NEW YORK (AP) — Shares of wireless heart-monitoring device maker CardioNet plunged in premarket trading Monday after the company said it faces Medicare reimbursement cuts, forcing it to withdraw prior financial guidance.
The stock fell $3.08, or 35 percent, to $5.75 in premarket trading. Shares closed at $8.83 Friday.
The Conshohocken, Pa.-based company said Highmark Medicare Services will adjust its reimbursement rate for MCOT heart-monitoring devices to $754 per service, down from more than $1,100 per service.
"CardioNet strongly believes that this reduction is unjustified and will immediately pursue with Highmark and CMS (Medicare) a methodology that appropriately values MCOT technology and related services," said CardioNet Chairman, President and CEO Randy Thurman in a statement.
Earlier this month, CardioNet cut its outlook for 2009 because of lower-than-expected reimbursement rates. At the time, it set adjusted profit guidance of 30 cents to 35 cents per share and $156 million to $160 million in revenue. That guidance is now withdrawn.
Jefferies & Co. analyst Dr. Joshua Jennings reaffirmed an "Underperform" rating and slashed his price target to $5 from $17 Monday, citing the reimbursement problems.
"Although CardioNet is the leader in mobile cardiac outpatient telemetry (MCOT), Highmark's decision to reduce reimbursement will drastically impact the aggressive growth trajectory and profitability targets previously set by CardioNet management and (Wall) Street," he said in a note to investors.
The company may need to restructure following the reimbursement cuts from Highmark, he said, adding that commercial payers will likely follow Medicare's lead and cut their reimbursement rates.