CMS has announced that its A/B Medicare Administrative Contractors (MACs) have withdrawn, effective immediately, the “final” Local Coverage Determinations (LCDs) addressing Skin Substitute Grafts/Cellular and Tissue-Based Products for treatment of Diabetic Foot Ulcers (DFUs) and Venous Leg Ulcers (VLUs) that were scheduled to become effective January 1, 2026.
This development alters the immediate coverage-policy timetable. It does not, however, change the broader regulatory trajectory: CMS and federal oversight bodies continue to identify skin substitutes as a high-risk category for improper utilization and spending.
I. Background and scope of the withdrawal
CMS’s fact sheet confirms that the MACs are withdrawing the applicable final LCDs and related articles that were set to take effect at the outset of CY 2026. The withdrawal removes the planned January 1, 2026 effective date and the uniform coverage framework that many stakeholders anticipated would govern DFU/VLU applications.
At the same time, CMS directs stakeholders to contemporaneous agency actions addressing skin substitute spending and payment reform. The withdrawal should therefore be understood as a change in coverage-policy implementation, not a reversal of CMS’s stated concern regarding utilization and cost growth.
II. The continuing enforcement and audit environment
Federal oversight has emphasized the scale and risk profile of skin substitute billing. The HHS Office of Inspector General (OIG) has reported that Medicare Part B spending for skin substitutes surpassed $10 billion annually by the end of 2024, and has warned that this benefit category is particularly vulnerable to questionable billing and fraud schemes, including financial incentives such as spread pricing.
CMS has separately publicized program integrity activity through its Fraud Defense Operations Center (FDOC), including amounts it states were prevented from being paid to suspect billing entities in 2025.
Compliance implication: The withdrawal of an LCD does not insulate providers from post-payment review, targeted medical review, data-driven outlier detection, referrals, or other enforcement pathways. Documentation and utilization defensibility remain the primary risk controls.
III. Payment methodology reforms for 2026 are proceeding
Independent of the withdrawn LCDs, CMS has finalized significant payment reforms in the CY 2026 Medicare Physician Fee Schedule (PFS) final rule, reflecting CMS’s view that prior payment structures contributed to rapid spending increases.
CMS has described a shift in 2026 toward paying most skin substitutes as incident-to supplies when furnished in connection with a covered application procedure, along with alignment of product categorization with FDA regulatory status and use of a single payment rate for 2026 with anticipated future refinement.
Operational implication: Providers should not interpret the LCD withdrawal as restoring the former economic environment. Payment redesign remains a central mechanism through which CMS is addressing perceived incentives and utilization patterns.
IV. Forward-looking utilization controls: the WISeR Model in six states
Beginning January 1, 2026, CMS will implement the WISeR (Wasteful and Inappropriate Service Reduction) Model in Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington. The model uses AI/ML-enabled claims analytics combined with clinical review to support earlier medical necessity assessment through prior authorization or prepayment review pathways.
CMS has published operational timelines and participation parameters for WISeR, including timing for acceptance of prior authorization submissions and the applicability of requests to dates of service.
Strategic implication: Even for providers outside WISeR jurisdictions, the model reflects a broader CMS direction: shifting medical necessity scrutiny “upstream” in the claims lifecycle.
V. Safe Harbor recommendations
In light of these developments, Safe Harbor Group recommends that clients take the following steps:
- Confirm the currently operative coverage requirements in your MAC jurisdiction. The withdrawal increases the likelihood of jurisdictional variation and interim guidance reliance.
- Strengthen episode-of-care documentation to clearly establish medical necessity, conservative care history, objective measurements over time, rationale for product selection, and rationale for repeat application when applicable.
- Conduct a utilization outlier review (provider-level, product-level, and beneficiary-level) to identify patterns that are commonly associated with audits and reviews.
- Reassess financial arrangements and vendor relationships in light of OIG’s express concerns regarding incentives and spread-pricing dynamics in this category.
- For WISeR jurisdictions, implement an operational workflow for prior authorization or prepayment review, including staffing, submission protocols, and tracking controls.
- Model 2026 financial and operational impact under the finalized PFS payment methodology changes to avoid reliance on outdated reimbursement assumptions.
Conclusion
The withdrawal of the final DFU/VLU skin substitute LCDs removes an anticipated coverage framework for January 1, 2026. Nevertheless, the prevailing risk environment is shaped more materially by (i) documented spending and utilization concerns, (ii) active program integrity enforcement posture, and (iii) finalized 2026 payment reforms and emerging front-end review models.
This advisory is provided for informational purposes and does not constitute legal advice. Clients with questions about specific coverage, documentation, coding, or risk mitigation should consult counsel regarding jurisdiction-specific requirements and operational implementation.
