iRhythm rallies after Citi sees reduced rates as placeholder

Shares of iRhythm Technologies are gaining back some of Friday’s losses after Citi analyst Joanne Wuensch said the reduced reimbursement rates disclosed Friday by a Centers for Medicare and Medicaid Services contractor for the company’s continuous electrocardiogram monitor are likely just a placeholder and not final. Shares of iRhythm sunk Friday after CMS contractor Novitas indicated on its website that the new Category 1 reimbursement codes for external electrocardiogram recording devices such as iRhythm’s Zio XT could be between $40 and $80, well below iRhythm’s previous rate of about $311. Per iRhythm’s press release on Friday, the company has not had the chance yet to speak with Novitas. The company added that the the codes were mapped or cross-walked to current Holter monitoring codes, regardless of the duration of the Holter Monitor’s 48 hour versus the Zio’s 14-day data collection. After speaking to management, Wuensch believes it is “highly probable” that the posted rates by Novitas are the result of “administrative pressure.” The reimbursement rate is likely more of a placeholder until iRhythm can properly meet with Novitas, Wuensch told investors in a research note. However, reconciliation and clarification of the reimbursement rate will not be immediate and the “overhang on the stock in the very near term will likely remain,” the analyst cautioned. Wuensch kept a Buy rating on iRhythm with a $252 price target. The stock in late morning trading is up 15%, or $26.06, to $194.48.