Dive Brief:

• Shares of iRhythm Technologies, maker of a wearable heart monitor for detecting cardiac arrhythmias, soared 33% on Tuesday after CMS proposed new, permanent codes for long-term electrocardiogram monitoring and recording in its draft Medicare physician fee schedule for 2021. 
• On a call with analysts Tuesday afternoon to discuss the potential updated payment policy, iRhythm CEO Kevin King said the proposal is recognition of the significant clinical value of long-term continuous monitoring, which leads to higher detection rates for irregular heart rhythms in cardiac disease patients.
• Creating a permanent Category I code to replace temporary codes that iRhythm uses to seek reimbursement for its Zio technology should drive greater adoption of the heart-monitoring patches, boosting the company's growth in 2021 and beyond, William Blair analysts said in a research note to clients Tuesday.

Dive Insight:

With its biosensor patch device and artificial intelligence-based data analytics, iRhythm has its sights on a $2 billion market opportunity in the detection of cardiac arrhythmias, the company said in a June investor presentation. A particular target is the large and growing population of asymptomatic atrial fibrillation patients, who are at increased risk for stroke if the condition is left undiagnosed.

Last September, iRhythm announced a partnership with Alphabet's life sciences organization Verily to develop technology to improve early detection of atrial fibrillation, or AFib, a form of abnormal heart rhythm estimated to affect more than 6 million Americans.

The onset of the COVID-19 pandemic caused patient registrations to decline beginning in mid-March, resulting in a roughly $2 million revenue impact in the first quarter, iRhythm said in June. A modest recovery began in late April and early May, but the company cautioned that demand could remain suppressed through the remainder of the year.

Impact of the CMS coding changes won't begin to be felt until 2021. King said Tuesday the new codes and proposed rates represent an increase over the existing Medicare fee-for-service reimbursement and are expected to improve physicians' willingness to adopt the technology over time.

National pricing will also enable the company to pursue contracting for Medicaid and potentially bill for home enrollment, King added.

William Blair analysts estimated the new codes increase iRhythm's reimbursement rate by about 6% over what the company was receiving under a temporary Category III code. "We think one of the more meaningful benefits of the establishment of a Category I code can be increased adoption and utilization of extended wear patches, which can provide a tailwind to growth in 2021 and beyond," the analysts wrote.

CMS is expected to release its final rule for the Medicare physician fee schedule by Dec. 1, following a public comment period. The rule then goes into effect on Jan. 1, 2021.

San Francisco-based iRhythm is scheduled to report its second quarter financial results on Thursday.