CardioNet shares sink on reimbursement rate cut

Shares of CardioNet Inc (BEAT.O: Quote, Profile, Research, Stock Buzz) fell as much as 36 percent Monday, a day after the company withdrew its 2009 outlook as Pennsylvania Medicare carrier Highmark cut the reimbursement rate for mobile cardiac outpatient telemetry (MCOT) services.

On Sunday, CardioNet -- a maker of technology to diagnose and monitor heart rhythm disorders -- said Highmark Medicare Services was adjusting its reimbursement rate for MCOT services to $754 per service, effective September 1.

Highmark had posted a reimbursement rate of $1,123.07 in May.

"We believe CardioNet will need to restructure as the Highmark cut creates significant margin compression and renders the company's current cost structure incompatible with profitability in 2010," Jefferies & Co analyst Joshua Jennings said and cut his price target on the stock to $5 from $17.

CardioNet said it had previously indicated that it had been aware that Highmark was conducting a normal review of the reimbursement rate for MCOT.

Analyst Jennings said the review process had been comprehensive and Highmark's decision was unlikely to be reversed.

CardioNet shares fell 36 percent to $5.63 Monday morning, making them the top percentage losers on Nasdaq.