The Skin Substitute Rate Cut Didn't Close Your Old Claims – What to Do When Medicare Demands Repayment

Reviewed by Mandie Eichenlaub, Senior Healthcare Attorney, Hendershot Cowart P.C. | Last updated: November 9, 2026

Many wound care providers assumed the January 2026 payment overhaul closed the chapter on skin substitutes. It didn't. The new flat rate changed what Medicare pays going forward. It did nothing to the claims Medicare already paid.

In most cases, Medicare can reopen a paid claim and demand repayment up to four years after the initial payment decision, and there's no time limit when there's evidence of fraud or similar fault. That means skin substitute claims from as far back as 2022 may still be open to review.

Medicare contractors like Novitas are actively sending letters to providers demanding repayment. What you do in the first 30 days after that letter arrives shapes everything that follows.

Why Medicare Is Reviewing Old Skin Substitute Claims Now

Medicare spending on skin substitutes climbed from about $200 million in 2019 to $14.4 billion in 2025, according to Medicare Part B claims data. In response, CMS replaced product-by-product pricing with a single national rate of about $127 per square centimeter starting Jan. 1, 2026. We explained the 2026 payment overhaul when it was announced.

That change fixed the pricing incentive going forward. It also left several years of high-dollar claims sitting in Medicare's records, and auditors are working through them.

Here's how far back they can reach: Medicare can reopen a paid claim within one year for any reason, and within four years for 'good cause,' such as new evidence.

What Your Repayment Demand Actually Says

The letter comes from your Medicare administrative contractor – Novitas Solutions for Texas Part B providers – and is labeled an "Initial Request." It runs several pages, and much of it is standard language. Here's what it tells you:

• The amount Medicare says it overpaid you and a request to repay it in full
• An enclosure listing each denied claim and the reason
• Deadlines to repay, rebut, or appeal before interest and recoupment begin
• Repayment options, including an extended repayment schedule or "immediate recoupment"
• Warnings that unpaid debts can be collected from your Medicaid payments, affiliated providers or the U.S. Treasury

How the Overpayment Was Determined

For skin substitute claims, the enclosure should cite the reason for overpayment, usually something like:

"Based on Medicare guidelines, the service(s) on the original claim was not considered medically necessary. This decision is based on either the documentation that was submitted or the failure by the physician/supplier to furnish information that was requested to support the claim. Therefore, payment was made to you in error."

That one explanation covers two different scenarios:

1. Either you responded to a medical records request, and the contractor found that your documentation didn't show the treatment was reasonable and necessary; or
2. The contractor requested records and never received them – or received them late or incomplete – so it denied the claims without reviewing your documentation.

Knowing which one applies to you shapes what happens next:

If you have already responded to a records request

Medicare typically sends a records request (called an additional documentation request, or ADR) when it's investigating whether a claim met the medical necessity standard. If you received an ADR and sent your records, the reviewer looked at what you sent and decided it didn't meet the standards for medical necessity in the applicable local coverage determination (LCD) or national coverage determination (NCD).

Your main option is the five-level Medicare appeals process, and the focus is the medical necessity finding itself. You carry the burden of showing the services met applicable coverage criteria, and a physician's signature or order alone won't do it. The patient's condition, as documented in the records, has to make the case. In practice, your first-level appeal should:

• Identify exactly what the reviewer thought was missing
• Show where the record already supports it
• Add records that weren't part of the original submission, such as wound photos, referring physician notes, or a narrative from the treating clinician

You can also file a rebuttal within 15 days of the demand letter. A rebuttal addresses only whether recoupment should go forward on schedule, not whether the overpayment finding is correct. It doesn't pause recoupment while it's pending, and the decision can't be appealed. What actually stops recoupment is a first-level appeal (redetermination) filed within 30 days.

The catch: extrapolation

Often, an auditor will request and review only a sample of your claims and then apply that error rate to a much larger group of claims – a process called extrapolation. It's how a handful of denied claims becomes a six- or seven-figure overpayment demand.

An extrapolated demand can be challenged on three fronts:

1. By disputing the denial of individual claims in the sample;
2. By attacking the statistical validity of the sample itself; or
3. By questioning whether extrapolation was allowed at all. By statute, a contractor can extrapolate only after finding a sustained or high level of payment error, or after documented educational intervention failed to correct it.

A statistical challenge questions whether the sample was properly drawn, whether it can be replicated, and whether the math holds up. If it succeeds, the extrapolation can be set aside, typically limiting repayment to the claims actually reviewed. Ask for the sampling methodology and the claims universe early. You can't challenge math you haven't seen.

If you never saw a records request

While some repayment demands are not preceded by a records request, a medical necessity denial – common with skin substitute claims – is different. Deciding whether treatment was necessary requires looking at the chart, so a demand citing this reason usually means a records request was sent, whether it reached the right person or not. (Requests often go to an old address, land with a former billing company, or sit unread on someone's desk or in an inbox.)

If you overlooked the request or missed its deadline, the contractor denies the claims for "no documentation" and determines that an overpayment occurred.

If that happens, here are your options:

• You can't respond to the ADR late. Once the demand is issued, there's no way to send the records back to the contractor outside the appeals process.
• A rebuttal isn't the place for those records. The demand letter itself says a rebuttal "is not intended to review supporting medical documentation" or to dispute the overpayment decision.
• You can submit records through the Medicare appeals process. Redetermination is the first level of appeal, and it's your first chance to submit the records the contractor never saw. Filing an appeal within 30 days also stops recoupment. And when the claims were denied for missing documentation, the contractor is required to treat your redetermination request as a reopening and consider the records you send.
• All evidence – including medical records, physician narratives, and expert opinions – must be entered into the record by the second level of the appeals process. Evidence not submitted by the reconsideration stage generally can't be added later without a showing of good cause. Miss the appeal deadlines, too, and you may lose the right to challenge the overpayment at all.
• Don't count on a late-filing excuse. CMS's own manual says a billing company's or consultant's failure to file on time is not good cause for missing an appeal deadline.

What Auditors Look for in Skin Substitute Records

Your claims are judged against the Medicare coverage policies (local coverage determinations, or LCDs) that applied on each date of service. For Texas providers, that's Novitas Solutions’ LCD for bioengineered skin substitutes, which has been in effect in its current form since September 2019. (CMS had prepared to issue a new LCD effective January 1, 2026; however, they withdrew the draft on December 24, 2025.)

Under current policy, reviewers look for:

• At least four weeks of documented conservative care that failed before the first application – including debridement, infection control, offloading for diabetic foot ulcers, and compression for venous leg ulcers
• A wound that qualifies: at least 1 square centimeter, clean, free of infection, and not involving tendon, muscle, or joint capsule
• Adequate circulation, confirmed by a vascular assessment such as an ankle-brachial index
• Documented diabetes management, smoking history, and cessation counseling
• Wound measurements at baseline, after conservative care, immediately before each application and at least every 30 days
• No more than 10 applications per wound, generally within a 12-week episode, with documented progress to justify each one
• Product size that best fits the wound, with the amount used, amount wasted, reason for waste, and lot or serial number recorded
• Patient identification, dates of service, and the treating practitioner's legible signature on every page of the record

The reality: medical necessity comes down to how closely the chart tracks the LCD. Reviewers work through the policy's requirements one by one and check the record for each. Sound clinical judgment isn't enough on its own. If the chart doesn't document a requirement the LCD lists, the reviewer will treat it as unmet.

I spent years on the payer side overseeing special investigations and payment integrity, so I've seen this from the other side of the desk. Reviewers aren't asking whether you're a good doctor. They're asking whether the chart checks each box. A chart that tells a strong clinical story but skips an element the LCD requires will lose almost every time.

Your Deadlines After a Medicare Repayment Demand

The deadlines run from the date on the letter, and some are much shorter than providers expect. Here's how the process works:

• 15 days: Deadline to submit a rebuttal. A rebuttal explains why recoupment shouldn't begin, but it is not an appeal.
• 30 days: File a first-level appeal (redetermination) by this date to keep Medicare from withholding your current payments. Interest also begins to accrue if the balance isn't paid within 30 days, and the rate on recent demands has been above 11%.
• 41 days: If no appeal is on file, Medicare begins recoupment – offsetting the debt against your incoming payments.
• 120 days: Final deadline to request a first-level appeal, though recoupment protection has expired by then.
• Second-level appeal (reconsideration): 180 days to file, but filing within 60 days of the first-level decision keeps recoupment on hold.
• Administrative law judge (ALJ) hearing: 60 days to request. For appeals filed in 2026, at least $200 must be in dispute. This amount may change each year. For calendar year 2027, the amount in controversy will remain $200.
• Medicare Appeals Council and federal court: 60 days each. Federal court review requires at least $1,960 in dispute in 2026.

The catch: after the second-level decision, Medicare can resume recoupment even while your ALJ appeal is pending, and interest continues to accrue. Learn more about how Medicare recoupment works.

What Not to Do After You Receive a Repayment Demand

Here's what not to do:

• Don't let the 30-day mark pass while you decide. Missing it means Medicare starts withholding payments your practice relies on.
• Don't pay the full demand before you understand how it was calculated. An extrapolated amount may be far larger than the claims actually denied.
• Don't change, add to, or "clean up" old medical records. Altered records can turn a payment dispute into a much more serious problem. Any clarification should be a dated, clearly labeled addendum prepared with counsel.
• Don't send a box of unorganized records with no explanation. Reviewers decide based on what you show them, so tie each record to the requirement it satisfies.

When a Repayment Demand Is Only the First Enforcement Action

A repayment demand is a payment dispute. It doesn't always stay one. A pattern of medical necessity denials on high-dollar skin substitute claims is exactly the kind of data that gets a practice noticed by the government's fraud enforcement side, and the same claims can resurface under the False Claims Act, where exposure is a multiple of what Medicare paid plus per-claim penalties.

That pipeline is getting faster. In October 2026, CMS released a draft model for its fraud investigation contractors (Unified Program Integrity Contractors, or UPICs) that would put CMS itself in charge of deciding who gets investigated, and would keep those contractors involved through rebuttals, appeals, and hearings. If that model goes forward, assume that what you send in response to a records request or a demand letter can end up in a much larger enforcement file.

We're seeing both ends of this right now: a home-based wound care practice appealing a seven-figure skin substitute overpayment, and a physician in a federal investigation where skin substitute billing sits at the center. Different postures, same lesson. What goes into the record early follows you all the way through.

If the demand letter arrives alongside a subpoena, a civil investigative demand, or a call from an investigator, treat it as more than a billing problem. Get counsel involved before anyone responds.

New Claims Face Scrutiny, Too

The 2026 payment changes didn't end the review of skin substitute claims. They moved some of it to the front end.

Since Jan. 1, 2026, Texas has been one of six states in CMS's Wasteful and Inappropriate Service Reduction (WISeR) model, a six-year pilot that runs through 2031. Technology companies under contract with CMS – Cohere Health in Texas – use AI-assisted tools to review selected services before Medicare pays. Skin substitutes are on the list.

For each skin substitute application, Texas providers now have two paths:

• Request prior authorization. Decisions are generally due within three calendar days. A denial (called a "non-affirmation") can be resubmitted as many times as needed, with the option of a peer-to-peer discussion with a reviewing clinician.
• Skip prior authorization, and the claim goes to prepayment review after it's submitted. You'll have 45 days to send the documentation the reviewer requests.

CMS requires a licensed clinician to review any non-affirmation before it's issued, and denied claims can be appealed through the standard Medicare appeals process. Since July 2026, providers with a strong approval record can also earn an exemption from prior authorization and prepayment review. The exemption is granted clinician by clinician, not to the practice as a whole, and requires at least 10 requests and a minimum approval rate during the assessment period.

The rollout hasn't been smooth. Records released in September 2026 show some requests took far longer than the promised turnaround – one went unresolved for 83 days.

What this means: WISeR reviewers apply the same Novitas LCD that auditors use on older claims. The documentation gaps behind today's repayment demands – missing wound measurements, no record of failed conservative care, continued applications without documented progress – can now delay or block payment up front. And an approval is only a preliminary finding. It doesn't protect the claim from a later audit.

If WISeR non-affirmations or prepayment denials are holding up payment, we can help you respond to non-affirmations and appeal denied claims. We can also review your skin substitute documentation against the LCD as part of a regulatory compliance check, before a WISeR reviewer does.

Get Help With a Skin Substitute Repayment Demand

The outcome of a Medicare repayment appeal often depends on the record built in the first few months – what was submitted, when, and how it was explained. Providers who wait until the ALJ stage often find their strongest evidence can no longer be considered.

Our healthcare attorneys represent wound care providers, podiatrists, and physician practices in Texas and beyond at every stage, from the first records request through civil and administrative appeals.

Your appeal deadline is closer than you think. Call (713) 783-3110 or contact us online before you respond.