CardioNet Received Rate Cut Call

This morning CardioNet announced that effective on September 1, 2009, Medicare will cut payment rate for mobile cardiac monitoring service (code 93229) from $1,123 to $754, a 33% reduction. The rate cut has been in the rumor mill for some time, but CardioNet’s management only recently reduced its guidance for 2009 revenues and earnings. It appears that the rate cut is deeper than management’s expectation as the company’s stock tanked 30% after a 40% drop just a week and half ago. Although CardioNet vows to appeal the decision, but chances are slim given the current environment. CardioNet’s situation once again highlights the risks in the home medical diagnostic market. The reimbursement environment for medical devices in general might get worse as the call for healthcare savings paying for reform gets louder.