After months of rumors and analyst speculation, Highmark CMS has, after all, cut the reimbursement rate for wireless cardiac monitoring MCOT services from $1,123.07 to $754. While some analysts have been anticipating a rate drop on the order of about $200 for the past few months, the rate cut was almost double that.
CardioNet, the only pure-play wireless health company that has gone public, is credited with creating the reimbursement codes for MCOT or wireless cardiac monitoring from CMS. 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 earlier this year.
Since then the reimbursement environment could hardly be called "stable".
Two weeks ago CardioNet announced a lowered financial outlook for fiscal year 2009 because some commercial payers had planned to reduce their rates for the company's services, but the company did not include Highmark CMS in that prediction.
During CardioNet's last quarterly investor call, SVP and Chief Finanical Officer Marty Galvan noted that the company has always 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 CEO Randy Thurman assured investors and analysts that the company does not "anticipate any change on reimbursement whatsoever."
In mid-May, CardioNet announced that Highmark CMS had posted its reimbursement rate for MCOT services as $1,234.07 -- the same rate it had always been. At the time Merrill Lynch wrote:
"Yesterday Cardionet announced that Highmark (the insurance carrier that currently sets Medicare pricing for [CardioNet]'s MCOT technology) posted its 2009 reimbursement rate for MCOT last week at $1,123, which represents no change from recent history... Because [CardioNet] has not yet talked directly to Highmark about this posting, the posting does not definitively mean Highmark will not cut reimbursement for MCOT or that CMS will not use a lower rate when it ultimately takes over pricing, but logic would strongly suggest that the probabilities of a near term rate cut are now very low."
Reimbursement rates are crucial for wireless health companies playing in the clinical space - they directly affect a company's bottom line because they set the price points that the Centers for Medicare and Medicaid Services are willing to pay clinicians for prescribing the products. Commercial payers use those rates as benchmarks for their own -- so the importance of reimbursement can't be overstated.
No one seems to be beating that drum more loudly than CardioNet founder Jim Sweeney, who is now the CEO of IntelliDOT: "In the world we're moving into, more than ever, if you can't justify the cost benefits, then you will fail," Sweeney said at a recent conference. "In my view, getting the FDA's approval is not nearly as hard as getting the CPTs and insurance reimbursement approvals."
CardioNet's current stewards might add that approval isn't nearly as hard as keeping reimbursement levels high.
For more on the CardioNet reimbursement rate kerfuffle, read the company press release after the jump.
CardioNet Announces Highmark Medicare Services Reimbursement Reduction
CONSHOHOCKEN, Penn. - CardioNet (Nasdaq: BEAT), announced today that on Friday, July 10, 2009, it received a letter from Highmark Medicare Services stating effective September 1, 2009 Highmark was adjusting its reimbursement rate for MCOT services to $754 per service. This reimbursement change affects all providers covered under CPT Code 93229.
Randy Thurman, Chairman, President and CEO of CardioNet, Inc., said, "CardioNet strongly believes that this reduction is unjustified and will immediately pursue with Highmark and CMS a methodology that appropriately values MCOT technology and related services. This review with Highmark and CMS will reinforce for Medicare the demonstrated benefit of Mobile Cardiac Outpatient Telemetry in detecting cardiac arrhythmias and improving the health of Medicare beneficiaries.
"We are strong proponents and supporters of the very real need to manage the cost of healthcare. We believe that early diagnosis through innovation in technology is fundamental to the provision of high quality health care and a cost efficient US healthcare system. Nearly 250,000 patients have been enrolled in MCOT to date with physicians and patients greatly benefiting from the CardioNet MCOT technology and service. We have made it our mission at CardioNet to educate the medical community about the value of wireless medicine in the diagnosis and detection of disease and we will further increase our efforts to demonstrate its potential to substantially lower costs to both patients and payors."
CardioNet has previously indicated that while it had been aware Highmark Medicare Services was conducting a normal review of the reimbursement rate for MCOT, it had received no indication of any rate adjustment or the specific timing of a Highmark decision prior to being notified on July 9, 2009. During a July 9 communication, Highmark reported that CardioNet would receive a letter notifying it of a change in reimbursement including the exact amount of the change. That letter arrived July 10, 2009.
Based on the Company's ongoing discussions with Highmark and CMS and the Company's desire for a re-evaluation of reimbursement that it is pursuing, but cannot assure will be realized, the Company believes it is prudent to withdraw previously stated 2009 guidance at this time.
About CardioNet
CardioNet is the leading provider of ambulatory, continuous, real-time outpatient management solutions for monitoring relevant and timely clinical information regarding an individual's health. CardioNet's initial efforts are focused on the diagnosis and monitoring of cardiac arrhythmias, or heart rhythm disorders, with a solution that it markets as Mobile Cardiac Outpatient TelemetryTM (MCOT). More information can be found at http://www.cardionet.com.
Forward-Looking Statements
This press release includes certain forward-looking statements within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995 regarding, among other things, our growth prospects, the prospects for our products and our confidence in the Company's future. These statements may be identified by words such as "expect," "anticipate," "estimate," "intend," "plan," "believe," "promises" and other words and terms of similar meaning. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including important factors that could delay, divert, or change any of them, and could cause actual outcomes and results to differ materially from current expectations. These factors include, among other things, the potential for re-evaluation from Highmark or the CMS, the success of our sales and marketing initiatives, our ability to attract and retain talented executive management and sales personnel, our ability to identify acquisition candidates, acquire them on attractive terms and integrate their operations into our business, the commercialization of new products, market factors, internal research and development initiatives, partnered research and development initiatives, competitive product development, changes in governmental regulations and legislation, changes to reimbursement levels for our products, the continued consolidation of payors, acceptance of our new products and services and patent protection and litigation. For further details and a discussion of these and other risks and uncertainties, please see our public filings with the Securities and Exchange Commission, including our latest periodic reports on Form 10-K and 10-Q. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
CardioNet, Inc.
Marty Galvan, 800-908-7103
Investor Relations
investorrelations@cardionet.com
