Share prices fizzled for a few orthopedic device makers in the days following news of the Centers for Medicare & Medicaid Services’ pre-reimbursement review project.
Last week CMS unveiled plans to launch a new pre-payment review program, asking doctors to provide up-front justification for certain medical equipment and types of claims, especially for orthopedic and cardiac devices.
The news may have had a hand in sinking share prices for industry heavyweights Smith & Nephew plc (NYSE:SNN) , Stryker (NYSE:SYK) and Zimmer Holdings (NYSE:ZMH) over the next week.
On Friday, Dec. 2, before the news went public over the weekend, SNN shares opened at $46.56, Stryker opened at $49.78 and Zimmer opened at $51.24.
By the end of that day all three stocks had dwindled, with SNN closing at $46.07 (down about 1 percent), Stryker sinking to $47.85 (down about 4 percent) and Zimmer coming in at $49.26 (down about 4 percent).
The news may have also had a hand in sending share prices down among cardiac device makers, even as the major indices capped off a week of growth. Over last weekend, shares of Medtronic Inc. (NYSE:MDT) dropped 6 percent to $34.61; Boston Scientific Corp. (NYSE:BSX) lost 6.8 percent, landing at $5.50. St. Jude Medical Inc. (NYSE:STJ) fell 7 percent to $35.83.
The CMS program, set to launch in 11 states next month, will flip the reimbursement system from the agency’s existing "pay-and-chase" method of looking for improper payments after they’ve already been made.
The measures come as the agency continues to weather charges of excessive waste, most recently from ex-CMS chief Dr. Donald Berwick, who claimed that 20 to 30 percent of health care spending at the agency was wasted on over-treatment, uncoordinated care, an administrative labyrinth, overbearing rules and fraud.