO BEACH, FL – January 07, 2026 – In a surprise move that sent ripples across the MedTech industry, the Centers for Medicare & Medicaid Services (CMS) has withdrawn a highly contentious reimbursement rule for skin substitutes just days before it was set to take effect. The decision averts a potential crisis in advanced wound care, ensuring continued Medicare patient access to a wide range of therapies for chronic, non-healing wounds like diabetic foot ulcers (DFUs) and venous leg ulcers (VLUs).

Florida-based BioStem Technologies (OTC: BSEM), a key player in the regenerative medicine space, commented on the development, which safeguards access to its placental-derived products, VENDAJE® and VENDAJE AC®. The withdrawal of all seven Local Coverage Determinations (LCDs) for skin substitutes, originally slated for a January 1, 2026, implementation, has been hailed by many as a victory for patient care and clinical choice.

A Regulatory Reprieve Born from Advocacy

The now-rescinded LCDs would have dramatically reshaped the advanced wound care landscape. The proposed rule aimed to standardize coverage by limiting Medicare reimbursement to a pre-approved list of just 18 products that met stringent evidence criteria. This would have simultaneously designated 158 other products as non-covered and placed another 154 into a discretionary category, effectively removing hundreds of options from the clinician’s toolkit.

The proposal was born from CMS’s effort to rein in spiraling costs and address what it perceived as potential fraud and abuse in the sector. Part B spending on skin substitutes had skyrocketed from approximately $252 million in 2019 to an estimated $10 billion in 2024, prompting regulators to seek greater control.

However, the proposed restrictions triggered significant pushback from a broad coalition of stakeholders. In his response, BioStem CEO and Chairman Jason Matuszewski praised the outcome, stating, “We appreciate the thoughtful collaboration during this period between clinical partners, policymakers, and advocacy organizations as they continue to shape an evolving reimbursement environment that optimizes patient care while supporting innovation and fiscal responsibility.”

This collaboration was crucial. Medical professional societies, including podiatric and wound care organizations, joined manufacturers and patient advocates in arguing that the narrow list of approved products would severely limit a physician's ability to choose the most appropriate therapy for an individual patient’s needs. They warned that such a restrictive formulary could lead to poorer health outcomes for a vulnerable patient population suffering from debilitating chronic wounds.

The Battle Isn't Over: A New Payment Reality Dawns

While the withdrawal of the LCDs provides immediate relief, the advanced wound care industry is far from returning to the old status quo. The regulatory reprieve does not affect another landmark change from CMS that also took effect on January 1, 2026: a new standardized, site-neutral payment methodology.

Under this new system, CMS has moved away from the previous model, which was often based on a product's Average Sales Price (ASP). Instead, it has implemented a flat payment rate of approximately $127 per square centimeter for the application of non-biological skin substitutes in both physician offices and hospital outpatient departments. For many products, this represents a significant payment reduction and is designed to eliminate pricing disparities and encourage cost competition among manufacturers.

This fundamental shift in payment structure means that the financial pressure on manufacturers remains intense. The era of high-priced products with limited differentiating clinical evidence is effectively over. The new flat rate forces all companies to compete on a more level playing field, where manufacturing efficiency and proven value are paramount. Furthermore, CMS is proceeding with its Wound Care prior authorization model (WISeR) in select states, adding another layer of administrative oversight to ensure appropriate use.

BioStem's Bet on Clinical Evidence

In this reshaped market, BioStem Technologies is doubling down on its long-held belief that robust clinical data is the ultimate driver of success. While the company benefits from the maintained market access for VENDAJE®, its leadership emphasizes that short-term policy shifts do not alter its core mission.

“Importantly, the recent withdrawal of the LCDs is not expected to impact patient access to BioStem’s technology or our ability to serve patients and clinicians,” Matuszewski noted. “Even with broader coverage criteria, we continue to believe that long-term adoption and value creation will be driven by high-quality clinical evidence and remain firmly committed to an evidence-based strategy.”

To that end, the company is making significant investments to prove the efficacy of its proprietary BioRetain® processing method, which is designed to preserve the natural growth factors and tissue structure of perinatal allografts. BioStem is actively enrolling patients in multiple clinical trials. These include a multicenter, randomized controlled study (NCT06565156) evaluating VENDAJE® for treating DFUs, which launched in January 2025. Another trial (NCT06511596) is assessing its AmnioWrap2™ product for the same indication, while a separate study (NCT06811909) is focused on treating venous leg ulcers.

By generating definitive data that demonstrates superior healing outcomes compared to standard care, BioStem aims to not only secure its position with payers but also convince clinicians to choose its products in an increasingly crowded and cost-conscious environment. This evidence-first approach is central to its plan to differentiate its technology and drive market share gains.

A Reshuffled Deck for the Wound Care Market

The unexpected withdrawal of the LCDs has created a complex and paradoxical situation for the competitive landscape. While the decision was a collective win for the industry in terms of preserving market access, it also removed a potential tailwind for certain companies. The proposed rule, by drastically limiting the number of covered products, would have funneled patients and revenue toward the few approved therapies.

With the rule's withdrawal, the market is now open to hundreds of competing products once again. This new dynamic was reflected in the stock market, where shares of some major players like MiMedx and Organogenesis traded lower following the news, as investors weighed the impact of increased competition. Conversely, companies like Integra LifeSciences, whose products were well-positioned under the new payment rules, saw the continued uniform reimbursement as a way to enhance their commercial potential.

The overarching message from CMS remains clear: the agency is committed to controlling costs and demanding value. The new flat payment rate is a powerful tool to achieve that goal. The future of the advanced wound care market will likely be defined not by regulatory carve-outs, but by a company's ability to deliver clinically superior and cost-effective solutions, backed by irrefutable data, in a system that will no longer pay a premium without proof.