Increased use of portable nerve test spurs questions from insurers

Some health plans, including WellPoint and Cigna, say they are either not paying physicians for diagnosis of neuropathies made by a hand-held device, or they are closely reviewing claims to determine if the device is being overused.

The NC-stat device, manufactured by Waltham, Mass.-based NeuroMetrix does not have its own CPT code, but doctors have been using three generic nerve conduction testing codes for reimbursement.

Between 2004 and 2005, the Centers for Medicare & Medicaid Services reported a 17.5% increase in claims using one of those three codes. "When an overuse of a code stands above the crowd of what Medicare is used to seeing, they pay attention," said Terry Fife, MD, president of the Arizona Neurological Society.

The controversy is having an effect on NeuroMetrix. Even though the sales of NC-stat helped nearly double company revenues in the first nine months of 2006, compared with the previous year, and helped nearly triple profits, its stock price is dropping on fears the insurers' crackdown will hit hard. The company's stock dropped nearly 20% the first few days of this year to $12.90 on Jan. 5. That was the stock's lowest price since mid-May 2005 and represents a drop of nearly two-thirds from its peak closing price, $39.33 on April 21, 2006.

NeuroMetrix CEO and founder Shai Gozani, MD, PhD, said he is meeting with insurers to show them data he believes will prove NC-stat is clinically sound and cost effective.

The growth of NC-stat

After hitting the market in 1999, the NC-stat gained immediate attention. The company marketed the system as a way for doctors to noninvasively diagnose neuropathies.

Single-use biosensors are placed on the patient's extremities to measure nerve conduction, or F-waves. The readings are sent to an NC-stat monitor, which customizes and calibrates the test for each patient. The data are then sent to the NC-stat docking station, then transmitted via telephone lines to the company's "on-call information system," where the data are analyzed for a diagnosis. The company says the whole process can take as little as 15 minutes.

The company went public in 2004 amid excitement from investors encouraged by the firm's impressive sales figures. According to a transcript from NeuroMetrix's 2006 third-quarter earnings conference call, the company's chief operating officer, Gary Gregory, said there were 4,518 active customers who used biosensors 302,000 times during that quarter. Primary care physicians accounted for 67% of the use, Gregory said. And the $35.4 million in revenue from the sale of biosensors represented 86% of NeuroMetrix's total revenue.

Gregory told investors that, on average, "new NeuroMetrix customers delivered annualized revenue of over $16,200 per account." The device itself sells for about $5,000.

The company marketed the NC-stat to non-neurologists because it was a way for them to save patients a lengthy wait to see a neurologist and to keep the revenue -- estimated at $200 per test -- in-house. Dr. Gozani said there are neurologists who use NC-stat, but, for the most part, it was non-neurologists who were most interested in the device.

After several members expressed concern over NC-stat in 2005, Elaine Jones, MD, president of the Rhode Island Neurological Society, arranged a meeting with Dr. Gozani to have him demonstrate the system.

"The technology is outstanding and very intriguing," Dr. Jones said. But because the test "has some errors" that only trained neurologists can understand, they are the only ones who can place the test results in the correct context, she said.

Keith Lehman, MD, vice president of the Ohio Academy of Family Physicians, said he wouldn't use an NC-stat often enough to justify its cost. But he said primary care doctors trained on the device should not be restricted from using it.

Insurance backlash

Cigna was one of the first to take a position against coverage for the NC-stat. The company said in 2004 that nerve conduction velocity studies performed without needle electromyography, and with the NC-stat specifically, would not be covered because "they are considered experimental, investigational or unproven."

Several other insurers said late last year that using miscellaneous codes no longer would guarantee approval and that each case would be determined individually.

First Coast Service Options, a BlueCross BlueShield subsidiary that administers Medicare programs in Florida and Connecticut, issued an article on Oct. 23, 2006, that said all NC-stat claims must be billed using unlisted codes so that additional records can be requested.

"A previous payment of a claim is not a guarantee of coverage, since standard codes may have been automatically paid without a formal review," said James J. Corcoran, MD, medical director for First Coast.

Other insurers will be basing decisions on the device's efficacy, which they are still evaluating.

According to Tania Graves, a spokeswoman for WellPoint, the company does not have a policy regarding coverage for NC-stat. But the device will be evaluated by the company's Medical Policy and Technology Assessment Committee early this year. The committee develops policy based on clinical assessments of devices, procedures, therapies and biologicals.

Dr. Gozani says he can show specific data to answer questions about effectiveness and utilization. For example, every time the device is used, a report is generated at NeuroMetrix headquarters, so, Dr. Gozani said, he can break down utilization data as much as insurers would like.

As insurers work to formulate opinions on the device, investors and physicians are taking a wait-and-see approach.

Despite her concerns with the device, Dr. Jones hopes there won't be a blanket policy against coverage for the device.

If the test is "good quality and if used in good context, it would be appropriate for them to cover it," she said.