Alert

Medicare will implement significant changes to its Local Coverage Determination (LCD) for Cellular and/or Tissue-Based Products (CTPs) starting January 1, 2026. Also known as skin substitutes, these products are used in outpatient wound care for the treatment of diabetic foot ulcers (DFUs) and venous leg ulcers (VLUs). These changes emphasize evidence-based practice, standardized clinical thresholds for medical necessity, and more robust documentation to support utilization.

This LCD will be adopted by all seven Medicare Administrative Contractors (MACs), collectively covering all 12 Medicare jurisdictions, ensuring nationwide consistency in coverage criteria. An associated billing and coding article has also been released, offering detailed guidance on appropriate coding, billing, and documentation requirements aligned with the updated LCD.

While the formal regulation has been delayed multiple times and isn’t yet in effect, health care leaders shouldn’t mistake these delays for reprieve. Delays in enforcement don’t diminish the likelihood of eventual adoption.

Organizations that wait until the final hour to adapt, risk coverage denials, revenue disruption, and care delays. Early action offers the best opportunity to align workflows, retrain staff, and maintain compliance.

Key Policy Updates

Providers can look for the following key changes to Medicare’s LCD for CTPs.

Coverage Limited to Evidence-Based Use

• Only CTPs with peer-reviewed clinical evidence supporting efficacy in DFUs or VLUs will be reimbursed.
• Products like Oasis Tri-Layer Wound were removed from coverage due to lack of evidence.
• New additions to the covered list include Derma-Gide, Kerecis, and NuShield for DFU indications.

Clinical Thresholds for Use

• Failure to respond has been replaced with the phrase ‘50% ulcer area reduction after four weeks of standard care of treatment.
• Vascular assessment, not ABI specifically, will be required prior to application.
• Uncontrolled diabetes is no longer an absolute exclusion.
• The reference to Class 3 compression has been removed from the LCD language; however, the use of appropriate compression therapy remains standard of care treatment for VLUs.

Utilization Limitations

• CTP episode of care equals 12–16 weeks, beginning with the first application.
• Up to eight total applications allowed per episode of care. More than four applications require evidence of healing progress and provider attestation of medical necessity,
• Denial if eight applications are billed, product is placed on infected, ischemic, or necrotic wound beds, there’s no control of underlying conditions, for example active infection, Charcot arthropathy, active vasculitis, ischemia.

Implications for Hospital Outpatient Departments and Wound Centers

These changes aren’t simply clinical—they have downstream impacts across authorization, billing, supply chain, staff training and patient education.

Preparation for Compliance

Update Clinical Workflows

• Ensure four weeks of standard wound care is documented prior to CTP application.
• Complete and document a vascular assessment for each case.
• Choose products only from the LCD’s covered list.

Tighten Utilization Tracking

• Create flags in the EHR or manual tracking process for episode start date, number of applications, and healing progress at each follow-up.
• Require provider attestation for all CTP use beyond the fourth application.

Coding and Documentation Compliance

• Review the associated billing and coding article.
• Adopt updated HCPCS/CPT billing guidance.
• Use KX modifier as an attestation of medical necessity for use over four applications.
• Use proper GA/GX/GY/GZ modifiers when billing for services outside of covered indications.
• Review claims where and E/M is reported with the treatments to ensure compliance with modifier 25 requirements.

Inventory and Formulary Management

• Use up existing inventory of products that will no longer be covered before the January 1, 2026, effective date; avoid reordering.
• Ensure approved products are available and aligned with the covered indications in the finalized LCD.
• Coordinate with purchasing and clinical leadership to adjust formulary and stocking practices based on the updated list of evidence-supported products.

Provider and Staff Education

Train wound care providers and billing teams on:

• New coverage criteria and utilization thresholds
• Required documentation—including wound measurements and progress notes
• Updated definitions of failure to respond and medical necessity

Educate patients on:

• The importance of standard wound care prior to CTP treatment
• What qualifies as treatment progress under Medicare guidelines
• The limited number of covered applications, and the need for disease control, for example glucose, infection.
• Why treatment may be delayed, denied, or stopped based on wound response

What’s Next

Implementation of this LCD will not restrict use of these products for conditions other than DFUs and VLUs. Services outside the scope of the LCD must adhere to Medicare’s reasonable and necessary (R&N) criteria.

This LCD supplements but doesn’t replace, modify or supersede existing Medicare applicable National Coverage Determinations (NCDs) or payment policy rules and regulations for skin substitute grafts/cellular and tissue-based products for the treatment of diabetic foot ulcers and venous leg ulcers.

The implications are significant, and the window for proactive response is narrowing. Waiting until enforcement is finalized risks costly disruptions.

While this LCD applies specifically to Medicare beneficiaries, providers should not overlook the potential implications for commercial payers. Many commercial insurers adopt similar coverage criteria or align their policies closely with Medicare guidance. We strongly recommend reviewing applicable commercial insurance policies to ensure compliance and consistency in clinical documentation, coding, and billing practices across all payer types.

We’re Here to Help

To learn more about Medicare’s changes for Local Coverage Determination for Cellular and/or Tissue-Based Products and how they can impact your organization, contact your firm professional.

Additional Resources

• Health Care Practice
• Health Care Consulting Services