A proposed 26% cut in the Medicare Physician Fee Schedule (PFS) for independent labs is set to hit major lab service providers such as Quest Diagnostics and Laboratory Corporation of America (LabCorp). However, analysts disagreed over the potential impact on these companies: while Morgan Stanley downgraded Quest to “underweight” from its previous rating of “equal rate”, Goldman Sachs’ Isaac Ro described the cuts as “manageable”.
“Today’s reaction [was] overdone,” the latter added. He continues to rate Quest as “buy” and LabCorp as “neutral”. Mr Ro estimates that PFS payments make up only 1.5-2% of both...