CardioNet hit by insurer price cuts

Wireless heart-monitor maker CardioNet, Conshohocken, whose share price tumbled two weeks ago when it admitted lower-than-expected income and sales, warned yesterday it faces a further "unjustified reduction" in payments from Highland Inc., the Pittsburgh-based Blue Cross insurer.

Analyst Greg Chodaczek at Boenning & Scattergood, in West Conshy, told clients this morning that CardioNet learned from Highmark Medical Servcies last week that as of Sept. 1 Highmark "was adjusting its reimbursement rate" from Medicare for a key CardioNet product  "to $754 per service.

"While we had modeled a 20% cut in our 2010 model, we did not expect Highmark to not only lower their reimbursement rate 33%, but to make this cut effective in the middle of calendar year 2009...

"We believe this cut will not only affect CardioNet's Medicare revenues, but will also allow commercial payers more room to renegotiate their reimbursement rates... Unfortunately for CardioNet, their business model is not set up for such a low Medicare reimbursement level, and will have to pursue a change in cost structure.  Until this CMS reimbursement situation gets straightened out and CardioNet revamps their cost structure, we will remain on the sidelines with regards to CardioNet shares."

CardioNet had been a rare good-news story: It was hiring salesmen in a tough employment market, and its share price was up in an awful stock-market year.