CTP Audit Trends 2026: Why Medicare Scrutiny of Skin Substitutes Is Increasing and How Providers Can Assess Risk

Key Takeaways 

• In this expert’s experience, CTP audits have shifted from clinical documentation to policy-based denials. 
• While medical necessity remains the frontline issue, appeals increasingly hinge on investigational status, homologous use, and peer-reviewed clinical evidence. 
• Payment does not equal approval—and audits are investigations, not routine reviews. Providers often underestimate the financial and legal risk associated with UPIC audits, including extrapolation, payment suspension, and potential Medicare debarment. 
• Inconsistent policy guidance is driving frustration and risk. The absence—or withdrawal—of LCDs does not eliminate coverage requirements. Instead, it raises the evidentiary bar under “reasonable and necessary” standards, increasing subjectivity in audit determinations. 

The audit environment surrounding cellular and tissue-based products (CTPs) has changed dramatically over the past several years. What began as medical necessity–focused reviews has evolved into complex, policy-driven scrutiny centered on investigational status, coding interpretation, and clinical evidence thresholds. In this Q&A, William O’Malley, MBA, examines what’s driving the shift, common provider misconceptions, and where CTP auditing may head next. 

How has the audit landscape around CTPs evolved in recent years? What is driving the increased scrutiny? 

From my vantage point, the audit landscape around CTPs has become more complex, more scrutinized, and in many ways less clinically grounded. 

Looking back to some of the first CTP cases we handled in 2021, determinations were largely based on medical necessity. Auditors focused on conservative treatment, wound documentation, proper utilization, homologous use, and related clinical factors. 

Over time, that has shifted. While medical necessity remains the frontline denial issue, appeals increasingly focus on policy-based arguments. As cases move forward, we now see determinations centered on whether homologous use was met, whether the product is investigational or experimental, and whether peer-reviewed literature or clinical trials support its use. These issues have become the nexus of many reviews. 

We’ve also seen changes in contractor behavior. There were three UPICs at the outset, and there still are. In 2020 and 2021, CoventBridge was particularly aggressive, auditing claims more frequently and in larger volumes. 

One early case involved a client who failed two audits, resulting in extrapolation and a payment suspension. At that time, the issues were primarily medical necessity–driven. We were able to lift the payment suspension in approximately 90 days, with reimbursements resuming about 90 days later. The review involved more than 575 dates of service—a complex and labor-intensive process focused largely on wound staging, infection status, utilization, and placement procedures. 

However, the review landscape began morphing. In early 2024, determinations shifted from medical necessity–based denials to policy-based denials. While UPICs and MACs still cited clinical requirements at the initial level, nearly every QIC determination centered on a lack of peer-reviewed literature or clinical trial support. This rationale later became foundational to the draft LCDs (since withdrawn), which suggested that without sufficient clinical evidence, products would not be payable. 

That trend continued for roughly a year. However, at the ALJ level, many judges did not find those rationales enforceable, and numerous determinations were overturned. 

In the first quarter of 2025, we saw another pivot. The QIC began arguing that because skin substitute HCPCS codes begin with “Q,” they represent temporary codes and therefore investigational products. That interpretation is incorrect, yet it appeared repeatedly in determinations. Medical necessity remained in the background but was no longer the primary focus. 

By December 2025, we began to see another shift, likely in anticipation of the proposed LCDs (with an effective date of January 1, 2026) and the increasing volume of peer-reviewed literature and clinical trials emerging since late 2024. 

Now that the LCDs have been withdrawn, determinations appear to be pivoting back toward medical necessity—but in a generalized manner. We’re seeing broad statements that claims, “do not meet medical necessity criteria,” without detailed support. 

So, what is driving this? Primarily, utilization and spending patterns have increased dramatically. That visibility—combined with questionable billing activity and instances of fraud, waste, and abuse—has prompted aggressive oversight. 

At the same time, there is a lack of clear policy and shared understanding. Providers frequently tell us they want guardrails—clear guidance on how and when these products can be used. That would also help CMS control spending. Instead, CMS has often taken a broad, “shotgun” approach rather than a targeted one. 

It’s also frustrating that one claim for a diabetic foot ulcer may be audited and denied, while a nearly identical subsequent claim is paid without review. That inconsistency creates confusion and angst among providers. 

We are also seeing determinations become more subjective, often driven by inference rather than the medical record. Providers may document six weeks of conservative therapy and receive no credit for it in an audit finding. That disconnect creates understandable concern. 

Moving forward, increased scrutiny is likely to continue. CMS can review claims up to six years from the date of service, and we are seeing historical claims audited accordingly. 

What common misconceptions contribute to provider risk or frustration? 

There are several. 

First, many providers view an audit as routine. It is not. A UPIC record request is an investigation. Contractors may already possess information from audits of other providers, biotechs, distributors, or even beneficiary interviews. Record submissions can have broader implications. 

Financial exposure can be substantial—payment suspensions, extrapolated overpayments, and cases valued at $40–$50 million. There is also the risk of Medicare debarment if credible allegations of fraud are substantiated. 

Second, some believe that if there is no LCD, there is no policy. That is incorrect. In regions without LCDs, claims fall under the Program Integrity Manual’s “reasonable and necessary” standard, which requires that services be safe and effective, not investigational or experimental, and consistent with the standard of care in duration and frequency—without exceeding the beneficiary’s needs. 

In the absence of an LCD, the evidentiary burden is often higher, not lower. 

Another misconception is that EHR templates protect claims. Boilerplate documentation that does not align with LCD language—or coverage criteria—creates vulnerability. 

Similarly, prior payment does not equal approval. Medicare operates largely on an honor system at submission. Payment does not preclude later review. Providers may “test” a diagnosis, receive payment, expand use, and only later discover in audit that the claims were not payable. 

Finally, modifying medical records after the fact creates poor optics. Administrative law judges frequently question how providers recall granular wound details 6–18 months later. Amendments raise credibility concerns. 

What is the broader operational and emotional impact of audits? 

Audits extend far beyond financial implications. They affect operations, morale, and emotional well-being. 

Some providers respond proactively—meeting deadlines, organizing records, and communicating effectively. Others delay, miss deadlines, and react only after receiving adverse determinations. 

Clinically, it is difficult for providers to reconcile that what is medically appropriate may not be reimbursable. That disconnect creates frustration. 

When practices face multimillion-dollar overpayment demands, the stress can be overwhelming—especially for younger providers early in their careers. In some cases, they face both Medicare overpayments and repayment demands from biotechs, while documentation deficiencies weaken their defense. The emotional toll includes stress, sleeplessness, and uncertainty about the practice’s future. 

What signals should providers watch to anticipate where auditing is headed? 

Several signals are important. 

First, monitor policy developments closely. Although the LCD was withdrawn, policy guidance will eventually return. Scrutiny is not limited to traditional Medicare; Medicare Advantage plans and secondary payers are increasingly auditing and denying claims—sometimes without full medical record review. 

Second, track the evolving product landscape. New products, emerging indications, clinical trials, and peer-reviewed literature all influence coverage arguments. 

Third, be cautious as the field pivots to new emerging modalities. Limited policy, inconsistent contractor interpretation, and limited evidence-based guidelines may recreate the same pitfalls seen with skin substitutes. 

Finally, closely monitor your own claims data. Watch denial trends and MAC-level changes. If patterns shift, pause and investigate—review policy updates, consult industry groups, and reassess documentation practices.  

Mr. O’Malley is the Chief Operating Officer at Engage Health Solutions.