One of the critical success factors for a wireless healthcare service is a physician's willingness to prescribe it, and that conversation typically begins once a service has been given the green light for reimbursement by the Centers for Medicare and Medicaid Services (CMS) and other payers.

CardioNet, mHealth's Reimbursement Pioneer?

CardioNet, the only pure-play wireless health company that has gone public, is one pioneering company that has sought CMS reimbursement for its wireless cardiac monitoring offering. In the first quarter of this year, CardioNet received Category I CPT Codes and Reimbursement Rates for the professional and technical components of its system, which has set "the stage for a more simplified and stable, reimbursement environment going forward," CardioNet CEO Randy Thurman said during a recent investors' call.

"In addition, the validation provided by having dedicated CPT Codes has been positive reinforcement in our efforts to establish coverage with the remaining commercial payers," Thurman explained. "Year-to-date, we have added 11 new payers, representing over 4 million new covered lives. As such, CardioNet now has contracts covering nearly 200 million lives. Coupled with the fact that CardioNet will soon have been used on a quarter of a million patients, nearly 7 times that of any MCOT competitor, it is clear that we've moved well beyond the experimental or investigational stage."

Reimbursement, then, is one of the final, official designations of a wireless health solution's commercialization.

So, when a financial analyst firm reports a rumor that one CMS contractor, Highmark Medicare, is planning on reducing your reimbursement rate, it can be a big deal for your company's bottom-line. Jefferies & Co., a financial analyst firm, sent out just such an email briefing last week, citing sources at Highmark that the contractor planned on reducing reimbursement rates for CardioNet's system.

Understanding CardioNet's Reimbursement Inputs

First, let's understand CardioNet's reimbursement inputs: CardioNet's are broken down into two parts: One for the professional services associated with the solution, and one for the technical support and equipment fees.

The professional CPT input is for the number of minutes that our monitoring center technicians spend over the course of an average length of service, which was established at about 14 days, CardioNet's Vice President of Managed Care Philip Leone explained during the investors' call. Overall, the professional part of the fee includes any time that CardioNet spends monitoring the patients, configuring the device for the patient or educating the patient about the service. Leone explained that the other reimbursement input is for capital equipment costs, which includes the cost of the device, hardware and software required to run the monitoring center.

Safe to Assume Some Reductions in Reimbursement?

CardioNet's SVP and Chief Finanical Officer Marty Galvan noted that the company has assumed some reduction in reimbursement when predicting its earnings through 2011, but Galvan made a caveat: "Candidly the argument is just as strong that we could justify a higher level of reimbursement as there would be any reduction."

Later in the call Thurman assured investors and analysts that the company does not "anticipate any change on reimbursement whatsoever."

How Often Could Reimbursement Rates Change?

Financial analyst Bob Hopkins from Banc of America-Merrill Lynch asked Galvan whether Highmark has an annual review process or semiannual review process for updating its reimbursement rates.

Galvan explained that there is no set schedule for these updates yet.  "You have to remember that CardioNet is really the pioneer in this whole area of wireless medicine," Galvan said. "And I think there has been this absolutely professional collaborative relationship between the payers and us on justifying and understanding the cost benefit of what we do."

CardioNet Circles Back to Quash Reimbursement Rate Rumor

"While it is not our practice to respond publicly to analyst reports, we felt that it was important to address some of the assertions contained in the April 24 report," Thurman wrote in a company release just days after the investor call. "Since the release of this analyst report, CardioNet has received information from senior officials at both CMS and Highmark Medicare Services. These officials have stated to us that the analyst's suggestion of an imminent adjustment was not based on guidance from Highmark Medicare Services or CMS and that ‘neither organization provided the analyst with any confidential information or any information specifically about CardioNet.'"

For more check out CardioNet's Q1 2009 press release from last week.
Also, take a look at CardioNet's response release here.