Below The Knee — October 2025 Edition

October in Review — Innovation Everywhere, Capital Nowhere

October felt like standing at the crossroads of medtech’s next evolution — innovation surging, capital retreating, and clinicians rethinking what “continuum of care” actually means.

DFCon and SAWC Fall set the tone: wound care is rapidly becoming digital, diagnostic, and data-first, even as investors retreat to safer ground.

What defined October:

• Tech Took Center Stage: Digital imaging, ambient listening, smart scales, AI-assisted wound assessment, and even 3D-printed grafts stole the show. “Smart prosthetics” and sensor-enabled tissue interfaces were everywhere — signaling that data capture, not dressing material, is becoming the new differentiator.

• Transitional Care Convergence: The divide between sites of care is officially collapsing. Mobile providers are moving upstream into SNFs and post-acute, while wound centers are extending reach into home and community care. Patient journeys are no longer bound by four walls — and payors are watching closely.

• Reimbursement Reality Check: CMS’s 2026 skin substitute policy continues to hang over the biologics segment like a dark cloud. Flat rates, bundled payments, and ASP compression are forcing companies to rethink business models.

• Investor Anxiety Peaks: Public valuations across wound and regenerative medicine dropped sharply again — driven by margin uncertainty and sluggish capital inflow. October marked the capstone of a $4.3B contraction across the sector since late summer.

• Evidence and Execution Take Over: The WoundCareFund Innovation Index spotlighted strong momentum in diagnostics, imaging, and digital enablement — signaling the market’s pivot toward evidence-led innovation and scalable reimbursement pathways.

💲 Finance & Fund Performance — A Volatile Reset

The WoundCareFund posted a –2.54% decline in October slowing the losses in September, but remaining up +1.59% since June inception. The correction mirrors the broader medtech market, though diagnostics and digital wound solutions continued to outperform biologics-heavy portfolios.

Fund Drivers:

• Diagnostics = Relative Strength: Companies tied to fluorescence, thermal, and imaging analytics held ground as clinical adoption data and reimbursement utilization grew.

• Biologics Under Fire: ASP fears and policy uncertainty continued to drag down valuations, with some biologics names losing 20–30% since July.

• Digital Stability: SaaS wound platforms maintained modest gains, bolstered by cross-setting workflow adoption and remote documentation efficiencies.

Despite the dip, the Fund’s long-term trajectory remains positive — signaling that capital will flow back once reimbursement clarity and evidence depth stabilize.

⚠️ Special Feature — $4.37B Lost: The Great Wound Care Correction

Since August, over $4 billion in market capitalization has evaporated across wound care and regenerative medtech.
That’s not a typo — and it’s not isolated to a few bad earnings calls.

What drove the drawdown:

• Reimbursement Reset: The 2026 CMS skin substitute rule triggered widespread ASP compression fears, hammering CTP portfolios and chilling investor sentiment.

• Overhyped Innovation: Platforms without reimbursement pathways or differentiated clinical outcomes saw valuations collapse as investors pivoted toward evidence-based plays.

• Capital Bottleneck: Venture capital and strategic funding slowed sharply, with deal counts down >30% versus H1. The result? A clear flight to quality.

Winners and Survivors:

• Diagnostics & Imaging: Companies with fluorescence, multispectral, or AI-enabled assessment tech are now the safest bets. Their revenue models help normalize some of the impacts while also providing measurable outcomes.

• Digital Platforms: SaaS and workflow automation platforms remain quietly resilient — recurring revenue, clinical efficiency, and data-backed ROI stories are attracting private investment despite market volatility.

• Next-Gen Regeneratives: A few biologics innovators with novel mechanisms or active FDA progress still draw attention, but investors now demand durability over differentiation.

Bottom Line: The market shift is doing its job — clearing noise, forcing capital discipline, and rewarding real performance. Expect the next upcycle to belong to companies that combine reimbursement defensibility, clinical evidence, and digital integration.

🧩 Market & Company Updates

• MolecuLight showcased RCT data validating fluorescence-guided debridement, improving healing times and reducing infection rates — positioning the tech as standard of care by 2026.

• Kent Imaging continues to gain traction with perfusion quantification tools, increasingly used in diabetic limb salvage workflows.

• Organogenesis and MiMedx remain under pressure from investors, each repositioning through data-driven strategies to maintain relevance post-2026 reimbursement shift.

• Sanara MedTech sustained growth in both its ProgenaMatrix® platform and digital analytics division (Precision Healing), executing the most balanced dual play in the sector.

• PolarityBio confirmed mid-2026 BLA submission plans for its regenerative biologic, signaling regulatory confidence despite market headwinds.

• Orpyx® expanded its remote patient monitoring insole platform, cementing its role in preventing DFU recurrence via continuous pressure and temperature tracking.

• Zimmer Biomet and Stryker continue strategic expansion into foot & ankle — further blending surgical, wound, and limb salvage market lines.

• Swift Medical was named a semi-finalist for the 2025 Fierce Healthcare Innovation Award in Digital Health—the only wound care company recognized in the category.

🧠 Policy Pulse: CMS 2026 Brings a New Era of Scrutiny

CMS dropped its 2026 Physician Fee Schedule final rule, and the wound care world just got a financial reshuffle. The biggest move: skin substitutes are now fully transitioned to a per-square-centimeter payment model — roughly $127 per cm² — across office, mobile, and hospital-based wound centers. This change ties reimbursement directly to documented wound size and precision, where accuracy and digital traceability suddenly matter more than ever.

For providers, this means margin now lives and dies in measurement and documentation. Clinics that mis-measure or over-document risk losing reimbursement parity, while those leveraging digital imaging and automated measurement tools stand to gain.

Market-wise, expect to see pricing compression on larger grafts, tighter product utilization, and accelerated adoption of digital documentation platforms to capture, justify, and optimize reimbursement. Forward-thinking providers should audit their workflow economics now: model per-patient cost under the new rates, align coding protocols, and explore imaging tech that automates the paper chase. In 2026, profitability in wound care won’t come from applying more, it’ll come from documenting smarter.

Starting January 2026, CMS will launch the WISeR Model (Wasteful and Inappropriate Service Reduction) in six states — Arizona, Ohio, Oklahoma, Texas, New Jersey, and Washington. The model targets high-cost and high-variability services, including skin and tissue substitutes, bringing new layers of prior authorization, pre-payment review, and digital audit capability. For providers, this means documentation standards are going up — and manual, paper-heavy processes are going out.

The implications are big: digital documentation, wound measurement, and image-based verification will no longer be “nice-to-have” — they’ll be the difference between timely payment and administrative limbo. Providers should start reviewing how their workflows capture clinical evidence, automate claims support, and ensure audit readiness. The winners in this new environment will be those who adopt data-driven wound care practices, align closely with coverage policies, and partner with tech vendors who can help them stay compliant, efficient, and ahead of the curve.

🔭 What’s Next — Earnings, Evidence, and Early Consolidation

Q4 is shaping up to be a proving ground:

• Earnings Season Incoming: Expect biologics firms to post margin warnings while diagnostics and digital health companies highlight adoption and evidence wins.

• Strategic Buying Returns: Larger medtechs are eyeing undervalued wound and imaging assets. The second wave of consolidation could start before year-end.

• Evidence Season Ramps Up: New imaging trials and data drops expected before December could reignite investor confidence — particularly in fluorescence and perfusion tools.

The takeaway:
The easy money is gone. We’re now in a cycle that rewards precision over promotion. The future of wound care belongs to those who can connect data, diagnosis, and delivery — not just products, but platforms.

Closing Thought

October was a month of mixed signals—innovation pushing forward, capital pulling back, and policy stepping in to redraw the map. With the 2026 CMS reimbursement updates taking shape, we’re likely seeing the first signs of long-overdue stabilization in wound care economics.

As rates normalize and value-based frameworks mature, investment confidence should begin to follow. The smart money is already repositioning—this isn’t a pause, it’s a reset.

-scott