CPT 95905 was published in the 2010 Medicare physician's fee schedule. This reimbursement code provides clarity but generally results in lower reimbursement. The Company believes that the majority of Medicare fiscal intermediaries now cover medically appropriate nerve conduction studies billed using this CPT code. A uniform electrode price, consisting of increases in some electrodes and decreases in others, was implemented by the Company. This resulted in an overall 12% reduction in electrode average selling price from the fourth quarter of 2009. Per-study electrode usage declined by 5.5% from the fourth quarter of 2009. Electrode sales in the fourth quarter of 2009 were 29% higher than customer electrode usage. Further, in the first quarter of 2010, the Company did not offer discounts on volume purchases of electrodes as it had done in the fourth quarter of 2009 and previously. The Company believes these two factors contributed to reduced electrode orders from its installed base of customers during the first quarter of 2010. The installed base of active accounts was 4,309 at the end of the quarter. This was a contraction of 4.1% from 4,493 accounts at the beginning of the quarter. The Company placed 86 new systems in the quarter, a 15% increase from the fourth quarter of 2009. Patient studies performed using NC-stat and ADVANCE devices were 36,529 in the first quarter. This was an increase of 2.5% from 35,649 studies in the preceding quarter. The Company continued implementation of its field clinical team which is focused on providing customers with on-site clinical support and education.

Shai N. Gozani, M.D., Ph.D., NeuroMetrix President & CEO commented: "We are now in the process of building our NC-stat business around the new reimbursement dynamics created by CPT 95905. Our focus continues to be on selling NC-stat into primary care and ADVANCE into specialist markets including orthopedics, neurology, and physical medicine and rehabilitation. The first quarter saw a step decrease in revenue related to anticipated and necessary changes in the business. However, we are encouraged that despite these substantial changes, our core operating metrics of patient studies and customer accounts were largely preserved. We believe we have an effective strategy in place but it may take several quarters to see meaningful trends emerge."

SOURCE NeuroMetrix