Abiomed (NSDQ:ABMD) shares are up 3.2% since the Centers for Medicaid & Medicare Services announced a lower-than-expected cut to the reimbursement rate for intensive care unit procedures using its Impella heart pump.
CMS had proposed a 35% reimbursement reduction in mid-April for procedures using the Impella pump in the ICU, but in its Final Inpatient Prospective Payment System ruling released last week the cut was revealed to be only 19%, according to a Leerink Partners note to investors.
“Shares are likely to respond positively to this as it at least mitigates in part the bear thesis that centers will not implant Impella unless it is highly profitable. We think the final rate cut changes nothing fundamentally,” Leerink Partners analyst Danielle Antalffy wrote.
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Procedures under the DRG215 code will cover approximately 50% of all procedures using the Impella, according to Antalffy, and given the reduced cut “can still be profitable for the hospital, and even more so with good outcomes.”
The final rate for the procedures under the DRG215 code clocks in higher than previous reimbursement under a DRG216 code, Antalffy said, which made up 80% of the procedures using the Impella device before a change to reimbursement codes last October.
The initially proposed 35% cut may have been due to an analysis of the device and associated ICU procedures, labeled by CMS as DRG215, having a small sample size, CEO Michael Minogue said in May during the company’s 4th-quarter earnings call.
“Specifically around the analysis that was done for the proposal for payment for next year for 215, what we have discovered is that it’s a very small sample size that was run as a comparison. It did not include our Impella 2.5 and CP populations,” Minogue said, according to a Seeking Alpha transcription of the call.
Minogue said the company had worked with CMS during the comment period to “understand why such a small patient population or patient sample dropped significantly and what is the potential alternatives to it.”
The company said that its labeling under the CMS system was also getting more diverse, with more patients being labeled under different DRGs, making the reimbursement analysis more complex.
“So I’m very confident what we’re going to come up with is a fair plan. And I think what’s important for folks to remember is that the DRG system is designed to allow efficient hospitals to breakeven or make a little bit of money. So the better the outcomes, the better the margin for the hospital and this is why our protocols are so important and why we’re partnering with hospitals to improve on all the patient populations,” he said.
Abiomed shares rose 3.2% last week, and are up 1.5% today at $153.27 as of 10:10 a.m. EDT.
Late last month, the company saw shares fall slightly despite it topping expectations on Wall Street with its 2nd quarter earnings results.
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