Labcorp Puts Medicare Lab Fee Cuts At About $125 Million For 2027 And Warns Of Threat To Patient Access
The CFO sized the 2027 hit while the CEO said proposed rates draw on data from only 2% of laboratories, and the long-term outlook stands.
Labcorp Holdings, which runs laboratories that test patient samples and support drug development, expects proposed Medicare lab fee cuts to cost it approximately $125 million in 2027, CFO Julia Wang said on the company's third-quarter earnings call on Wednesday. CEO Adam Schechter said the proposed rates rest on data from only 2% of the laboratories paid under Medicare Part B in 2024.
A $125 million estimate, partly offset
Wang said the figure is based on the preliminary fee schedule proposed by the federal Medicare agency under the PAMA law, and that Labcorp expects to offset a portion of it. The company will give 2027 guidance in February, she said.
Schechter said the $125 million covers traditional Medicare and Medicaid, with some spillover into other parts of the business that Labcorp will manage day to day. He said the company has worked to decouple other contracts from the fee schedule and will keep doing so.
Labcorp's base case assumes the cuts take effect in 2027, he said, while it keeps pushing for the Results Act, a bipartisan bill, or for a delay. Asked by a Piper Sandler analyst about later years, he said most of the impact lands in 2027, with smaller incremental effects in 2028 and 2029 that he called manageable.
"Threaten patient access"
Schechter said he is disappointed, arguing the preliminary schedule is not representative of the broader commercial lab market. Beyond the 2% figure, he cited very limited data from physician-office and hospital-outreach laboratories.
In his view, the cuts "will threaten patient access to laboratory services" and will affect the viability of laboratories across the country. He said Labcorp had already weighed PAMA pressure in its 2026-to-2029 long-term outlook and reaffirmed that outlook.
He named four levers to offset the hit: the underlying diagnostics business, biopharma lab services, the company's Launchpad productivity program, and acquisitions. He added that PAMA could enlarge the deal pipeline, since smaller hospital and regional labs may struggle.
Quarter and guidance behind the warning
Revenue rose 7% to $3.8 billion and adjusted earnings per share rose 14.5% to $4.78, with free cash flow of $412 million, the company said. Diagnostics, which accounted for 78% of 2025 revenue, grew 6.5% to $2.9 billion, and biopharma lab services rose 8.5% to $867 million.
Labcorp raised the midpoint of its 2026 revenue range by $65 million and of its adjusted EPS range by 18 cents, to $18.30 to $18.70. After the quarter it signed deals to buy select BioReference assets, Myriad Genetics' prenatal testing business and Millennium Health. Labcorp's market value was $26.9 billion in Wednesday morning trading.
Wang said Labcorp will give its 2027 guidance in February, including how much of the PAMA hit it can offset.
Sources
- Labcorp Holdings (LH) Q3 Earnings and Revenues Surpass Estimates — Yahoo Finance
- Compared to Estimates, Labcorp (LH) Q3 Earnings: A Look at Key Metrics — Yahoo Finance
- Waters & Labcorp Expand Access to FDA-Approved HPV Screening Tests — Yahoo Finance
- Labcorp Reports Strong 2026 Third Quarter Results; Raises Full Year 2026 Guidance — prnewswire.com
