How Will PolyNovo Capitalize on Medicare’s New $806 Flat Rate for Wound Care?
PolyNovo Limited stands to benefit from proposed U.S. Medicare changes that introduce a flat reimbursement rate for outpatient wound care skin substitutes, potentially reshaping the competitive landscape in favour of cost-effective, clinically proven products.
- U.S. Medicare proposes flat reimbursement of USD $806 per square inch for skin substitutes
- Current incentive structure favours expensive products, driving Medicare costs above $10 billion
- PolyNovo’s NovoSorb BTM and MTX remain profitable under new reimbursement model
- Change expected to boost PolyNovo’s competitiveness and outpatient market growth
- Final CMS decision anticipated in November 2025 for January 2026 implementation
Background – Medicare’s Costly Incentives
The U.S. Medicare system has long reimbursed physicians for outpatient wound care skin substitutes based on a percentage of the product price. This model inadvertently encouraged the use of higher-priced products, as physician payments decreased with cheaper alternatives. The result – Medicare spending on skin substitutes more than doubled from 2023 to 2024, surpassing $10 billion, according to The New York Times.
Proposed Reform – Flat Reimbursement to Curb Costs
In a significant policy shift announced in mid-2025, the Centers for Medicare & Medicaid Services (CMS) proposed a flat reimbursement rate of USD $806 per square inch for outpatient skin substitutes. This contrasts sharply with current payments that can reach $2,000 per square inch. The reform aims to eliminate financial incentives that favour expensive products, promoting a value-driven market focused on clinical effectiveness rather than price tags.
PolyNovo’s Position – Poised for Opportunity
PolyNovo Limited, an Australian ASX 200 medical technology company, sees this regulatory change as a potential catalyst for growth. Its flagship products, NovoSorb BTM and MTX, are designed to be both clinically effective and cost-efficient, allowing them to remain profitable under the new flat reimbursement scheme. Acting CEO Dr Robyn Elliott highlighted that while PolyNovo’s current footprint is primarily inpatient, the outpatient market, targeted by the CMS proposal, represents a significant growth opportunity.
Chairman David Williams expressed optimism about the company’s alignment with the new reimbursement environment, emphasizing PolyNovo’s commitment to quality and value. He also noted the company’s interest in addressing chronic wounds among American servicemen, veterans, and diabetic patients, hinting at broader social impact ambitions.
Looking Ahead – Uncertainties and Strategic Moves
The CMS proposal remains under consultation, with a final decision expected in November 2025 and implementation slated for January 2026. PolyNovo is actively assessing its commercial strategy to capitalize on the outpatient market shift. However, the full extent of the impact depends on how plastic surgeons, podiatrists, and other clinicians respond to the new reimbursement framework and how competitors adjust their pricing and product offerings.
Investors will be watching closely as PolyNovo navigates this evolving landscape, balancing regulatory developments with market dynamics and clinical adoption.
Bottom Line?
PolyNovo’s next moves in the outpatient wound care market will reveal how well it can leverage Medicare’s reimbursement overhaul to accelerate growth.
Questions in the middle?
- How will competitors respond to the flat reimbursement rate and will they adjust pricing or product strategies?
- What commercial model will PolyNovo adopt to maximize penetration in the outpatient wound care segment?
- Will clinicians’ preferences shift decisively towards cost-effective products with strong clinical evidence under the new reimbursement rules?
