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Highlights

  • U.S. Medicare proposes a flat reimbursement of USD 806 per square inch for outpatient skin substitutes, replacing the current percentage-based system.

  • PolyNovo’s NovoSorb® BTM and MTX products remain profitable under the new model and may benefit from reduced competition from higher-cost products.

  • PolyNovo shares rose 11% to AUD 1.46 on 2 September 2025 following the announcement.

PolyNovo Limited (ASX:PNV) has outlined the potential impact of the proposed changes to U.S. Medicare reimbursement for outpatient wound care, as detailed in a 31 August 2025 article by The Australian. The reforms, announced by the U.S. Centers for Medicare & Medicaid Services (CMS), aim to reshape incentives in the skin substitute market by shifting to a flat-rate payment system.

Current System

At present, U.S. physicians are reimbursed based on a percentage of the price of skin substitutes used in outpatient wound care. This model has incentivised the use of higher-priced products, as lower-cost alternatives reduce the reimbursement received by physicians. The New York Times reported that spending on skin substitutes exceeded USD 10 billion in 2024, more than double the expenditure recorded in 2023.

Proposed Change

In July 2025, CMS proposed a significant change: a flat reimbursement of USD 806 per square inch for outpatient skin substitutes. Currently, certain products can attract payments of up to USD 2,000 per square inch. By classifying skin substitutes as “incident-to supplies” rather than biologicals, CMS expects the new system to lower federal spending on these products by nearly 90%.

According to CMS, this adjustment will eliminate price-based incentives, ensuring that surgeons’ choices focus on clinical outcomes rather than financial returns. A press release from the agency noted the reform is intended to save billions of dollars annually while maintaining patient access and quality of care.

Implications for PolyNovo

PolyNovo said its NovoSorb® BTM and NovoSorb® MTX products remain profitable under the proposed reimbursement structure. The company views the changes as potentially advantageous, as they could reduce the prevalence of more expensive competitors and shift physician decision-making toward clinically proven, cost-effective solutions.

PolyNovo highlighted three main outcomes:

  1. Sustained product margins under the new reimbursement model.

  2. Enhanced competitiveness through the removal of price-based disincentives.

  3. Growth potential as clinical outcomes become the central driver of product selection.

The CMS proposal is currently under consultation, with a final decision expected in November 2025. If approved, the new system would take effect from 1 January 2026. 

Company Background

PolyNovo, an ASX 200-listed medical technology company based in Melbourne, specialises in wound management solutions using its proprietary NovoSorb® technology platform. To date, more than 70,000 patients across 46 countries have been treated with its products. The company is investing in expanding its product range, indications, and global markets.

NovoSorb® BTM is a dermal scaffold that supports regeneration of the dermis lost due to surgery, trauma, or burns. NovoSorb® MTX, derived from the same platform, is designed to support natural wound healing without a sealing membrane, particularly for complex or exudative wounds.

Market Response

On 2 September 2025, PolyNovo’s share price rose 11% to trade at AUD 1.46, following investor response to the Medicare reimbursement proposal and its potential implications for the company’s competitive position in the U.S. market.