The fact that physicians only receive about $30 total per precription for this test with CMC/Medicare, removes any financial advantage for the physician and will hurt the overall volume of tests prescribed and thus the corresponding revenue to the company. Certainly the company was banking on CMS approving a "daily" reimbursement for the physicians. Now physicians and their staff will have to retrieve and look through daily reports for up to 21 days for a measly $30....too much work for too little return when they can use other devices with better reimbursement rates to achieve clinically comparable results IMO.
In addition to this, Blue Cross/Blue Shield will most likely hang their hat on a lack of convincing data as a reason to deny coverage, regardless of CMS's decision. This happens all the time with this insurer. I believe this company made a strategic error long ago when they commented to the effect that this technology would keep or promises to keep hospital admissions and re-admissions lower for patient monitoring when there was no evidence or a single study done to convince insurers that it would do this. Blue Cross/Blue Shield can certainly hang thier hat on this premise as a reason to hold out on coverage.
The 3X study comparing their detection rate to "patient activated only" event recorders is a yawner. Any "auto trigger" event recorder,in combination of patient activated events would certainly perform better than patient activated symptomatic only event recorders, however this is the cornerstone of their marketing approach. True their stas are correct, but the design of the study leaves a lot to be desired. I think the "Blues" know this and the analysts have also figured this out.
This, I believe is the reason for the stock deteriation. Do your own DD, and of course is IMHO. Waiting to see if this company produces better evidence through better designed clinicl studies.
Could my post on 6-23-09 help explain why this fell off the cliff? How else can you explain the conflict with the sales increase,yet lower revenues per sale? Loose billing practices with the insurer's prior to Jan 1 2009 are over and they must now live within the new codes that they created. Questionable receivables?
The other variable is there is no gaurentee that the reimbursements rates just established will remain at their ccurrent levels looking forward.
According to Yahoo/finance, last month, in May alone, 21,555 shrs were purchased in the open mkt @ approx $18 by 7 insiders. 3 of them were for 5000 or more shrs each, including the pres/ceo Thurman. That's a tad shy of $400,000 reinvested
The fact that physicians only receive about $30 total per precription for this test with CMC/Medicare, removes any financial advantage for the physician...
Would you please explain how you got to this $30 number? I haven't seen that any where else.
i'm pretty sure that's the correct number. i've seen it mentioned by the wall street analysts.
personally, i think it's old news and priced into the stock. a stock doesn't fall 50% in 3 months, while the S&P goes up 10%, without a "reality check" factored in.
not arguing that cash flow could be a problem, that's why i mentioned a 50 to 60% cut in profit (and cash flow) - and my quick and dirty math show the stock is still cheap.
so what do you think it's all worth? 10? 14? 30? zero? not sure, but just less than today?
Cash Flow basis? One of the previous posters pointed out the differences in their cash flow and outstanding receivables. This is something to keep an eye on since billing out to insurance companies, especially the private payors will not be a sure thing. Remember they are transitioning from a "loose" CPT coding approach(prior to Jan 2009) to a new CPT code which the privates will be converting to as well. This could cause a little cash flow problem short term...will all receivables be converting to cash flow? Going forward, what will be the prescription rate with the reduced compensation for the ordering physician? These are significant changes to the paradigm as compared to prior to Jan 2009. Company does great, physician does not yet everything starts with the script written by the physician. I sense an overall anger out there with physicians due to reimbursement cuts across the board, not to mention potential overhauls to the heathcare system in general. This all adds up to uncertainty on Wall Street.
sure, i can see sales growth slowing significantly and further competition could enter (although IP might be an issue), but company still has value. by my back of the envelope calculations, even if profit is cut by 50 to 60%, the stock is still absurdly cheap on a cash flow basis.
Not disputing the sales numbers...time will tell which direction this growth will trend at and at what rate. Keep in mind, the reimbursement data is relatively new and we really don't know how it will affect prescriptions going forward. I think this is creating a little uncertainty in this stock.
I read another interesting post on opinion about technology platform, owning this space, etc. Although I don't support Lifewatch, they clearly have already expanded into other paramters with 2 way wireless technology, not limited to ECG so I don't see this company holding anything that is exclusive to them. In fact, there will certainly be more competitors entering this space since wireless communication technology and clinical parameter measurement sensors are all considered to be commodities today. Anyone can think up the right clinical combination of parameters, match it with off the shelf wireless communication technology, set up monitoring center infrastructure, submit 510K's and be a competitive force. So I do not agree with the assessment that CardioNet has anything that is proprietary to their operation which would exclude competition. Phillips, Siemens, GE, etc all could decide to enter this space and CardioNet or Lifewatch could do nothing about it. Let's all realize these possibilities.
so given all the bad news that's out there on the company and on reimbursement, and given the massive stock decline, what do you think the stock is worth?
What i'm getting at is that despite everything you've said, the company still put up very impressive numbers. I'd say a lot of the bad news is now priced in.
this is a $300M enterprise value company that will do $170M in sales this year and will continue to produce free cash even if the world falls apart.