Update Monday April 12. iRhythm shares fell rapidly by -35% from about $135 to about $85 on Monday. iRhythm issued a press release saying they may withdraw from the Medicare marketplace here. See a typical follow-on story by MedTechDive here.
Share price is down from a high of $250 in January 2021, although it's not much different today than exactly 1 year ago.
As of April 9, iRhythm had a share price of $132 and a market cap of $3.9B, both values down by half from the beginning of the year.
The cause was a transition from longstanding Category III CPT codes, paid at several hundred dollars, to new Category I codes which CMS was unable to price in time for CY2021.
Seeing the new CPT codes in January, the main MAC paying for this service (Novitas) dropped its price from $264 to $97, down 70%. iRhythm issued a rapid press release on January 29 (here) which was soon followed by headlines like "iRhythm Stock Tanks" (here).
In a surprise move on Saturday, April 10, Novitas posted new rates which bring the main iRhythm payment up to about $140, but that's still just half of the 2015-2020 pricing when the service was a locally-priced, Category III code.
See Novitas pricing page here.
Also on Saturday, April 10, iRhythm issued a rapid press release that it would host an investor call on Monday, April 12, here.
A class action lawsuit was announced along the way, but that's a fairly common event (here). In separate news, an investor called Hill-Rom was reportedly trying to exit a once-expected acquisition of supplier Bardy for $375M (March 1, here; also here.)
For several years, iRhythm (and other venders using the code, which were much smaller) was by far the most successful AMA Category III code in CMS utilization. The transition to RVU pricing is stormy in digital health (my earlier December articles, blog and blog). More than a decade ago, CardioNet also had a stormy transition between local MAC pricing ($1200, as I recall, then abruptly cut substantially) and CMS RVU pricing (circa $700, as I recall.) (Some Cardionet detailed historical entry points about MAC pricing here, and here; not vetted for accuracy. But these are easily available on the internet to CMS medical directors; the first is a qui tam case against CardioNet, the second a shortseller's thesis against IRTC.) Also available to CMS medical directors, in the past months, a consultancy called MCDA submitted several detailed documents to CMS about RVU pricing of iRhythm codes (entry point here).
The new iRhythm price at Novitas is retroactive to January 1, 2021. The MAC is not required to, and does not, provide any justification for its price points. Because RVUs are expected to provide roughly break-even values (this much labor, this much supplies, this much amortized capital equipment, this much malpractice), Novitas may be considering that IRTC's 2020 revenue was $265M while it stated its COGS as $70M. Typically RVU indirect costs are less than 100% (less than COGS). The PFS/RVU process does not include value (as in a white paper essay by Brian Blase.)
CMS Challenged by Pricing Multiple DHealth Codes, Not Just iRhythm
Similar story on retinal AI-based testing. See an article on the winding path of valuation and value-based medicine for AI-retinopathy technology - here. That one was from the CEO of Retina-AI-Health. And see a detailed essay on the CMS AI reimbursement topic from Brian Blase, quite critical of CMS RVU pricing methods, here.
Like the iRhythm code, CMS also decided to leave the main retinopathy-AI code "contractor priced" in December 2019; see rulemaking here and search for "contractor pricing for CPT code 92229."
At that time, CMS wrote, "...AI applications are emerging, we recognize that issues involving the use of AI are complex. While we agree that the costs for AI applications should be accounted for in payment, AI applications are not well accounted for in our PE methodology."
More on CMS and iRhythm
For CMS December policymaking decision regarding local pricing for iRhythm, see the same link and just search for "93241."
CMS has a new (Fall 2020) office called, "Technology Coding and Pricing Group" which may be involved in the CMS decision-making for 2022, during 2021.
Original version of this blog April 10, also posted at Linked In.
I've put a ZIP of most of the cited links (Fed Reg, Qui Tam, MCDA, Kerrisdale short thesis, Blase, etc) in the cloud here. Copy of the April 10 Novitas page here. See also a December 2020 Bloomberg article here,on the growing crowd of short-sellers like Kerrisdale at that time.
See an NEJM article this week on whether remote monitoring is overused.
Historically, most MACs haven't published their prices for locally priced codes. Palmetto recently began systematically releasing prices on locally-priced molecular tests (here).