Leading U.S. laboratory services companies Labcorp and Quest Diagnostics are lobbying Congress heavily to pass new legislation before the end of the year, aiming to reform the medical payment rate-setting mechanism used by the Centers for Medicare & Medicaid Services (CMS), in light of expectations of significant financial cuts in the healthcare sector.
Background on Payment Cuts and Financial Results
The CEOs of both companies announced during their third-quarter earnings calls that the proposed changes to the fee schedule, set to take effect early next year, will negatively impact revenue. Labcorp expects to incur a loss estimated at $125 million as a result of government payment cuts in 2027, while Quest estimated the impact at approximately 1% of its 2026 revenue.
The Centers for Medicare & Medicaid Services released the preliminary clinical laboratory fee schedule, which mandates a 15% payment cut for 775 tests during 2027, with the possibility of further cuts in 2028 and 2029, according to the American Clinical Laboratory Association.
Details of the RESULTS Act and Market Data
The current crisis stems from the Protecting Access to Medicare Act of 2014 (PAMA), which linked laboratory test payments to private sector market price data. The laboratory industry argues that the current data collection process overestimates the market share of independent laboratories and relies on inaccurate metrics.
The medical testing sector is seeking to push the Retroactive Evaluation and Sustainable Testing (RESULTS) Act toward the finish line during the current legislative session of Congress. This legislation requires CMS to contract with an independent, non-profit commercial claims database to determine reimbursement rates with greater accuracy.
Why This News Matters
This legislative conflict is of critical importance to the medical technology and diagnostic services sector, as the adjustment of federal reimbursement policies determines the ability of laboratories to invest in innovation and provide services efficiently. Both companies are awaiting the Congressional Budget Office's assessment of the federal cost of the legislation, hoping for its inclusion in the year-end financial package should the relevant committees in the House and Senate reach an agreement.