Executive Summary

In 2026, Medicare laboratory reimbursement entered a materially different phase as delayed PAMA-driven reductions to the Clinical Laboratory Fee Schedule resumed, allowing payment cuts of up to 15% annually for many tests. While the policy itself is not new, its financial impact is now surfacing more clearly in hospital and health system revenue, particularly across outreach and high-volume lab services. This shift represents a structural change in Medicare reimbursement rather than a temporary adjustment, with implications for forecasting, margin sustainability, and system-level financial performance.

For years, the Protecting Access to Medicare Act (PAMA) was treated as a future issue—acknowledged, delayed, and often deprioritized amid more immediate operational pressures. That period of deferral is ending.

Beginning in 2026, scheduled PAMA-driven reductions to the Clinical Laboratory Fee Schedule (CLFS) resumed, with payment cuts of up to 15% per year for many laboratory tests. The policy itself is not new, but its financial impact is now becoming difficult to absorb or overlook.

Why 2026 Will Feel Different

Between 2018 and 2020, PAMA reductions were capped at 10% annually. Subsequent updates were repeatedly delayed through congressional relief and COVID-era legislation. While those delays provided short-term stability, they also muted visibility into the true effect of the policy.

Starting in 2026, CLFS reductions may reach 15% annually, with cuts compounding through 2028 and affecting hundreds of high-volume, commonly ordered tests.

For many hospitals, this is the first time PAMA is appearing clearly in month-over-month Medicare payment variance, rather than being diluted within long-term trend noise.

Hospital Lab Exposure Is Structural

Hospital laboratories operate under a fundamentally different economic model than large independent reference labs. Most hospital-based labs function as cost centers supporting inpatient and emergency care, rely on outreach volume to offset fixed costs, and have limited ability to mitigate Medicare rate changes through contracting.

As CLFS rates decline, health systems should expect increased pressure on outreach margins, greater cross-subsidization from other service lines, and renewed scrutiny of staffing, automation, and utilization. In this environment, laboratory reimbursement is no longer a departmental issue—it is a system-level financial concern.

Impact Surfaces Faster Than Expected

Hospitals are not blind to these changes. Directional Medicare payment variance can often be identified within the first 30 days of new rates taking effect by comparing actual allowed amounts to historical CLFS expectations at the CPT level.

While early data is imperfect due to claims lag and lower-volume tests, it is typically sufficient to identify the most impacted assays, quantify early revenue exposure, and inform leadership discussions.

By 60 to 90 days, results generally stabilize enough to support forecasting, re-baselining, and board-level communication.

Implications for CFOs

For finance leaders, PAMA is a forecast integrity issue. Without deliberate monitoring, laboratory reimbursement erosion risks being misattributed to volume shifts or payer mix changes—masking a structural decline in Medicare revenue.



Key questions include whether FY26–FY28 assumptions reflect CLFS reductions, which outreach programs or service lines are most exposed, and how quickly actual Medicare lab revenue can be validated against expectations.

Implications for Revenue Cycle Leaders

For revenue cycle teams, PAMA presents a measurement and attribution challenge. Organizations best positioned for 2026 are those able to track Medicare lab payment variance at the CPT level, separate reimbursement impact from operational performance, and communicate clear, data-backed insight to finance and operations.

This is less about reacting to cuts and more about demonstrating where and how they are occurring.

Closing Perspective

PAMA is not a surprise policy—it is a delayed reality.

As 2026 unfolds, the difference between disruption and discipline will be determined by how early organizations choose to recognize and measure its impact. Hospitals that treat laboratory reimbursement as a system-level financial signal, rather than background noise, will be better positioned to manage what comes next.