Hillrom is calling off a planned acquisition of cardiac monitor-maker Bardy Diagnostics, saying the closing conditions of the deal had not been satisfied. The Chicago-based medical technology company announced its decision on Monday after Medicare Administrative Contractor Novitas Solutions slashed reimbursement for long-term cardiac monitoring.
Bardy Diagnostics filed suit in the Delaware Court of Chancery on Sunday, saying the payment changes don’t provide a legal basis for cancelling the deal. Hillrom declined to comment on the case beyond its statement.
Hillrom first announced plans to acquire Bardy in late January for $375 million. Bardy’s 230 employees were also expected to join the company as part of the deal.
The Seattle-based startup makes an electrocardiogram patch that can be worn for up to two weeks to help detect arrhythmias. It brings in about $30 million per year in annualized revenue, according to the terms of the deal.
A number of companies have spun up device to monitor heart conditions at-home, from startups like AliveCor building out FDA-cleared EKG sensors, to wearable device-makers like Apple and Fitbit rolling out their own arrhythmia detection algorithms. The Centers for Medicare and Medicaid Services also began covering remote patient monitoring for certain conditions in 2019 – a big step toward adoption.
But just weeks after Hillrom and Bardy announced the deal, Medicare Administrative Contractor Novitas slashed reimbursement rates for extended holter cardiac monitoring — a type of portable ECG. The new rates ranged from $40 to $80, in some cases, a fraction of what companies previously made.
Another remote monitoring company affected by the decision, iRhythm Technologies, said it had banded together with other device makers to negotiate with Novitas.
“We believe the evidence that we presented was compelling, but can provide no assurances as to if and when Novitas will expect to change the proposed rates,” iRhythm CEO Mike Coyle said in a Feb. 25 investor call.
The changes could also affect other recent remote monitoring deals. Last month, Boston Scientific shared plans to acquire Preventice for $925 million.
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