iRhythm picks up the tempo with 19% revenue boost despite Medicare pricing letdown

For the third quarter in a row, iRhythm Technologies continued its streak of increasing revenues amid a host of challenges ranging from staffing shortages to lower-than-expected Medicare reimbursement rates to the ongoing COVID-19 pandemic.

The ECG patch maker reported $85.4 million in revenue for the third quarter of the year. That’s an 18.7% increase over the same period in 2020 and a 5% increase compared to the previous quarter of 2021—during which iRhythm posted massive year-over-year gains, with a nearly 60% boost in revenue compared to the second quarter of 2020.

Despite that sustained growth, iRhythm saw its earnings dip even further into the red, with a net loss of $23.7 million for the quarter, more than five times the $4.7 million net loss it reported for the third quarter of last year.

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Even with its long-lasting upward trend in revenue, iRhythm tempered its expectations going into the final quarter of 2021. Citing the aforementioned COVID and staffing challenges, plus delays in its expansion plans, iRhythm lowered its full-year revenue prediction from the previous range of $320 million to $325 million to somewhere between $317 million and $319 million, which would still represent 20% growth compared to 2020.

“Looking ahead, I see significant opportunity for continued growth in the U.S., expansion into the silent [atrial fibrillation] market and international development,” Quentin Blackford, CEO and president of iRhythm, said in a statement. “To capture our full potential, we must also transform the way that we operate so we can scale our business effectively and efficiently.”

Blackford came aboard iRhythm just after the reported quarter, following the abrupt exit of Medtronic alum Mike Coyle after less than half a year in the top job. Blackford stepped into the role at the beginning of October, joining iRhythm after a four-year stint as first chief financial officer and then chief operating officer of CGM tech developer Dexcom.

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The third-quarter revenue boom came amid iRhythm’s ongoing struggle with the Centers for Medicare & Medicaid Services’ (CMS') reimbursement policies for long-term cardiac monitoring tech, with Blackford noting that, “Once again, strong volume growth offset Medicare pricing headwinds.”

The Zio system from iRhythm centers around an adhesive patch that collects cardiac monitoring data for up to two weeks, after which iRhythm’s technology analyzes the data and generates a report that’s automatically sent to physicians. CMS has declined to set a national reimbursement rate for this and other similar systems, leaving the tech developers at the mercy of regional Medicare rate setters.

In April, one such contractor, Novitas Solutions, dealt a major blow to iRhythm by lowering its reimbursement levels for the monitoring technology from a previous high of about $300 to just over $100. As a result, iRhythm’s stock plummeted to a low that it wasn’t able to recover from until this week.

Those troubles were compounded this month with the release of CMS’ reimbursement rules for 2022, which declined yet again to install a nationwide standard rate for iRhythm’s tech. In response to the decision, Blackford said in a statement that the company was “disappointed” but remained optimistic about the possibility of being granted national pricing in the future and about its ongoing discussions with regional contractors about upgraded rates.