It's a perfect storm of factors that has contributed to an unprecedented spike in skin substitute spending, which recently sparked Medicare payment reform.
A new analysis from the Health Care Cost Institute (HCCI) has identified higher prices for more products and patient utilization as the drivers behind more than $10 billion in Medicare spending on skin substitutes in 2024.
CMS recently identified "abusive pricing practices" as the largest contributor to the exponential growth in skin substitute spending, which rose from just $256 million in 2019. However, greater utilization and the use of more products also increased Medicare spending, with geographic variations playing an additional role , HCCI reported.
Average skin substitute spending reached up to $3,132 in 2024 among counties with at least 1,000 Medicare Part B beneficiaries. But the average fell to $0 in some of these counties, the analysis showed.
As a result, the median per-person spending across all counties was $94. In 5% of the counties, though, spending was over $735 per person that year, including counties in Texas, Wyoming and Oklahoma.
Use of skin substitutes also varied significantly by county. Counties with at least 1,000 Medicare Part B beneficiaries had between 0 and 17 people per 1,000 receive the treatment in 2024. In the middle 50% of counties, that translates to 1 to 4 beneficiaries per 1,000. However, in 5% of counties, there were over 7 beneficiaries per 1,000 using skin substitutes.
Skin substitute recipients also tend to get multiple treatments. The analysis showed that the median number of claims per patient was 4.8. Additionally, the median number of units per claim in 2024 was 4.82 but significantly varied by region. For example, the average rose to over 31 units per skin-substitute claim in 5% of counties.
As with utilization and product, price per skin substitute also varied. The median price per unit was $521, but even within the middle 50% of countries, there were large differences, ranging from $233 to $844. The price per unit even jumped to $1,141 in some counties.
HCCI identified some counties that fell into multiple categories of high spending, higher patients per capita, high number of visits per patient and high unit prices. Those counties included Los Angeles and Miami, which generally had elevated levels across all four categories.
With such large populations, the analysis calculated that Medicare spent over $600 million on skin substitutes in LA and nearly $230 million in Miami in 2024.
Increased spending spurs reimbursement reform
Not all of this spending on skin substitutes is necessary or appropriate, CMS maintains. The agency's Fraud Defense Operations Center stopped nearly $185 million in improper payments to providers billing for skin substitutes in 2025. In one case from September, officials prevented over $4.3 million in suspected improper payments submitted by a single medical group practice.
In October 2025, CMS changed how Medicare pays for skin substitutes under Part B, shifting from an incident-to-supplies model. The agency expects the new payment methodology to reduce Medicare spending on skin substitutes by nearly 90%, amounting to about $19.6 billion next year.
Some healthcare industry groups, particularly those representing manufacturers, are worried the lower rates could limit access to the effective wound care products, potentially increasing amputation rates. Smaller physician groups are also concerned that the new rates do not cover their costs for providing the treatment, as they lack the purchasing power of larger health systems.
However, advocates of the policy change say it will combat excessive "spread pricing," in which providers profit from the gap between acquisition costs and reimbursement rates. Groups like the National Association of Accountable Care Organizations (NAACOS) also contend it will curb wasteful, excessive and sometimes fraudulent spending.
"HCCI’s analysis of skin substitute utilization and spending demonstrates trends that continued to escalate through 2025," Aisha Pittman, senior vice president of government affairs at NAACOS, said in a note to RevCycle Management. "Several counties saw early indications of misuse and high spending on skin substitute products."
Many of those regions also had a higher proportion of patients with complex and high medical needs, which makes them vulnerable to misuse of skin substitutes, Pittman said, citing NAACOS' own analysis.
Spikes in skin-substitute spending can adversely affect ACO shared savings if certain regions experience faster growth, according to NAACOS. A reduced, consistent payment rate for the treatments, though, can keep costs down, allowing ACOs to better achieve shared savings.
Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.
