As of Tuesday, the Centers for Medicare and Medicaid Services (CMS) began paying laboratories $100 for each COVID-19 diagnostic test they conduct using high-throughput technologies to rapidly process large numbers of samples, nearly twice the approximately $51 per test the agency pays them for other types of COVID-19 tests.
"This is an absolute game-changer for nursing homes, where risk of coronavirus infection is high among our most vulnerable," CMS Administrator Seema Verma said in a statement.
The increased reimbursement will benefit diagnostic companies, such as Laboratory Corporation of America (NYSE:LH) and Quest Diagnostics (NYSE:DGX), which both have large networks of labs that have been running COVID-19 tests for over a month.
It's less clear how much of the increased reimbursement will trickle through to the companies that developed those tests for COVID-19, such as Roche Holding (OTC:RHHB.Y), Thermo Fisher Scientific (NYSE:TMO), and Abbott Labs (NYSE:ABT). Considering the cost of the tests, plus need for trained employees to run them, and the general overhead costs, it's possible Lab Corp and Quest were generating slim margins or even losing money processing COVID-19 tests for patients under the previous Medicare reimbursement rate.
The American Clinical Laboratory Association (ACLA), a trade group of diagnostic testing laboratories, praised the CMS's move.
"We know that the lack of predictable reimbursement for tests performed has been a barrier to entry for some laboratories, and today's decision will help encourage all laboratories with the appropriate expertise to come to the table and perform COVID-19 testing," ACLA President Julie Khani said in a statement.