NeuroMetrix Unnerves Some

The stock bounces, but reimbursement issues remain.
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Billing issues continue to unnerve some

NeuroMetrix

(NURO) - Get Report

watchers.

Shares have lost half their value since this spring as a number of insurers have said they would restrict reimbursement for the company's nerve tests. But some investors are betting doctors who find the tests convenient -- not to mention profitable -- will continue to find a way to get paid for using them.

Wellmark, the Blue Cross/Blue Shield carrier for Iowa and South Dakota, announced two years ago that it would not cover nerve studies involving NeuroMetrix's flagship NC-stat device. Despite some confusion since then, "We do not cover NC-stat," a spokeswoman recently told

TheStreet.com

.

But Orthopedic Consultants, a medical practice based in the Midwest, apparently failed to get the message. The office manager there told

TheStreet.com

just this month that her group continues to get reimbursed for NC-stat tests.

This month, regional Medicare carrier TrailBlazer said doctors should couple NC-stat tests with electromyograms -- thorough needle exams normally carried out by specialists -- if they expect to be reimbursed for their efforts.

"That would hurt the company greatly," a former NeuroMetrix employee says, adding that nearly all of the doctors who use NC-stat machines perform NC-stat tests alone.

But Jefferies analyst Ryan Rauch has offered a far different take.

"TrailBlazer

suggested

that NCS should routinely be performed with concomitant EMG, but this is not a mandate," writes Rauch, whose firm makes a market in NeuroMetrix securities. "If TrailBlazer determines that a physician has deviated from this suggested guideline, Medicare may seek a medical review. (But) we believe this action would be very difficult to enforce, prohibitively expensive for TrailBlazer to conduct and will ultimately have little impact upon the existing base of (general practitioners) who use NC-stat."

Still, Wellmarks said it plans to seek answers from Orthopedic Consultants about any claims that it submitted for NC-stat studies.

NeuroMetrix didn't answer questions for this story. The company's stock, which fetched more than $40 before being hammered by reimbursement concerns, bounced 13% to $19.36 Tuesday after a new analyst began recommending it.

Blind Spot

Meanwhile, NeuroMetrix CEO Shai Gozani has offered some telling comments already. Notably, just two months ago, Gozani suggested that NeuroMetrix has overcome reimbursement challenges before and even downplayed a negative ruling issued this summer by heavyweight commercial insurer

Cigna

(CI) - Get Report

.

"NeuroMetrix has prevailed in similar disputes with carriers in the past, Gozani said, though he wouldn't be specific,"

Dow Jones Newswires

reported in late September. "Gozani also said physicians shouldn't worry because Cigna 'can't see' whether they are billing for NC-stat or a traditional nerve test, so it can't enforce its coverage ban, a comment he also made Wednesday at an investors' conference hosted by A.G. Edwards."

Billing codes definitely matter.

NeuroMetrix could have requested its own code for reimbursement but chose to rely on existing codes for more extensive nerve studies instead. Otherwise, a former employee says, payments for NC-stat tests might have come in as much as 75% lower. As a result, he adds, doctors -- reluctant to perform new tests without promises of big returns -- would have never flocked to the machines as they have.

The vast majority of those doctors are general practitioners rather than the specialized neurologists who have always performed most nerve studies in the past. Based on a recent

New York Times

report, those GPs can score a quick $250 -- about triple their charge for routine office visits -- by carrying out an NC-stat test.

Going forward, however, those incentives could very well diminish. In its marketing materials, NeuroMetrix specifically instructs doctors to use codes that will bring generous reimbursement. But negative coverage decisions could now subject those doctors to reviews -- and expensive repayments -- if they do so.

Meanwhile, specialists have already cried foul. They claim that ordinary doctors lack the skills to diagnose nerve problems and, moreover, that they have been relying on inadequate tests to do so.

Still, until recently, NeuroMetrix counted some prominent neurologists among its outspoken fans. Two of them, Seward Rutkove and Jeremy Shefner, offered public support for NC-stat tests in a July article published by

Neurology Today

when both men served on the company's advisory's board. The two specialists did admit that NC-stat tests have their limitations, however, and have since seemingly parted ways with the company. Neither one is now listed as a member of the advisory board on the company's official Web site.

Rutkove and Shefner failed to answer phone messages seeking reasons for their apparent departures.

Meanwhile, despite their public optimism, even NeuroMetrix insiders seem worried. Over the past year, all three of the company's top officers have been cashing in their stock options. Gary Gregory, the operating chief who oversees marketing and reimbursement, has sold millions of dollars worth of stock at nearly double the current share price.