Orthofix surges after CMS change on non-invasive bone growth stimulators

Orthofix Medical shares jumped 16% on Tuesday after the Centers for Medicare and Medicaid Services reversed a proposed reclassification of non-invasive bone growth stimulators, removing a reimbursement risk that had hung over the company since last year.

The agency had floated a draft rule in 2023 to reclassify the devices – which use electromagnetic fields or ultrasound to aid bone healing in spinal fusion and fracture patients – as not reasonable and necessary for Medicare coverage. That would have cut off a key revenue line for Orthofix, which derives a significant share of its sales from the segment. CMS reversed course in the final rule published Monday, citing updated clinical evidence and comments from surgeons and device manufacturers.

The ruling effectively restores Medicare coverage for the stimulators. Traders said the move removed the single biggest overhang on Orthofix shares, which had fallen roughly 25% between the draft rule's release and Monday's close. Volume on Tuesday ran more than three times the 20-day average.

Orthofix competes with larger device makers including Medtronic and Zimmer Biomet in the spinal implant market. The bone growth stimulator line had been a focus of analyst concern because of its high reliance on Medicare patients. The reversal lifts that headwind and improves visibility for the company's near-term revenue trajectory, traders said.

The CMS rule takes effect 60 days after publication in the Federal Register.