Quest, Labcorp Shares Tumble on Proposed Medicare Reimbursement Cuts

Shares of major clinical laboratory operators Quest Diagnostics and Laboratory Corporation of America Holdings dropped in premarket trading Tuesday after a U.S. government agency proposed substantial cuts to reimbursement rates for lab services.

CMS Proposes Lower Lab Fees

The Centers for Medicare & Medicaid Services (CMS) released preliminary proposals for its 2027 Clinical Laboratory Fee Schedule that could reduce payments by as much as 15% annually, starting January 1, 2027. The agency stated the move is intended to align Medicare payments more closely with rates paid by private insurers.

According to CMS, its analysis of data from over 6,400 laboratories indicates that Medicare currently pays approximately 16% more than private insurance plans for the same services. The agency estimates that implementing the proposed changes could result in annual savings of about $1 billion for taxpayers.

Market Reaction

Investors reacted swiftly to the news, which poses a significant threat to the revenue streams of diagnostic testing companies. The proposed cuts overshadowed a recent analyst note from Truist Securities that had maintained a Hold rating on Quest while raising its price target.

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• Quest Diagnostics (DGX): Shares fell 6.9% in premarket trading. The decline follows a recent run-up that saw the stock reach a fresh 52-week high.
• Labcorp (LH): Shares dropped 4.5% on the same concerns over future reimbursement revenue from Medicare.

Other Premarket Movers

Several other companies saw significant price movement before the opening bell based on company-specific news:

• On Holding (ONON): The sportswear company's shares jumped 6.4% after its board authorized a new share repurchase program of up to $1 billion through 2029.
• Vicor (VICR): The power electronics firm surged nearly 9.9% after it significantly raised its third-quarter revenue outlook, now expecting sequential growth of more than 20%, up from a previous forecast of 10%.
• GameStop (GME): Shares gained 3.5% after a regulatory filing revealed that CEO Ryan Cohen purchased an additional $26.4 million worth of the company's stock.