What happened

Shares of Glaukos (NYSE:GKOS) were tanking on Wednesday, with the stock down 20.5% as of 10:38 a.m. EDT. The decline came after the Centers for Medicare and Medicaid Services (CMS) released its proposed physician fee schedule for fiscal year 2022.

The proposed fee schedule wasn't favorable to Glaukos. In a press release, Glaukos CEO Thomas Burns said that the ophthalmic medical technology and pharmaceutical company was "extremely disappointed" with CMS' proposed fees. This news also prompted investment firm William Blair to downgrade the healthcare stock to market perform from market outperform.

Surgeon with patient on the operating table and another healthcare professional standing nearby.

Image source: Getty Images.

So what

CMS sets the rates that physicians receive for specific procedures performed for Medicare patients. Glaukos was expecting the reimbursement for procedure codes used for its iStent device used in micro-invasive glaucoma surgery would be much higher than those on CMS' proposed fee schedule for fiscal 2022.

William Blair analyst Brian Weinstein estimated that CMS' proposed rate could reduce the amount of reimbursement for iStent-related procedures by around 90%. This is especially problematic for Glaukos because nearly 80% of its sales stem from the use of its glaucoma surgical devices.

Now what

CMS' proposed rule isn't final yet. There's a 60-day window for the public to comment on the proposed rates. Burns said that Glaukos is "committed to exploring every option during the public comment period in hopes that medical providers across our network are paid appropriately" for performing the procedures using the company's devices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.