CardioNet Inc., the Conshohocken maker of electronic heart monitors, was one of the few bright spots in corporate Philadelphia last year as it continued hiring salespeople while others laid off. But then, big insurers began reducing the prices they were willing to reimburse users.
Last week, CardioNet reported a 47% jump in third-quarter patient volume over last year. But profit margins fell 3.4% "due to lower reimbursement rates from both Medicare and commercial payers," and CardioNet lost money on higher sales, after profiting in the same quarter last year, reports Boenning & Scattergood analyst Greg Chodaczek.
"While we still believe CardioNet is the technology leader in the cardiovascular monitoring space, CardioNet must drastically alter its expense structure in order for its business to stay viable," Chodaczek concluded.
In a statement to shareholders Friday, ceo Randy Thurman told CardioNet investors that the company faces two problems: lower-than-expected reimbursement of only $754 per monitor by Pittsburgh-based insurer Highmark Medical Services, and lower-than-expected bill collection due partly to "billing and collection practices stemming from the Company's entrepreneurial past which have taken longer than expected to correct."
"Without significant restructuring," CardioNet is "in jeopardy," he added. But it's addressing the problems, and "CardioNet's strong cash position adn lack of debt provides us with time to effect these changes." More later, he promised.