Arthrocare Gets No Medicare Love

Lately, however, the automobile insurers have started fighting back. Instead of automatically paying large sums for the half-hour operations, they often choose to challenge the cases in court. They have scored some legal victories already and, with help from the new Medicare ruling, now hope to win even more.

"The fact that CMS views the procedures this way will certainly make winning these cases, from the claimant's perspective, substantially more difficult," says Dan Martinez, an attorney who is contesting PDD claims on behalf of one of the nation's largest car insurers. "Some judges may not even let the jury hear about (PDD) or even consider making an award for it."

As a result, he concluded, "I think this is the beginning of the end for the procedure."

A government probe could dampen enthusiasm for the surgery as well. As TheStreet.com reported in August, FBI officials in Florida are investigating PDD surgeries covered by pending legal settlements rather than traditional health insurance.

Of course, by then, Arthrocare had already caught the government's attention. In July, the company announced a looming restatement that triggered an informal inquiry by the Securities and Exchange Commission.

Arthrocare's stock has suffered dearly as a result. Last November, before questions began to surface about Arthrocare's booming spine business, the company's stock peaked above $65 a share. Now, even after a 6.4% jump to $29.50 on Wednesday, the stock fetches less than half that amount. On Thursday, the stock was up 4 cents to $29.54.