- The Centers for Medicare and Medicaid Services again passed on setting a national price for long-term cardiac monitoring, leaving in place dramatically reduced rates from the regional Medicare rate setter Novitas Solutions.
- CMS asked for further public comments regarding pricing information in the proposed calendar year 2022 Physician Fee Schedule, released Tuesday, as industry has expressed concern that Novitas' rates are below the cost of providing the devices and services. However, the agency also asked for more information from companies because prices that were proposed in last year's Physician Fee Schedule but ultimately not finalized were "much higher than they should be."
- Baird analyst Mike Polark said in a Tuesday note that CMS' decision was surprising. Polark added that while there are questions as to why CMS cannot set prices on its own, industry representatives like iRhythm Technologies have not provided the agency with sufficient pricing information despite multiple requests. "The language clearly suggests the right information (i.e., invoices) needs to be presented to compel action. This has been the open public call for a year now. The industry response to this call, so far, has not satisfied CMS," the analyst wrote.
The long-term cardiac monitoring pricing saga goes back to December 2020 when CMS first passed on setting a national price after proposing to do so. The agency at the time noted conflicting pricing recommendations and passed the decision to Medicare Administrative Contractors.
Novitas, the MAC that processes the majority of all long-term cardiac wearables claims, then reduced rates from over $300 to a $40-$50 price range in late January. This move shocked the industry and Wall Street analysts, eventually leading to a near 80% drop in iRhythm's stock price and Hillrom attempting to back out of its $375 million Bardy Diagnostics acquisition.
The MAC ultimately raised rates in April but they were still far less than historical prices. For example, iRhythm's historical Medicare price for long-term cardiac monitoring, which is the majority of its business, was about $311, but the final Novitas adjustment in April set prices at $115.
iRhythm's former CEO Mike Coyle contended during an investor call after the April pricing update that services could not be delivered at the new rate.
CMS addressed concerns from industry that service costs are above Novitas' rates but said the agency still needs more information to set accurate new prices.
During last year's rulemaking process, CMS rejected invoices from the clinical study marketplace provided by industry, which showed pricing at $595, because "we typically require an invoice representative of commercial market pricing to establish a national price for a new supply or equipment item," according to Tuesday's proposed rule. The agency also rejected two methodologies from nontraditional pricing information, such as the weighted mean of insurance claims data, which set prices at about $440 and $417.
"In consideration of continued access to these services for Medicare beneficiaries, we are once again seeking public comment and information to support CMS' future rulemaking to establish a uniform national payment that appropriately reflects the PE that are used to furnish these services," according to the proposed rule. "As previously stated, invoices or other additional information ... would be ideal for us to use in establishing fair and stable pricing for these services."
The agency's move leaves the industry with few options. CMS can technically finalize a national pricing later this year if the appropriate information is provided. Even then, there is no guarantee that CMS sets prices at a meaningfully higher rater than Novitas.
If the agency does not set a national price, companies will be forced to continue negotiations with Novitas or move to another MAC. Neither option, however, guarantees Medicare rates will be increased.
J.P. Morgan analysts wrote in a Tuesday report that CMS' decision was "disappointing but not surprising," likely leaving iRhythm with the lower rates for the foreseeable future.
"As the company has struggled to find adequate proof of cost for SD339 over the last year, we currently believe it's prudent to assume that the same will remain true going forwards and expect that the $100-115 rate from Novitas stays as is for the near to mid-term," the analysts wrote.
iRhythm is still working with CMS on national pricing as well as "all of the MACs" on new Medicare rates, according to a Wednesday statement. Additional commentary on the proposed rule will be provided during the company's next earnings call in early August.
While the Novitas pricing saga has cast uncertainty over the entire sub-market, iRhythm has taken a particularly heavy hit as the company's business is primarily made up of long-term cardiac monitoring devices and Medicare claims account for about 25% of the company's revenue.
iRhythm's stock price dropped from $251 on Jan. 28 — the day before Novitas published the first rate adjustment — to $59.07 when the market closed Tuesday.
William Blair analysts wrote in a Wednesday note that the pricing uncertainty and future risks for iRhythm are largely the same as they were before the CMS announcement. However, the analysts still back the company going forward.
"We should get a better idea of the extent of these risks in the next several quarters, but we believe that the benefit of the technology for patients, the limited impact on direct physician reimbursement, and cost savings to systems will continue to drive adoption rates of the technology higher," the analysts wrote.