What happened

Guardant Health (GH 1.71%) shares were up 4.6% at Tuesday's close after the company announced its Guardant360 TissueNext test will be included among the diagnostic tests that at least one Medicare insurance service provider covers.

So what

It's complicated; here's the simple and short explanation. The more specific a cancer diagnosis is, the more effective a response can be. The Guardant360 TissueNext test offers patients with advanced cancers a better diagnosis of their condition. Ergo, using the test's genomic sequencing capabilities, Guardant Health empowers oncologists to design a highly detailed plan of treatment.

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Coverage is being approved by Palmetto GBA, which is contracted to oversee Medicare's Molecular Diagnostics Services program. But, in that Palmetto is an approved Medicare insurance service provider partner, reimbursement for Guardant360 TissueNext testing is in effect coming from the federally managed agency.

Now what

The knee-jerk bullish response is understandable, but not necessarily built to last.

While Palmetto GBA is authorized by Medicare to handle a variety of caregiving support services, it's not a nationwide provider. Palmetto (a division of the Celerian Group) only operates in a handful of states in the southern part of the United States. Although its willingness to include Guardant360 TissueNext as part of its covered services bodes well for Guardant Health itself, Tuesday's news isn't exactly game-changing -- at least not yet. The size of Medicare's Molecular Diagnostics Services program also isn't completely clear.

That's not to suggest the stock is unownable, however. Last quarter's revenue growth of 38% is not only impressive, but better than expected. Its 2022 sales growth guidance of between 23% and 26% is similarly impressive. That's the bigger and better reason to own Guardant here, particularly in the shadow of its 55% rout over the course of the past 12 months. Tuesday's news may end up merely being a much-needed catalyst or news item that buyers can latch onto.