Dive Brief:

• Novitas Solutions, a regional Medicare rate negotiator, posted reimbursement rates Friday for extended external EKG devices significantly lower than previous rates, casting some uncertainty over the future of a market Wall Street analysts have recently been optimistic about.
• The posted rates range between $40-$80, a drop of hundreds of dollars for some rates. For example, industry leader iRhythm Technologies' prior reimbursement rate was $311, according to William Blair analysts. After iRhythm's stock closed down by 32% on Friday, the stock price was up nearly 8% when the market opened Monday.
• Analysts questioned whether the rates were final and if iRhythm could renegotiate rates in the near future. Novitas Solutions did not return requests for comment at the time of publication.

Dive Insight:

The posted rates seem to be another setback for the subsector of EKG monitors. In December, CMS declined not to establish a national price for the devices in a finalized rule. The decision reversed what the agency initially proposed and took analysts and industry by surprise.

iRhythm said in a Jan. 29 statement that they believe the codes are "crosswalked" from EKG codes meant for 48 hours rather than extended use. The company said they requested a meeting with Novitas on Jan. 3 but has not yet met with them.

J.P. Morgan analysts wrote that “there are still many questions that need to be answered” but the fact that the rates matched to the penny rates for 48-hour use suggest that they are likely temporary.

Baird analyst Mike Polark wrote in a Sunday report that after speaking with management, iRhythm contends that final rates could end in a range between $300-$400, in line and slightly higher than previous rates. However, Polark was not confident this range could be reached.

“Respectfully, we do not think those levels are likely. We think odds should favor Medicare eventually landing at one hundred something, say $150 at the midpoint,” the analyst wrote.

BioTelemetry, another played in the space now being acquired by Philips, could also be impacted, though its shares saw little change Friday.

CMS did finalize Category I permanent codes for extended use devices, leaving pricing to regional Medicare Administrative Contractors (MACs), like Novitas Solutions. The MAC has two jurisdictions: Jurisdiction H includes Texas, Louisiana and Mississippi. And jurisdiction L includes Maryland, New Jersey and Pennsylvania.

New iRhythm CEO Michael Coyle said in a recent interview with MedTech Dive that while not receiving national pricing was a challenge, getting the Category I code was a positive as it assures providers that the devices have coverage for extended use. The CEO did not have much to say about possible rate cuts from the MACs.

William Blair analysts said that the rates were well below iRhythm's historical rates.

"The update appears to be a setback though we will wait until more data and management commentary are available before commenting more definitively," the analysts wrote. "This could also be a temporary rate used to bill extended [EKGs] while iRhythm and Novitas engage in more lengthy discussions about the positive RUC committee decisions/society guidelines from the last two years."

The analysts added that CMS makes up about 25% of the company's overall revenue and receiving the Category I code will be a bright spot for the company going forward.

Polark wrote in a Friday report that the rate decline "is a massive slash on face in the most important MAC jurisdiction for iRhythm." 

Polark added that Texas zone 18, which includes Houston, is the most important for the company, where a rate of $42.68 was posted. However, he acknowledged that there is still a lack of clarity.

The recent reimbursement setbacks come soon after what were seen as successes for iRhythm. In November, the company presented data at the American Heart Association's annual scientific meeting showing its Zio patch increased the rate of atrial fibrillation detection and reduced cardiac events, furthering the efforts to double its existing market by targeting asymptomatic patients. 

The company also received a boost in early December when the U.K. National Institute for Health and Care Excellence published guidance recommending the use of its Zio XT as an option for people with suspected cardiac arrhythmias who could benefit from electrocardiogram monitoring for longer than 24 hours.

This story has been updated with additional information and insight on the posted reimbursement rates.