Quest Diagnostics and Labcorp, along with professional organizations in the laboratory sector, have renewed their call for the U.S. Congress to reform the mechanism for determining Medicare payments after the Centers for Medicare & Medicaid Services (CMS) proposed cutting payments by 15% for approximately 775 tests beginning in 2027. This percentage represents the maximum reduction permitted under current law.
According to the American Clinical Laboratory Association (ACLA), the proposed fee schedule would affect nearly 1,200 tests in total, with additional reductions expected in 2028 and 2029. CMS said the changes could save the government approximately $1 billion annually, while the industry argues that the current pricing methodology does not fully reflect the broader commercial laboratory market.
Dispute Over the Source of Pricing Data
The pricing mechanism is based on the Protecting Access to Medicare Act of 2014, known by the acronym PAMA, which was designed to align Medicare reimbursement more closely with the prices paid by the private sector. Laboratory companies say that the data-collection process resulting from the law is incomplete and biased and does not represent the broader commercial market.
The Reforming and Enhancing Sustainable Updates to Laboratory Testing Services Act, known as the RESULTS Act, proposes that CMS contract with an independent, nonprofit commercial claims database to determine prices. Quest supports passage of the bill, pointing to support from organizations including the American Medical Association, the American Cancer Society, and the American Hospital Association. Labcorp has also renewed its support for the proposal, saying that prices based on the current data could threaten patients’ access to laboratory services.
What Is Changing in Practice?
If the cuts take effect, the revenues of providers of tests covered by the fee schedule will be affected, while CMS seeks to prevent Medicare from paying more than private insurers for the same tests. For patients and physicians, the practical question is whether laboratories will be able to maintain the infrastructure needed to provide accurate and timely diagnostic results.
Qihui “Jim” Zhai, chairman of the Pathologists Physician Group, said the 2027 schedule shows that the current system is unsustainable, warning that reductions of this magnitude threaten the stability of the infrastructure on which patients and physicians rely. In contrast, CMS official Dr. Mehmet Oz said taxpayers and Medicare patients had paid laboratories high prices for years.
Chances of Passing the Reform
The chances of the bill being enacted during the current year appear uncertain, as the House of Representatives has recessed until after the November midterm elections. James Davis, Quest’s chief executive officer, said the laboratory sector is pushing to include the RESULTS Act in a broader healthcare package at the end of the year.
However, TD Cowen analysts expected Congress to postpone the 2027 PAMA cuts, as it has done in previous years. Labcorp said in a financial filing that it still expects pressures related to PAMA reimbursement to continue to factor into its long-term financial outlook.
Editorial reading: The core of the dispute is not only the size of the reduction, but also which entity determines the price and the data on which it relies. CMS has a direct argument concerning reductions in public spending, while providers are calling for a permanent change in methodology rather than the periodic postponement of cuts. The source does not determine whether the RESULTS Act will pass or how the prices of individual tests will change; therefore, the effects of the reform on service access and Medicare costs remain tied to the final legislative decision.