(Reuters) - Shares of CardioNet Inc (BEAT.O) fell as much as 20 percent to their lowest ever on Wednesday morning, a day after it said the U.S. Department of Justice was investigating allegations that it had submitted incorrect Medicare claims.
“Over the last couple of years, the company went through a major reduction in reimbursement for their services and in that process they had an audit which I think would have highlighted any major issues here,” Roth Capital analyst Matt Dolan told Reuters.
CardioNet said DoJ had issued a civil investigative demand (CID) saying the company may have used inappropriate diagnosis codes when submitting Medicare claims for its cardiac monitoring services.
Dolan said most such investigations end in financial settlements and the company should start finding the capital.
“We view this as a near-term overhang at the very least. This company has got $45 million in cash, which is about half of its current market cap. So we expect them to capitalize enough to deal with this,” he said.
Roth Capital downgraded CardioNet’s price target to $4 and said its rating and estimates were also under review.
The company said it had no knowledge of the investigation before receiving the CID and plans to fully cooperate with the government.
Shares of CardioNet, whose devices are used to diagnose and monitor heart rhythm disorders, tanked as much as $3.01, making it the biggest loser of the day on Nasdaq. They closed at $3.77 on Tuesday.
Reporting by Kavyanjali Kaushik in Bangalore