CareDx (CareDx (CDNA)) just got a big regulatory hug from Medicare, and investors are celebrating. Shares of the precision medicine diagnostics company jumped nearly 29% on Thursday after Medicare finalized its Local Coverage Determination (LCD) for molecular testing used to monitor solid organ transplant rejection. The policy keeps coverage in place for CareDx's kidney, heart, and lung transplant surveillance tests.

The stock was trading at $38.34 at publication time, up 28.89%. That's a pretty good day for a company that lives and dies by Medicare reimbursement decisions.

So what exactly did Medicare say? Let's break it down by organ.

Kidney Testing: Still Covered, With Limits

For kidney transplant patients, Medicare will cover surveillance testing with AlloSure Kidney for up to six tests in the first year after transplant. In years two and three, coverage drops to up to four tests annually. That's actually pretty generous—CareDx notes that patients currently average only three to four tests in the first year, so the policy gives them room to use more if needed.

For-cause testing—when a doctor suspects rejection—remains covered without those limits, as long as it's clinically indicated.

Heart Testing: Two Tests, One Policy

Heart transplant recipients get continued coverage for both AlloMap and AlloSure Heart. Medicare will cover up to 12 surveillance tests in the first year and up to four annually in years two and three. The policy also allows the two tests to be used together when medically appropriate, which is a nice nod to clinical flexibility.

Again, for-cause testing is covered without the surveillance limits.

Lung Testing: Frequent Monitoring Approved

Lung transplant patients are the most fragile, and Medicare's policy reflects that. AlloSure Lung is covered for up to 12 surveillance tests in the first year and four tests annually in years two and three. CareDx says these criteria align with the need for frequent monitoring early on, which makes sense—lungs are tricky.

The Big Picture

CareDx describes itself as a precision medicine diagnostics company focused on transplant, specialty oncology, and cell therapy. This Medicare policy is a huge deal because it locks in reimbursement for its core transplant surveillance business. Without it, the company would have faced a lot of uncertainty.

Investors seem relieved. The 29% pop suggests the market was worried Medicare might tighten the screws. Instead, the final policy largely maintains the status quo, which is a win for CareDx.

One thing to watch: the policy sets surveillance testing limits, but those limits seem reasonable given current usage patterns. And for-cause testing remains wide open. So for now, CareDx's revenue stream looks secure.