The Protecting Access to Medicare Act (PAMA) has shaped the reimbursement landscape for clinical laboratories for more than a decade. Under PAMA, the Centers for Medicare & Medicaid Services (CMS) collects private payer rate data from applicable laboratories to periodically recalibrate the Clinical Laboratory Fee Schedule (CLFS), with the goal of aligning Medicare reimbursement more closely with market rates.

In theory, the concept is straightforward. In practice, it has introduced years of uncertainty for laboratories across the country.

Since PAMA’s implementation, Congress has delayed reimbursement adjustments multiple times. Each delay provides temporary relief – but it also reinforces a pattern of waiting. Many laboratories interpret these extensions as a signal that the pressure has been postponed.

The underlying economics, however, haven’t changed. Forward-looking organizations aren’t waiting to see what happens next in Washington. They’re preparing their operations today to perform effectively under a range of reimbursement scenarios.

Understanding the Current State of PAMA

PAMA requires certain laboratories to report private payer rate data to CMS. The agency then uses this information to update the Clinical Laboratory Fee Schedule, which determines how Medicare reimburses laboratory testing.

For many high-volume assays, the private payer rates reported under PAMA have come in lower than historical CLFS reimbursement levels. That means full implementation of the program could lead to meaningful reimbursement reductions for certain tests.

Since the original reporting cycles began, Congress has repeatedly delayed those reductions. Legislative proposals such as the SALSA Act (Saving Access to Laboratory Services Act) and the RESULTS Act have been introduced as potential long-term solutions, but neither has been enacted.

The result is prolonged uncertainty – and for many laboratories, an unclear path forward.

Why Delays Can Create Strategic Risk 

Each legislative delay provides temporary stability, but it can also reinforce the assumption that your laboratory has more time to prepare.

In reality, the underlying data CMS has collected still exists, and the infrastructure required to adjust reimbursement continues to evolve. Whether through PAMA itself or through future legislation, reimbursement pressure will eventually surface in some form.

Laboratories that rely on continued delays as their strategy may find themselves scrambling when reimbursement shifts arrive.

The organizations that manage this uncertainty most effectively take a different approach. Rather than trying to predict exactly what Congress will do next, they focus on strengthening their understanding of the laboratory’s economics today.

Compliance and Operational Risk 

Regulatory compliance also becomes more complex when oversight is distributed across multiple teams.

Personnel qualification records may sit within human resources. Equipment maintenance logs may reside with facilities or operations teams. Quality control documentation may remain with the technical supervisor or laboratory manager.

When accreditation surveys approach, assembling a complete regulatory picture can mean pulling together information from several systems and departments – rather than relying on a single coordinated oversight process.

Organizations with more unified visibility find it easier to maintain consistent regulatory readiness because they can monitor requirements holistically rather than through separate operational lenses. For a deeper look at the compliance areas most frequently targeted by federal regulators, see our analysis of the seven most common and costly laboratory compliance issues.

The Visibility Gap Many Laboratories Face  

One of the most common challenges we encounter when working with health systems is the absence of precise financial visibility at the test level.

Many laboratories can estimate departmental costs or review reagent spend and labor budgets individually. But fewer organizations maintain a fully loaded cost-per-test analysis that accounts for everything involved in producing a result – from specimen collection through result delivery.

Without that level of visibility, evaluating reimbursement risk becomes far more difficult. Leadership teams may not be able to answer fundamental questions:

• • Which tests generate positive contribution margin?
  • Which assays operate close to break-even?
  • Which services could become financially unsustainable if reimbursement declines?

What Proactive Laboratories Are Doing Today

Across the health systems and laboratories we work with, proactive organizations are already taking several practical steps to strengthen their position ahead of potential reimbursement changes.

True Cost-Per-Test Analysis
Leading laboratories calculate a fully loaded cost for each assay on their menu. This includes labor, reagents, equipment depreciation, overhead allocation, and quality control costs – from specimen collection through final result delivery. Accurate cost visibility becomes the foundation for nearly every strategic decision that follows.

Reimbursement-to-Cost Mapping
Once cost visibility exists, laboratories can directly compare reimbursement rates against operational cost. This analysis helps identify which tests remain profitable under current reimbursement structures – and which may become vulnerable if reimbursement levels decline.

Test Menu Optimization
Not every test needs to be performed internally. Some assays may be more cost-effective as send-outs to reference laboratories, while others may present opportunities for insourcing when performed efficiently at scale. The key is making these decisions intentionally, based on data rather than historical practice.

Reference Laboratory Spend Review
Many health systems send significant testing volume to external reference laboratories without periodically reevaluating the arrangement. A structured review of reference laboratory contracts and test volumes can often reveal opportunities to improve pricing, renegotiate agreements, or repatriate testing internally. In some cases, these initiatives have produced substantial savings.

Margin Stress Testing
Proactive organizations model their laboratory economics under several reimbursement scenarios – such as 10%, 15%, or 20% reductions. Understanding your potential exposure helps leadership prioritize which operational improvements provide the strongest protection.

The Strategic Advantage of Acting Early

The laboratories that complete this analytical work gain something more valuable than immediate cost savings: strategic clarity.

They understand the economics of their operation well enough to make confident decisions about staffing models, capital investments, outreach growth, and partnership opportunities.

Organizations that haven’t examined these fundamentals may find themselves making the same decisions under far greater pressure when reimbursement changes arrive.

Preparing for an Uncertain Future

No one can predict exactly how Congress will ultimately address laboratory reimbursement. But waiting for legislative certainty rarely produces strong operational outcomes.

Laboratories that invest in understanding their financial structure today place themselves in a fundamentally stronger position – regardless of what policy decisions emerge.

Reimbursement pressure may come through PAMA or through future legislation. The organizations best prepared for that future will be those that treated uncertainty as a reason to strengthen their strategy – not a reason to delay it.

Who Owns Your Lab? The Hidden Cost of Shared Responsibility in Health Systems
How governance structures can influence laboratory performance and financial outcomes.

Transforming Into a Strategic Asset: An Upper Midwest Health System
How connecting data across departments revealed $9.5 million in recurring annual opportunity

Rightsizing the Laboratory: Scripps Clinic
How focused interim leadership turned a $7 million loss into $5 million in contribution margin

Seven Most Common and Costly Laboratory Compliance Issues
The areas most frequently targeted by OIG, CMS, and DOJ investigations

At Colaborate, we work with health systems and laboratories nationwide to evaluate operational performance, financial structure, and strategic opportunities. Our experience across thousands of laboratories allows organizations to build the analytical foundation required for coordinated, cross-functional decision-making.

If your organization is evaluating its laboratory economics or preparing for potential reimbursement changes, our team would be glad to start the conversation.