CMS Proposes Up to 15% Medicare Lab Reimbursement Cuts Sending Quest Diagnostics and Labcorp Shares Lower

Quest Diagnostics fell roughly 5-7% in Tuesday trading after the Centers for Medicare and Medicaid Services disclosed it has been overpaying for lab work by approximately 16% compared to private-insurer rates and released preliminary 2027 Clinical Laboratory Fee Schedule rates proposing annual reimbursement cuts of up to 15%. The new rates, effective January 1, 2027, are based on an analysis of more than 6,400 laboratories and are intended to realign Medicare payments with what commercial insurers pay. CMS estimates the reduced rates will save taxpayers $1 billion per year.

Labcorp fell alongside Quest, dropping approximately 4.5-6.2% in premarket trading before settling lower through the session. Both stocks ranked among the most active pre-market names on September 22, with heavy institutional and retail volume as traders assessed the revenue impact of the proposed cuts. The preliminary rates are subject to a comment period before being finalized.

The announcement adds a significant overhang to both companies at a time when Quest had otherwise been gaining momentum from customer wins, advanced diagnostics, and artificial intelligence initiatives. The lab industry has historically fought Medicare reimbursement reductions, successfully arguing in past cycles that proposed cuts were based on incomplete pricing data, and industry groups are expected to press Congress and CMS to limit or reverse the reductions before January 2027.