UPDATE 1-CardioNet shares sink on reimbursement rate cut

* Says Highmark cuts reimbursement rate for MCOT to $754

* Withdraws 2009 outlook

* CardioNet shares down as much as 36 percent (Recasts; adds analysts' comments, updates share movement)

By Shailesh Kuber

BANGALORE, July 13 (Reuters) - Shares of CardioNet Inc (BEAT.O) fell 36 percent Monday, a day after the company withdrew its 2009 outlook as Pennsylvania Medicare carrier Highmark cut the reimbursement rate for mobile cardiac outpatient telemetry (MCOT) services by a third.

The revised rate was a worse-than-expected reduction, Cowen & Co analyst Sara Michelmore said, maintaining a "neutral" rating on CardioNet.

On Sunday, CardioNet -- a maker of technology to diagnose and monitor heart rhythm disorders -- said Highmark Medicare Services was adjusting its reimbursement rate for MCOT services to $754 per service, effective Sept. 1.

Highmark had posted a reimbursement rate of $1,123.07 in May.

"This cut will not only affect CardioNet's Medicare revenues, but will also allow commercial payers more room to renegotiate their reimbursement rates," Boenning & Scattergood analyst Greg Chodaczek said in a research note. He lowered the stock to "neutral" from "outperform".

CardioNet said it had previously indicated that it was aware that Highmark was conducting a normal review of the reimbursement rate for MCOT, which is used for ambulatory cardiac monitoring.

Jefferies & Co analyst Joshua Jennings said the review process had been comprehensive and Highmark's decision was unlikely to be reversed.

Jennings cut his price target on the stock to $5 from $17.

Cowen's Michelmore recommended that investors stay on the sidelines given the low visibility on near-term reimbursement dynamics, damaged management credibility and uncertainty around a transition of the company's business model.

CardioNet shares were trading down 32 percent at $6.02 Monday, making them one of the top percentage losers on Nasdaq. They touched a low of $5.60 earlier in the session. (Editing by Aradhana Aravindan)