Quest Diagnostics stock dropped 5.1% through 11:30 a.m. Tuesday after the Centers for Medicare & Medicaid Services disclosed Monday that it has been paying about 16% more for lab work than private insurers pay. Effective Jan. 1, 2027, CMS says it will cut reimbursement rates for lab costs by up to 15%, a move the agency estimates will save taxpayers $1 billion per year. Quest Diagnostics disclosed in its 10-K filing with the SEC that it received approximately 11% of its revenue from CMS reimbursement in 2025, and the company flagged reductions in Medicare and Medicaid rates as a key risk to its testing volume and collected revenue. If CMS cuts rates by the full 15%, Quest Diagnostics' annual revenue would decrease by 1.65%, and with successive 15% per year reductions possible from 2027 through 2029, the worst-case scenario implies a reduction of slightly less than 5% in its business. With the stock already down 5.1%, that worst-case scenario is more than priced in, leaving little reason to expect further declines.
Quest Diagnostics IncorporatedCMS will cut lab reimbursement rates by up to 15% effective 2027, and Quest gets ~11% of revenue from CMS, hitting its testing revenue.
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