Shares of iRhythm Technologies plunged 32.9% on Jan. 29 as Novitas solutions, a government contractor negotiating Medicare rates released reimbursement rates for external EKG / ECG (electrocardiogram) devices, which were significantly lower than the previous rates.
The new rates are poised to affect demand for the healthcare company’s products, which include wearable devices like ECG monitors to detect heart arrhythmias. iRhythm’s Zio range of wearable ECG monitors and biosensors is covered under Medicare and the company has contracts with many payors in the US including Centers for Medicare & Medicaid Services (CMS).
iRhythm (IRTC) released a statement in reaction to the Novitas announcement and said that “the published rates by Novitas on Jan. 29, are crosswalked from CPT codes 93224 and 93226, which are existing CPT [current procedural terminology] codes for external continuous electrocardiographic recording up to 48 hours” and that it is seeking further information from Novitas.
According to iRhythm, as of Dec. 31, 2019, 95% of patients in the US had access to reimbursed Zio devices through its payor contracts with third-parties.
Following the Novitas announcement, Robert W. Baird analyst Michael Polark reiterated a Hold rating and $170 price target, said that the rates “look really low” and “way lower than the rates for the T-codes.”
Polark further noted that in Texas zone 18, which he considers an important zone, the rate for CPT code 93247 is set at $42.68 and compares to the old rate for code 0297T in the same zone of “about $311.”
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 7 analysts recommending a Buy and 3 analysts suggesting a Hold. The average analyst price target of $251 implies 49% upside potential to current levels.